What amounts does the insurer agree to pay under the stated amount approach if the covered property is damaged or stolen?

The correct answer is based on the principles of the stated amount approach, which emphasizes that the insurer agrees to pay the amount specified in the policy in the event of a loss, rather than the actual cash value (ACV) or market value of the property. In this approach, the insurer will pay the amount necessary to repair or replace the damaged property or the dollar amount specified in the policy, whichever is applicable and lower than the policy limit.

This method ensures that the insured is protected for the amount they selected during policy inception, allowing for either the cost to repair or replace the property or the stated amount in the policy to guide the compensation for damages or loss. Thus, the focus is on honoring the agreed-upon coverage amount, which can lead to a clearer understanding of what the insured will receive in case of a claim.

Understanding why the other options are less accurate helps clarify why the stated amount approach is effectively represented in the correct choice. The first option suggests a range of values that do not conform to the stipulated policy amount, which can lead to confusion over what the insured ultimately receives. The third option refers to sale price and initial purchase price, which vary widely and do not encapsulate a set agreement as in the stated amount approach.