DP-2 Broad Form valuation for personal property is based on what?

DP-2 Broad Form valuation for personal property is based on what?

• A. Replacement cost
• B. Actual cash value
• C. Market value
• D. Agreed value

Answer: (B)

The key idea is how DP-2 handles the value of personal property after a loss. Under this form, personal property is valued on an actual cash value basis, meaning the insurer pays the replacement cost minus depreciation for age and wear. So you’re compensated for the item’s current worth, not what you originally paid or its full new replacement cost. This differs from replacement cost coverage (which would pay enough to replace with a new item) or from market or agreed-value approaches used in other contexts. For example, a five-year-old TV with a $1,000 new replacement cost would be paid at its actual cash value after depreciation, not $1,000.

The key idea is how DP-2 handles the value of personal property after a loss. Under this form, personal property is valued on an actual cash value basis, meaning the insurer pays the replacement cost minus depreciation for age and wear. So you’re compensated for the item’s current worth, not what you originally paid or its full new replacement cost. This differs from replacement cost coverage (which would pay enough to replace with a new item) or from market or agreed-value approaches used in other contexts. For example, a five-year-old TV with a $1,000 new replacement cost would be paid at its actual cash value after depreciation, not $1,000.