What is a contract that pays a stated amount in the event of a loss called?

A contract that pays a stated amount in the event of a loss is known as a valued contract. This type of insurance policy specifies a predetermined payout that is agreed upon by both the insurer and the insured at the inception of the policy. Regardless of the actual loss incurred, the insured is entitled to receive the agreed-upon amount if a covered event occurs. This is particularly useful in situations where the value of the insured item may be hard to determine after a loss, such as with antiques or collectibles.

In contrast, an indemnity contract is designed to reimburse the insured for the actual loss suffered, rather than providing a predetermined sum. Specific contracts typically refer to those covering defined risks or properties but do not inherently involve the fixed payout characteristic of a valued contract. An umbrella contract generally provides additional liability coverage beyond the limits of underlying policies but does not specifically pertain to payment amounts for losses.