OLT-Breakroom: Chapter 3 Quiz

Dear Jan

I am not sure why the answer to this question would be as stated when actual cash value is defined as Replacement Cost less depreciation:

Question 18

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How are losses under Part D of the PAP paid?

Select one:

A. Part D pays losses on the lesser of actual cash value (less depreciation) or the cost to repair or replace damages to the vehicle

B. None of the answers are correct Incorrect

C. Part D pays losses on the cost to repair or replace damages to the vehicle

D. Part D pays losses on a replacement basis if the insured carries a limit equal to the value of the vehicle

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The correct answer is: Part D pays losses on the lesser of actual cash value (less depreciation) or the cost to repair or replace damages to the vehicle

Please explain...

Shirley-Ann

Hi Shirley,

Losses for Part D auto coverage are covered for ACV minus depreciation. Replacement cost is not available in an auto policy. Please see page 57 in the state manual. Replacement cost on vehicles is something new that insurance companies have just started to offer. It is not a part of the PAP.

You are correct with your definition of replacement cost, but it not part of the auto policy unless a company is offering this as a specific endorsement.

Jan

Hi Jan

My manual is the 24th edition which was purchased two months before they revised it. When I contacted the person who is in charge of the editions, he said the changes were minor and that my teacher should be able to tell me what the minor changes are. I can identify a few changes in reading the notes here, but I am now wondering if this is one such change. My edition has Part D (How losses are paid) on page 61 and it states, "Part D's limit of liability provision calls for payment of the lesser of actual cash value or the cost to repair or replace, and a special limit of $1,500 applies to any non-owned auto that is a trailer".

Everything about the answer was correct to me except that insert about depreciation.

If you are able to point out any of the minor changes to the 24th edition I would be grateful.

Thanks again for your quick response.

Shirley-Ann

Hi Shirley,

There are minor revisions between the 24th and 25th editions. The revisions have been made in the course, so if you notice discrepancies you should always contact me so I can explain.

Regarding your question - this is not a discrepancy. The author of the course added "less depreciation" in parenthesis to show that the definition of ACV takes into account depreciation. This is not a difference in the 25th edition of the state manual.

Jan

Thank you.

Property and Casualty -General Lines

Chapter 3 Quiz

Question 18

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