Washington State Insurance Practice Exam 2025 - Free Insurance Practice Questions and Study Guide

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Question: 1 / 400

What method of valuation reflects the principle of indemnity by considering the reduction of value of property as it ages?

Actual Cash Value (ACV)

Explanation Actual Cash Value (ACV) is the only method of valuation that considers the reduction of value of property as it ages, reflecting the principle of indemnity. While functional replacement cost considers the cost of replacing the property, market value considers the current market value of the property, and stated value simply records the stated value of the property without considering its depreciation. Therefore, A is the most appropriate answer.

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Functional Replacement Cost

Market Value

Stated Value

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