North Carolina Adjuster Practice Exam

Which valuation method is typically used by an insurer under a MH (F) policy?

1. Replacement Cost

2. Actual Cash Value (ACV)

3. Market Value

4. Agreed Value

The correct answer is: Actual Cash Value (ACV)

The correct choice, Actual Cash Value (ACV), is commonly used by insurers under a Manufactured Home (F) policy due to the nature of the coverage and how depreciation is considered in such policies. ACV takes into account the replacement cost of the property minus depreciation, which reflects the current market value of the property after its wear and tear over time. This method provides a fair assessment of the home’s worth at the time of the loss, aligning with how claims are typically settled in the context of mobile and manufactured homes. Replacement Cost differs from ACV as it does not factor in depreciation, providing the cost to replace the item with a new one of similar kind and quality. This method is often more advantageous for policyholders but is not the standard for MH (F) policies. Market Value is a measure of the price a property would sell for on the open market, which can fluctuate significantly based on external conditions. While it offers insight into the property's worth, insurers generally do not base their payout structures primarily on market value in the case of manufactured homes. Agreed Value is a predetermined value set by the insurer and the insured before any loss occurs. While it can benefit situations where the value of items is hard to determine after a loss, this