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?

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. $300 ACV - $100 salvage value = $200. This loss was a constructive total loss because it would cost more for the insurer to pay the repair cost of $250 than to pay the ACV and then sell for salvage (net of $200).

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