CALA Total Loss Valuation 2

Question 1

A vehicle has prior unrepaired damage totaling $1,200. How should this affect the actual cash value (ACV) calculation?

Accepted Answer

The ACV is reduced by the cost to repair the prior damage

Answer

The ACV is increased to account for the owner's awareness of the damage

Answer

Prior damage is ignored because it predates the loss event

Answer

The ACV is reduced by the salvage value only

Question 2

Which valuation method uses recent sales of comparable vehicles in the same geographic region to establish ACV?

Accepted Answer

Market data approach

Answer

Income approach

Answer

Cost approach

Answer

Depreciation schedule approach

Question 3

A total loss vehicle has an outstanding loan balance of $18,000 but an ACV of $14,000. What amount does the insurer typically pay the policyholder?

Accepted Answer

$14,000 minus any applicable deductible

Answer

$18,000 to satisfy the lien

Answer

$14,000 plus the difference to the lienholder

Answer

$0 because the loan exceeds the ACV

Question 4

What does the term 'book value' refer to in the context of total loss valuation?

Accepted Answer

Published guide values such as those from NADA or Black Book

Answer

The vehicle's original MSRP adjusted for inflation

Answer

The lienholder's outstanding loan balance

Answer

The replacement cost of a brand-new equivalent vehicle

Question 5

An adjuster identifies three comparable vehicles but one comp is located 300 miles away in a different market. What is the best practice?

Accepted Answer

Apply a geographic market adjustment to the comp

Answer

Use it without adjustment since vehicles have national pricing

Answer

Discard it and find a comp within the local market

Answer

Average all three comps regardless of location

Question 6

Which of the following best defines 'replacement cost value' as distinguished from ACV in auto total loss claims?

Accepted Answer

The cost to replace the vehicle with a new one of like kind and quality without depreciation

Answer

The cost to repair the vehicle to its pre-loss condition

Answer

The vehicle's ACV plus a betterment charge

Answer

The loan payoff amount on the vehicle

Question 7

A 2019 sedan has high mileage of 120,000 miles compared to the average 75,000 for its age. How should the adjuster treat this in valuation?

Accepted Answer

Apply a negative mileage adjustment to reduce the ACV

Answer

Apply a positive adjustment because high-mileage vehicles are tougher

Answer

Ignore mileage since it is already reflected in the model year

Answer

Use the manufacturer's suggested retail price as the base