CCA CCA Auto and Property Claims 1 — Questions and Answers
Question 1: What does 'actual cash value' (ACV) mean when settling a property claim?
- The original purchase price of the property
- The replacement cost minus depreciation (Correct answer)
- The amount the insured paid for coverage
- The salvage value of destroyed property
Correct answer: The replacement cost minus depreciation
Actual cash value is calculated as the replacement cost of damaged property minus depreciation for age, wear, and obsolescence.
Question 2: Under a personal auto policy, 'uninsured motorist coverage' protects the insured when:
- The insured drives without a valid license
- A not-at-fault insured is injured by a driver who has no liability insurance (Correct answer)
- The insured's vehicle is stolen by an unknown person
- The insured causes an accident and the other party is uninsured
Correct answer: A not-at-fault insured is injured by a driver who has no liability insurance
Uninsured motorist (UM) coverage pays for the insured's bodily injury or property damage caused by a driver who carries no liability insurance.
Question 3: What is 'betterment' in a property or auto claim?
- Improvements made to the property before the loss
- A reduction in claim payment when a repair results in an improvement over pre-loss condition (Correct answer)
- Additional coverage purchased after a loss occurs
- An increase in the settlement to reflect market appreciation
Correct answer: A reduction in claim payment when a repair results in an improvement over pre-loss condition
Betterment deductions are applied when a repair or replacement leaves the insured in a better position than before the loss, such as replacing an old roof with a new one.
Question 4: A vehicle is declared a total loss when:
- The driver is at fault in the accident
- The cost of repairs exceeds the vehicle's actual cash value (Correct answer)
- The vehicle is more than 10 years old
- Any airbags deploy during a collision
Correct answer: The cost of repairs exceeds the vehicle's actual cash value
A total loss is declared when repair costs equal or exceed the vehicle's ACV, making repair uneconomical.
Question 5: Under a homeowners policy, which peril is typically EXCLUDED from standard coverage?
- Fire damage
- Theft
- Flood damage (Correct answer)
- Wind damage
Correct answer: Flood damage
Standard homeowners policies exclude flood damage; separate flood insurance (often through NFIP) is required for flood coverage.
Question 6: What is a 'deductible' in an insurance policy?
- The maximum amount the insurer will pay per occurrence
- The amount the insured must pay out of pocket before the insurer pays (Correct answer)
- The premium discount for filing no claims
- The penalty applied for late premium payment
Correct answer: The amount the insured must pay out of pocket before the insurer pays
A deductible is the portion of a covered loss the insured is responsible for before the insurance company pays the remainder.
CCA CCA Auto and Property Claims 1
What does 'actual cash value' (ACV) mean when settling a property claim?