West Virginia Property and Casualty Licensing Practice Exam

What is the maximum amount payable for a loss to a satellite dish under farm insurance forms?

1. Replacement value

2. Actual cash value

3. Market value

4. Set amount of $500

The correct answer is: Actual cash value

The maximum amount payable for a loss to a satellite dish under farm insurance forms is based on the actual cash value. Actual cash value is calculated as the replacement cost of the item minus depreciation. This method takes into account the current value of the property based on its age and condition, rather than what it would cost to replace it with a new item. This approach is particularly relevant in farm insurance, where certain property types and their wear and tear can significantly affect their worth. In contrast, replacement value would cover the cost to replace the satellite dish without factoring in depreciation, arguably offering a higher payout than what is provided under farm insurance for such items. Market value refers to the price at which the property could be sold in the open market, which can fluctuate based on demand and other economic factors, making it an unreliable measure for insurance purposes. A set amount of $500 would impose a limit on the payout regardless of the actual value or loss, which is not the standard practice for items like satellite dishes under typical farm insurance policies. Hence, actual cash value is the most accurate and applicable answer in this context.