Assessment & Evaluation Flashcards

Under the most common definition used in property policies, actual cash value (ACV) equals:

Answer: Replacement cost minus depreciation

ACV is typically calculated as replacement cost less physical depreciation and obsolescence.

Which ACV approach allows an adjuster to consider every relevant factor, such as market value, age, condition, and obsolescence?

Answer: Broad evidence rule

The broad evidence rule permits any evidence that logically bears on the property's value.

A building worth $400,000 is insured for $240,000 under an 80% coinsurance clause. Ignoring the deductible, what is paid on a $100,000 loss?

Answer: $75,000

Required insurance is $320,000, so the insurer pays $240,000/$320,000 × $100,000 = $75,000.

Functional replacement cost valuation pays to replace damaged property with:

Answer: Property that performs the same function using modern, less costly materials

Functional replacement cost uses equivalent but often cheaper modern materials that serve the same function.

When evaluating a business income claim, the adjuster measures the loss over which period?

Answer: The period of restoration

Business income loss is measured over the period of restoration, the time reasonably needed to repair or replace damaged property.

How does salvage affect the evaluation of a property loss?

Answer: It reduces the insurer's net loss when damaged property is sold

Once the insurer pays and takes title, proceeds from selling damaged property offset the claim payment.

To determine ACV on a total-loss auto claim, adjusters most commonly rely on:

Answer: Comparable vehicles sold in the local market

Total-loss valuations are generally based on prices of comparable vehicles in the insured's local market.