Property Loss Estimating and Claim Valuation
This domain tests whether you can convert a scope of damage into a defensible number using line-item estimating conventions and correct valuation math.
Building the estimate
Estimates are built line by line: quantity × unit price, priced to the date of loss and the local pricing region. Each item belongs to a trade, and the total is assembled from the trades. Standard components include removal and disposal, labor minimum charges, material and labor, sales tax, permits, and equipment rental.
Concepts the exam presses
- Replacement cost then depreciation. Compute replacement cost value (RCV) first, then subtract depreciation to reach actual cash value (ACV). On a replacement cost policy, the withheld depreciation is recoverable after repairs.
- Overhead and profit. O&P is added where the scope requires a general contractor to coordinate multiple trades, commonly when three or more trades are involved. It is not automatic on every claim.
- Matching. Where undamaged siding or roofing cannot reasonably be matched, the scope may need to extend to the matching area. Document the mismatch rather than asserting it.
- Betterment and code upgrades. New-for-old advantages and ordinance-driven upgrades are handled through depreciation, ordinance or law coverage, and policy limits.
- Salvage. Recoverable value reduces the loss.
Worked example
RCV of the repair is $24,000. Depreciation is $6,000 (25%). The policy has a $2,500 all-peril deductible and replacement cost coverage. The ACV payment is $24,000 − $6,000 − $2,500 = $15,500. When the insured completes the repair and documents the spend, the withheld $6,000 of recoverable depreciation is released, so the total paid approaches $21,500. The reasoning: the deductible is applied once, at the ACV stage, and depreciation is withheld rather than forfeited.
Traps that cost marks
- Applying overhead and profit without evidence a general contractor is required.
- Forgetting recoverable depreciation on an RCV policy.
- Using today's pricing for an older loss date.
- Double counting tear-out that is already embedded in a removal line.