Relier Pairs P. Insurance LOSS VALUATIONVersion en ligne Loss Valuation To be insurable, an item’s insurable value must be measurable. Thus, every property insurance policy includes a valuation provision that states how the value of covered property will be determined. Commonly used valuation methods are: replacement cost functional replacement cost actual cash value (ACV) market value stated amount agreed value par Bob Kazamakaz 1 Actual Cash Value 2 Broad Evidence Rule 3 Stated Amount 4 Replacement Cost 5 Market Value 6 Functional Replacement Cost 7 Agreed Value _________________ is generally defined as replacement cost minus physical depreciation. It is commonly used in valuing household contents and other personal property. A household object that cost $1,000 ten years ago has depreciated in value and may have an _________________ of $400 today. Used with older buildings that have components no longer found in modern buildings,_________________ is the amount it would cost to repair or replace a damaged building with common (and less costly) construction materials and methods that are functionally equivalent to the obsolete, antique, or custom construction materials and methods originally used. For example, Mary's old Victorian home has plaster walls, but if a kitchen wall were damaged it could be replaced with wallboard. The wall's _________________ cost reflects the cost of wallboard, not the cost of a plaster wall. Commonly used in valuing houses and commercial buildings,_________________ valuation method bases benefits on the cost to replace the damaged or destroyed property. If it would cost $400,000 today to build another house just like Bob's house, then the current _________________ of Bob's house is $400,000. _________________ is used in establishing the value of cars and other personal property. It is not used to establish the insurable value of real property such as a house or business structure. A building's _________________ includes the value of the land, the location, and other factors that have no direct bearing on the building's replacement cost or its actual cash value _________________ is a rule of valuation that deviates from the principle that the traditional measure of actual cash value (ACV) (replacement cost less depreciation) is the sole measure of value at the time of loss. Under this rule, the insurance company, appraiser, or adjuster examines every standard of value bearing on the property under consideration, such as the age of the property, the profit likely to accrue on the property, and the property's tax value. This establishes the value at which, in the event of a total loss, the insurance will completely indemnify the insured. When an insurance policy uses the _________________ valuation method, the insured items and their values are listed in a schedule that is made part of the policy. With this approach, the insurer agrees to pay the lowest of the following three amounts if the covered property is damaged or stolen: the property’s actual cash value at the time of the loss the cost to repair or replace the property with similar property the dollar amount of insurance specified in the policy schedule Policies that use the _________________ valuation method typically cover paintings, sculptures, antiques, and one-of-a-kind items for which it is difficult to determine a value. The insurer and the applicant agree on the value of the item when the policy is written. The insured items and their _________________ are listed in a schedule. If the item is stolen or destroyed, the insurer pays the listed dollar amount.
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