West Virginia Property and Casualty Licensing Practice Exam

Which law states that insurers issuing fire insurance policies on real property in West Virginia are liable for the limit of insurance in case of total loss by fire?

1. Valued Policy Law

2. Property Insurance Law

3. Fire Coverage Act

4. Insurance Security Act

The correct answer is: Valued Policy Law

The Valued Policy Law is significant because it mandates that insurers who issue fire insurance policies on real property in West Virginia must pay the full amount of the insurance policy limit in the event of a total loss due to fire. This law is designed to protect policyholders by ensuring that they receive the full value of their coverage without regard to the actual cash value or replacement cost of the property at the time of loss. This provision helps maintain the financial security of property owners in the event of catastrophic losses. It prevents underinsurance and minimizes disputes regarding claims after a fire loss, as insurers are obligated to pay the agreed-upon limits rather than reevaluating the property’s worth post-loss. The other options do not directly relate to this specific requirement regarding fire insurance policies. For instance, the Property Insurance Law might encompass various aspects of property coverage generally but does not stipulate the specific financial obligations of insurers like the Valued Policy Law does. Similarly, while the Fire Coverage Act refers to regulations concerning fire coverage, it does not have the same enforceable guarantee on behalf of the insurance limits. Lastly, the Insurance Security Act pertains to ensuring that insurance companies maintain the financial resources to pay claims but does not address the directly guaranteed payout for total fire losses.