AIC Assessment & Evaluation 2

Question 1

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

Accepted Answer

Replacement cost minus depreciation

Answer

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

Question 2

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

Accepted Answer

Broad evidence rule

Answer

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

Question 3

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?

Accepted Answer

$75,000

Answer

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

Question 4

Functional replacement cost valuation pays to replace damaged property with:

Accepted Answer

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

Answer

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

Question 5

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

Accepted Answer

The period of restoration

Answer

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

AIC - Associate in Claims Practice Test