Property Insurance FundamentalsQuestion 148 of 474
An 18-year-old composition-shingle roof with a replacement cost of $24,000 is destroyed by hail. Depreciation is calculated at $14,000. If the policy settles this partial loss on an ACTUAL CASH VALUE basis (no replacement-cost endorsement), the insurer will pay (before deductible):
a.$10,000
b.$24,000
c.$0, because shingles are excluded
d.$14,000
Explanation
Actual Cash Value (ACV) under California Insurance Code §2051 is Replacement Cost minus Depreciation: $24,000 - $14,000 = $10,000. The remaining depreciation is the insured's responsibility unless a replacement-cost endorsement is in force and the repair is actually completed.
Law Reference: Cal. Ins. Code §2051This topic, taught in full in the Personal Lines Insurance Producer guide. Personal Lines Insurance Producer — Complete Study Guide (2026) — PDF + EPUB, $19.99 · 14-day refund →
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