Which statement best describes a valued policy?

A valued policy is a type of insurance policy that specifies a fixed amount for the insured item, regardless of its actual market value at the time of a loss. This means that in the event of a covered loss, the insurer will pay out the agreed-upon sum listed in the policy, rather than determining the payout based on the current market value of the insured item.

This is particularly beneficial for items that have a stable valuation, such as fine art or collectibles, where determining the current market value may be subjective or vary widely. By establishing a fixed value upfront, both parties have clarity on the coverage amount, which helps to avoid disputes during the claims process.

In contrast to this, other options describe different types of policies or requirements. For instance, requiring proof of loss pertains to the general claims process and is not a defining characteristic of a valued policy. Similarly, a policy that covers all risks would be classified as an open peril policy and doesn’t align with the specific nature of a valued policy. Lastly, being subject to changes based on market value is more representative of a market-value policy rather than a valued policy, which maintains a set amount throughout the policy term.