You have cash value coverage for your personal property on your homeowner's policy. A camera that cost you $300 eight years ago had a life expectancy of 10 years. The camera was stolen, and a new one will cost only $200. How much will the insurance company pay?

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Quizplus · Accepted Answer

The insurance company will pay the actual cash value, which is the replacement cost minus depreciation. The camera has depreciated 80% (8 years out of 10), so the value is $200 - ($200 * 0.8) = $40. However, since the replacement cost is $200 and the camera is 80% depreciated, the insurance will pay $200 - $160 = $40. But since the minimum payout is typically the depreciated value of the original cost, which is $300 - ($300 * 0.8) = $60, the insurance company will pay $60.

You Have Cash Value Coverage for Your Personal Property on Your