Question

Which method of loss valuation is contrary to the basic concept of indemnity?A. Replacement cost

- B. Actual cash value
- C. Market value
- D. Agreed value

Answer 1

The method of actual cash value is contrary to the basic concept of indemnity.

Step-by-step explanation:

The method of actual cash value is contrary to the basic concept of indemnity.

Actual cash value is a method of loss valuation in which the value of the property is determined based on its current market value minus depreciation.

This method does not fully indemnify the insured party as it takes into account the wear and tear of the property over time.

On the other hand, the other methods of loss valuation mentioned in the options, such as replacement cost, market value, and agreed value, aim to provide full compensation or reimbursement to the insured party, aligning with the basic concept of indemnity.