Registered Insurance Brokers of Ontario (RIBO) Practice Exam

If an insured is worried about not being properly compensated for a special possession, what type of contract may be offered by the insurer?

1. Standard Insurance Contract

2. Replacement Cost Contract

3. Valued contract

4. Comprehensive Policy

The correct answer is: Valued contract

The choice of a valued contract is appropriate in this scenario because it specifically caters to the concern of the insured regarding proper compensation for a special possession. A valued contract guarantees a predetermined amount of coverage for a particular item or class of items, regardless of the actual cash value or replacement cost at the time of loss. This means that if the item is lost, damaged, or destroyed, the insured will receive the agreed-upon amount, ensuring peace of mind in terms of compensation. This type of contract is particularly beneficial for unique, special, or high-value possessions, where the fair market value may not adequately represent the sentimental or intrinsic value to the owner. By providing a fixed amount, a valued contract allows the insured to feel secure about receiving full compensation without the need for re-evaluating worth at the time of a claim. Other types of contracts, such as a standard insurance contract or a replacement cost contract, might not fully address the specific concerns of complete and adequate compensation for special possessions. A comprehensive policy, while broad and inclusive, typically does not guarantee specific amounts for individual items unless additional endorsements are applied.