Idaho Property and Casualty Practice Exam 2025 - Free Practice Questions and Study Guide

Question: 1 / 400

What does "actual cash value" include?

The total cost of replacement without any deductions

Market value of the property at the time of loss

Replacement cost minus depreciation

Actual cash value (ACV) is defined as the replacement cost of an asset minus depreciation. This approach takes into account the current worth of the property based on its age, condition, and any wear and tear it has experienced. When a loss occurs, insurers typically evaluate the ACV of the damaged or lost property to determine what amount they will reimburse the policyholder.

Using replacement cost alone does not reflect the decrease in value due to depreciation; hence, simply calculating total replacement cost would not provide an accurate assessment of the property's value at the time of loss. Other options, such as market value or historical purchase price, also do not accurately represent the current value of the property post-depreciation, as they can vary significantly based on market conditions and specific circumstances surrounding the property at the time of loss.

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The estimated value based on historical purchase price

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