Module 1-J - Valuation, Deductibles and Coinsurance

Question 1

Accumulated Depreciation

Answer 1

Annual depreciation multiplied by its age

Question 2

Actual Cas Value (ACV)

Answer 2

A valuation method that takes into account an item’s depreciation, same as fair market value and depreciated value

Question 3

Agreed Value

Answer 3

A valued policy in which the insurer and the insured agree to a specific value for an
item, appraised at the inception of the policy.

Question 4

Annual Depreciation

Answer 4

Replacement cost divided by the items useful life

Question 5

Coinsurance

Answer 5

Encourages the insured to purchase an adequate amount of coverage, typically at least 80% of a property’s value

Question 6

Deductible

Answer 6

The amount the policyholder must pay out-of-pocket before the insurance company will
pay the remaining costs. There are three types: fixed, franchise, and percentage.

Question 7

Deductible - Fixed

Answer 7

Specific predetermined amount that a policy holder must pay out of pocket before he can be indemnified

Question 8

Deductible Franchise

Answer 8

Policy kicks in only after the loss exceeds a predetermined amount
If losses are below the deductible, the insurer pays nothing
If losses are above the deductible, the insurer pays 100% of the damage

Question 9

Deductible Percentage

Answer 9

The insured pays a percentage of the insured risks value
Some policies combine fixed and percentage deductibles

Question 10

Depreciation

Answer 10

An item’s estimated loss of value due to wear, tear or age

Question 11

Market Value

Answer 11

The price something will sell for in the open market, or “fair market value.”

Question 12

Replacement Cost

Answer 12

A method of valuation based on the cost of replacing an item at current market prices, regardless of depreciation

Question 13

Stated Value

Answer 13

A valuation method in which the insured simply assigns the risk a value at the outset of
the policy. The insurer will pay this amount in case of a total covered loss.

Question 14

Underinsured

Answer 14

Not sufficiently insured against particular losses. For example, any home insured at less
than 80% of its value is considered underinsured.

Question 15

Valuation

Answer 15

The process of estimating what an item is worth. Methods of valuation include “Actual
Cash Value,” “Replacement Cost,” “Stated Value,” and “Agreed Value.”

Question 16

Value

Answer 16

The estimated or appraised worth of an item, used to determine the replacement cost or
indemnification amount.

Question 17

Valued Policy

Answer 17

A policy in which the insurer and the insured agree to a specific value prior to the start of
the policy. If the item is lost or destroyed, the insurer pays the amount agreed upon.