Damage Evaluation and Settlement Procedures Flashcards
7 cards from real CCA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Damage Evaluation and Settlement Procedures flashcards as text
When evaluating a total loss vehicle, which method determines the actual cash value (ACV) by referencing comparable vehicles currently available in the local market?
Answer: Market comparison approach
The market comparison approach determines ACV by analyzing the prices of comparable vehicles currently listed for sale in the claimant's local market.
A claimant disputes the adjuster's damage estimate and hires a public adjuster. Under most insurance policies, what dispute resolution mechanism is available to both parties?
Answer: Appraisal clause
Most property insurance policies include an appraisal clause that allows each party to hire an independent appraiser, with disagreements resolved by an umpire.
What is the primary purpose of a reservation of rights letter sent to an insured?
Answer: To notify the insured that coverage may not apply while the insurer investigates
A reservation of rights letter informs the insured that the insurer is investigating the claim without waiving its right to later deny coverage based on policy exclusions.
During a structural damage inspection, an adjuster discovers pre-existing damage unrelated to the current loss. How should this be handled in the settlement?
Answer: Exclude the pre-existing damage and only cover loss caused by the covered peril
Adjusters must differentiate between damage caused by the covered peril and pre-existing damage, settling only for the loss attributable to the covered event.
Which depreciation method calculates the reduction in value based on the ratio of an item's age to its total expected useful life?
Answer: Age-to-life method
The age-to-life method determines depreciation by dividing the item's age by its total expected useful life, then applying that percentage to the replacement cost.
A homeowner's policy contains a coinsurance clause requiring the property to be insured to 80% of its replacement value. If the owner insures to only 60%, how is a partial loss paid?
Answer: A proportionate share based on the ratio of insurance carried to insurance required
Under the coinsurance formula, the insurer pays (amount carried ÷ amount required) × loss amount, penalizing underinsurance on partial losses.
When settling a bodily injury claim, which document formally releases the claimant's right to pursue further legal action against the insured in exchange for payment?
Answer: General release
A general release is a legally binding document in which the claimant surrenders all future claims arising from the incident in exchange for the agreed settlement payment.