The insured's washing machine was damaged by a covered loss. At the time of the loss, the actual cash value (ACV) of the machine was $300. Repairs would cost $250. The scrap metal dealer would pay $100 for what remains of it. Which one of the following calculations correctly determines whether or not the washing machine was a constructive total loss?

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The insured's washing machine was damaged by a covered loss. At the time of the loss, the actual cash value (ACV) of the machine was $300. Repairs would cost $250. The scrap metal dealer would pay $100 for what remains of it. Which one of the following calculations correctly determines whether or not the washing machine was a constructive total loss?

A. $300 ACV - $100 salvage value = $200. This loss was a constructive total loss.

B. $300 ACV - $100 salvage value = $200. This loss was not a constructive total loss.

C. $300 ACV - $250 repairs = $50. This loss was a constructive total loss.

D. $300 ACV - $250 repairs = $50. This loss was not a constructive total loss.

Answer: A

AINS Chapter 6

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An insured's building has an actual cash value of $200,000, and he has insured the property for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay?

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