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Insurance Valuation Methods Quiz

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Questions and Answers

Which of the following best describes indirect loss in insurance language?

Damage to equipment and furniture

Physical damage to property caused by a disaster or accident

Tangible losses that can be seen and touched

Loss of income and increased expenses resulting from the insured's inability to use the damaged property (correct)

What is the primary focus of insurance loss valuation?

Helping insurers determine the appropriate compensation to repair or replace damaged property

Determining the monetary value of a property loss (correct)

Specifying the amount of money an insured will receive if a covered loss occurs

Preventing perils from causing direct losses

What are examples of direct losses in insurance?

Loss of contents due to fire and smoke damage

Damage to a building, equipment, and furniture (correct)

Wind damage from a hurricane and shock damage from an earthquake

Loss of income and increased expenses resulting from the insured's inability to use the damaged property

What term is used in business insurance policies to refer to indirect losses?

Consequential losses Signup and view all the answers

Which valuation method represents the current value of an insured property or asset in the open market at the time of a covered loss?

Market value Signup and view all the answers

What does 'Actual cash value' represent in the valuation methods?

The amount to replace damaged property, minus depreciation at the time of the loss Signup and view all the answers

What does 'Functional Replacement cost' refer to in the valuation methods?

The cost to repair or replace the damaged building with less costly common construction materials and methods Signup and view all the answers

What is the characteristic of 'Agreed Value' insurance?

It guarantees the insured will receive the full amount agreed upon in the event of a loss Signup and view all the answers

What does 'Valued Policy Law (VPL)' require insurance companies to do in the event of a total loss?

Pay the full value of a policy to the insured Signup and view all the answers

In 'Replacement cost' valuation method, what amount will the insured receive to repair or replace the damaged property?

The actual cost of repair or replacement at the time of loss Signup and view all the answers

What is the difference between 'Market value' and 'Actual cash value' in the valuation methods?

Market value represents the current value of the property, while actual cash value represents the amount to replace damaged property minus depreciation Signup and view all the answers

What does 'Valued Policy' refer to in insurance?

A policy in which the insurer and insured agree on a stated amount that will be paid in the event of a future loss Signup and view all the answers