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Questions and Answers
What does ACV stand for?
What does ACV stand for?
Actual Cash Value
What is the difference between ACV and replacement value?
What is the difference between ACV and replacement value?
ACV takes depreciation into account, while replacement value does not.
What is the purpose of co-insurance?
What is the purpose of co-insurance?
To ensure that the insured has enough insurance coverage to cover losses.
The cost to repair or replace damaged property, minus ______, is known as ACV.
The cost to repair or replace damaged property, minus ______, is known as ACV.
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What is the purpose of a Statement of Value?
What is the purpose of a Statement of Value?
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The Reinstatement Clause ensures that the insurance will be automatically restarted after a loss.
The Reinstatement Clause ensures that the insurance will be automatically restarted after a loss.
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Subrogation is the insurer's right to recover losses from a third party.
Subrogation is the insurer's right to recover losses from a third party.
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What is the purpose of a Property Protection System?
What is the purpose of a Property Protection System?
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What is the purpose of the Pair & Set Clause?
What is the purpose of the Pair & Set Clause?
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What are some examples of property types that might have a specific Statement of Value?
What are some examples of property types that might have a specific Statement of Value?
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Study Notes
Actual Cash Value (ACV)
- ACV is the cost to repair or replace damaged property, minus depreciation
- Replacement value is the cost to repair, replace, or rebuild without depreciation
- Original purchase price adjusted for depreciation is another way to look at replacement value
- Co-insurance requirement: Insured must carry enough insurance to cover losses
- Statement of Value clause is used to replace the standard co-insurance
- Specific risks or property types excluded from the policy
- Policy allows for changes in property without prior approval (within limits)
- Non-compliance is a risk for claim denial
- Automatic policy resetting/restarting after a loss is an important feature
- Insurer's right to reclaim losses from third parties is stated
- Property Protection Systems (e.g., alarms, monitoring) requirement detailed
- Duty to notify insurer about system issues
- Adjustments based on actual stock values
- Inspection of property after policy ends
- Valuation methods: ACV, repair/replacement, selling price minus discounts
- Reproduction cost of materials/labour for valuation
- Reproduction costs of duplicates/originals for valuation
- Property/Vehicle covered under specific security conditions
- Fire insurance contract rules are detailed
- Property specifically insured is named
- Property single limit of insurance (e.g., building A, building B, etc.)
Book Value
- Depreciation is considered in ACV, not in replacement cost
- Method to determine the replacement cost value (e.g., using buildings as examples)
- Using net annual rent and the capitalization rate to arrive at the ACV amount
- Insurer pays for all claims
Other Clauses
- Coverage reinstated after a loss
- Denial of coverage possible if certain rules aren't followed
- Policy wording defining coverage when a loss occurs (Pair & Set Clause, Parts Clause)
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Description
This quiz covers the concept of Actual Cash Value (ACV) in insurance, focusing on its definition, components, and related policy requirements. Additional topics include replacement value, co-insurance, and risk management within property insurance. Test your knowledge on these essential concepts!
