Total Loss Valuation Flashcards
7 cards from real CAIA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Total Loss Valuation flashcards as text
Under the 'replacement cost' valuation method for a total loss, what amount would the insurer owe?
Answer: The cost to purchase a new vehicle of the same make and model
Replacement cost pays for a new equivalent vehicle without depreciation, though this method is rare for standard auto policies.
Which of the following is NOT a standard factor used to adjust comparable vehicle values in a total loss appraisal?
Answer: Color preference of the insured
Color is generally not a recognized adjustment factor in professional total loss valuations because it has negligible market impact for most vehicles.
A total loss settlement offer is disputed by the insured. What formal process allows an independent review of the vehicle's value?
Answer: Appraisal clause / appraisal process
Most auto policies include an appraisal clause where each party selects an appraiser and they agree on an umpire to resolve valuation disputes.
What is 'diminished value' and how does it relate to total loss claims?
Answer: The loss in resale value a vehicle suffers after being repaired from a prior accident, not applicable to total loss claims
Diminished value applies to repaired vehicles and their reduced resale value, but in a total loss the vehicle is not repaired, so diminished value is not a settlement component.
Which state regulation requires insurers to provide the insured with documentation supporting the total loss valuation upon request?
Answer: State unfair claims settlement practices acts
State unfair claims settlement practices acts require insurers to substantiate their valuations and provide supporting documentation to claimants.
When selecting comparable vehicles for a total loss report, adjusters should prioritize comparables that sold within what timeframe?
Answer: Within the past 45–90 days in the local market
Recent local sales within 45–90 days best reflect current market conditions and geographic pricing for an accurate ACV determination.
An adjuster discovers the totaled vehicle has a rebuilt engine worth $3,500 installed six months before the loss. How should this be treated?
Answer: Evaluate whether and how much the rebuild increases market value
A rebuilt engine may add value, but adjusters must assess actual market impact since buyers may not pay full installation cost for a used vehicle's rebuilt engine.