Claims Handling, Loss Adjustment, and Damage Valuation
Domain 6 tests the claims process from notice to payment: duties after loss, investigation, valuation, and dispute resolution. The exam favors questions about proof of loss, examination under oath, and actual cash value.
Claims handling
- Insured duties: prompt notice, protect property from further damage, inventory, cooperate, submit proof of loss, allow inspection, and submit to examination under oath if required.
- Adjuster tasks: verify coverage, determine cause and scope, document damages, apply deductible and limits, evaluate subrogation, and preserve evidence.
- Appraisal resolves valuation disputes when the policy provides it; it does not decide coverage.
Valuation
- Replacement cost = current cost to repair or replace with like kind and quality.
- Actual cash value = replacement cost less depreciation; some policies use market value or a formula.
- Betterment and functional obsolescence can reduce payment.
Worked example
A 12-year-old roof with a 20-year life has a replacement cost of $20,000. Straight-line depreciation is 12/20 = 60%, or $12,000. ACV = $8,000. With a $2,000 deductible, the initial payment is $6,000. If the policy provides recoverable depreciation, the insured may recover the withheld $12,000 after completing repairs, subject to the limit. The reasoning: depreciation is withheld, not forgiven.
Traps
Do not miss the proof-of-loss deadline or assume verbal notice satisfies the policy. Do not pay replacement cost before repairs are complete unless the form allows it. Do not ignore salvage or subrogation.