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).

Popular posts from this blog

In insurance,

Jim has been arrested for drunk driving. In order to be allowed out of jail before his court date, Jim will most likely need: