Valuation, Appraisal, Depreciation and Salvage
Valuation items test actual cash value, fair market value, agreed value, replacement cost, depreciation, appraisal, constructive total loss, salvage, and damages estimates.
How to study claims adjusting
Treat each item as a claim file: verify coverage, document facts, value the loss, preserve defenses, and apply state adjuster duties.
Core concepts
Concept 1
Adjusters must apply the policy's valuation clause before calculating payment.
Exam cue: Identify valuation method before applying depreciation.
Concept 2
Depreciation, salvage, deductibles, limits, and coinsurance can materially change claim settlement.
Exam cue: Apply deductible and limit after measuring the loss.
Concept 3
Appraisal resolves amount disputes, while coverage disputes remain separate.
Exam cue: Separate salvage recovery from covered loss amount.
Risk pitfalls and guardrails
Using replacement cost when ACV applies.
Guardrail: Avoid answers that waive defenses, skip proof, ignore valuation wording, or use one state's claim rule everywhere.
Treating appraisal as a coverage grant.
Guardrail: Avoid answers that waive defenses, skip proof, ignore valuation wording, or use one state's claim rule everywhere.
Forgetting salvage value or deductible.
Guardrail: Avoid answers that waive defenses, skip proof, ignore valuation wording, or use one state's claim rule everywhere.
Memory anchors
Actual Cash Value
Actual cash value is commonly replacement cost minus depreciation.
Fair Market Value
Fair market value estimates what property would sell for in the market.
Agreed Value
Agreed value uses a value agreed before loss.
Replacement Cost
Replacement cost measures repair or replacement without depreciation when conditions are met.
Depreciation
Depreciation accounts for age, wear, and obsolescence.
Salvage
Salvage is remaining value in damaged property.
Constructive Total Loss
Constructive total loss occurs when repair is uneconomical under applicable rules.
Stated Value
Stated value is a value stated in the policy, subject to policy wording.
Material Damage Estimate
A material damage estimate documents repair or replacement cost.
Closing Report
A closing report records claim resolution and settlement basis.
Checkpoint rule
Do the check-up only after you can summarize each concept in one sentence and identify one dangerous pitfall from memory.
Knowledge Check (after reading)
Short check-up to confirm understanding of this module.
Check-up Questions
Which formula commonly expresses actual cash value?
What is physical depreciation?
Answer all questions to submit.
Next step personalized recommendations
Continue learning
Move forward only after this module is stable.
What is Pass Harbor?
Completely free exam prep for 317 U.S. exams.
- Practice questions
- Flashcards
- Study guides
- Mock exams
- No registration
- No paywall
- Start instantly
“No more expensive exam prep. Quality study tools should be accessible to everyone.”