Claims Adjuster Practice Exam 2026 - Free Claims Adjuster Practice Questions and Study Guide

The term "replacement cost less depreciation" is closely associated with the Actual Cash Value (ACV) method of calculating insurance claims. This approach determines the value of an insured item by taking into account the cost to replace the item with a new one of similar kind and quality, adjusted for depreciation. Depreciation reflects the wear and tear that occurs over time, which impacts the item's current value.

In the context of insurance and claims adjusting, using this method ensures that the policyholder receives an amount that reflects both the original cost of the item and its current condition. This concept is fundamentally tied to the calculation of Actual Cash Value, making it the correct choice in this scenario.

In contrast, the other options do not utilize this specific method for determining value. Business auto coverage and personal auto policy typically focus on different kinds of coverage and valuation methods, whereas an Inland Marine policy pertains to coverage for movable goods rather than applying the standard practicalities of replacement cost and depreciation.