(D) Loss Valuation Flashcards
LOSS VALUATION
Page 9
Loss Valuation is a factor in determining the premium charges and the amount of insurance required.
ACTUAL CASH VALUE
Page 9
The actual cash value method of valuation reinforces the principle of indemnity because it recognizes the reduction of value of property as it ages and becomes subject to wear and tear and obsolescence.
Actual cash is calculated as follows:
Current replacement cost-depreciation=actual cash value
REPLACEMENT COST
Page 9
Replacement cost is defined as the cost to replace the damaged property with like kind and quality at today’s price, without any deduction for depreciation.
MARKET VALUE
Page 9
Market value is a seldom – used method of valuing a loss based upon the amount a willing buyer would pay to a willing seller for the property prior to the loss.
AGREED VALUE
Page 10
Agreed value is a property policy with a provision agreed-upon by the insurer and insured as to the amount of insurance that represents a fair valuation for the property at the time the insurance is written and suspend any coinsurance or other contribution causes in the policy.
STATED AMOUNT
Page 10
A stated amount is an amount of insurance scheduled in a property policy that is not subject to any coinsurance requirements in the event of a covered loss. This scheduled amount is the maximum amount the insurer will pay in the event of a loss.
DEPRECIATION
Page 10
Depreciation is a financial amount that represents a loss in value to property over the period of time. Depreciation can be determined by mutual agreement between owner and adjuster or by using depreciation tables.
