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AIC 304 – Successfully Evaluating Property Claims
Verified Practice Exam Questions & Answers (2026/2027 Update)
SECTION 1: PROPERTY CLAIMS ENVIRONMENT & VALUATION METHODS
1. What is the primary difference between a first-party claim and a third-party
claim in property insurance?
A) First-party claims involve bodily injury; third-party claims involve property
damage
B) First-party claims are filed by the insured against their own policy; third-party
claims are filed against another party's policy
C) First-party claims are always fraudulent; third-party claims are legitimate
D) First-party claims require a police report; third-party claims do not
Correct Answer: B. First-party claims are filed by the insured against their own
policy; third-party claims are filed against another party's policy. Rationale: A
first-party claim occurs when the policyholder makes a claim on their own
insurance policy (e.g., homeowner files for fire damage). A third-party claim occurs
when someone files a claim against the policyholder for damage caused by the
policyholder .
2. Which of the following is a core duty of a property claims adjuster?
,A) Maximize payouts to policyholders to maintain customer satisfaction
B) Investigate the loss, determine coverage, evaluate damages, and negotiate
settlement
C) Represent the insured in court proceedings
D) Sell additional insurance products during the claims process
Correct Answer: B. Investigate the loss, determine coverage, evaluate damages,
and negotiate settlement. Rationale: The adjuster's core duties include
investigating the facts of the loss, reviewing the policy to determine coverage,
evaluating the extent of damages, and negotiating a fair settlement with the
insured or their representative .
3. What is Replacement Cost?
A) The cost to repair or replace property using new materials of like kind and
quality with no deduction for depreciation
B) The cost to replace property with new property of like kind and quality less
depreciation
C) An asset's historical cost minus accumulated depreciation
D) The price at which a particular piece of property could be sold on the open
market
Correct Answer: A. The cost to repair or replace property using new materials of
like kind and quality with no deduction for depreciation. Rationale: Replacement
cost is the cost to repair or replace property using new materials of like kind and
quality with no deduction for depreciation.
4. What is Actual Cash Value (ACV)?
A) The cost to repair or replace property using new materials with no deduction
for depreciation
B) The cost to replace property with new property of like kind and quality less
depreciation
,C) An asset's historical cost minus accumulated depreciation
D) The price at which a particular piece of property could be sold on the open
market
Correct Answer: B. The cost to replace property with new property of like kind
and quality less depreciation. Rationale: Actual cash value (ACV) is the cost to
replace property with new property of like kind and quality less depreciation.
5. What is the Functional Valuation Approach?
A) A valuation method in which the insurer is required to pay no more than the
cost to repair or replace the damaged property with property that is its functional
equivalent
B) A method of valuing property in which the insurer and insured agree on the
maximum amount that will be paid in the event of a total loss
C) An accounting method of calculating depreciation by taking an equal amount of
an asset's cost as an expense for each year
D) The price at which a particular piece of property could be sold on the open
market
Correct Answer: A. A valuation method in which the insurer is required to pay no
more than the cost to repair or replace the damaged property with property
that is its functional equivalent. Rationale: Functional valuation approach is a
valuation method in which the insurer is required to pay no more than the cost to
repair or replace the damaged or destroyed property with property that is its
functional equivalent .
6. In some structures, especially those with older or more ornate finishes such
as plaster walls, insurance coverage for property losses is provided to repair or
replace property using current construction methods and materials. This is
called a:
, A) Functional valuation approach
B) Limited ACV approach
C) Limited replacement cost approach
D) Contemporary valuation approach
Correct Answer: A. Functional valuation approach. Rationale: When older or
ornate finishes cannot be matched, the functional valuation approach pays no
more than the cost to repair or replace with property that is its functional
equivalent .
7. Net depreciated value is an asset's historical cost minus accumulated
depreciation, and is more commonly known as:
A) Replacement cost
B) Book value
C) Actual cash value
D) Street value
Correct Answer: B. Book value. Rationale: Book value (net depreciated value) is
an asset's historical cost minus accumulated depreciation.
8. What is Straight-line depreciation method?
A) Depreciation that occurs more rapidly when an item is first purchased and then
more slowly in subsequent years
B) An accounting method of calculating depreciation by taking an equal amount of
an asset's cost as an expense for each year of the asset's expected useful life
C) Depreciation that occurs slightly for a given time period and then increases
rapidly
D) The loss of value caused by changes in technology or fashion
Correct Answer: B. An accounting method of calculating depreciation by taking
an equal amount of an asset's cost as an expense for each year of the asset's
expected useful life. Rationale: Straight-line depreciation method is an accounting
Answers| Latest Update| Pass Guaranteed
AIC 304 – Successfully Evaluating Property Claims
Verified Practice Exam Questions & Answers (2026/2027 Update)
SECTION 1: PROPERTY CLAIMS ENVIRONMENT & VALUATION METHODS
1. What is the primary difference between a first-party claim and a third-party
claim in property insurance?
A) First-party claims involve bodily injury; third-party claims involve property
damage
B) First-party claims are filed by the insured against their own policy; third-party
claims are filed against another party's policy
C) First-party claims are always fraudulent; third-party claims are legitimate
D) First-party claims require a police report; third-party claims do not
Correct Answer: B. First-party claims are filed by the insured against their own
policy; third-party claims are filed against another party's policy. Rationale: A
first-party claim occurs when the policyholder makes a claim on their own
insurance policy (e.g., homeowner files for fire damage). A third-party claim occurs
when someone files a claim against the policyholder for damage caused by the
policyholder .
2. Which of the following is a core duty of a property claims adjuster?
,A) Maximize payouts to policyholders to maintain customer satisfaction
B) Investigate the loss, determine coverage, evaluate damages, and negotiate
settlement
C) Represent the insured in court proceedings
D) Sell additional insurance products during the claims process
Correct Answer: B. Investigate the loss, determine coverage, evaluate damages,
and negotiate settlement. Rationale: The adjuster's core duties include
investigating the facts of the loss, reviewing the policy to determine coverage,
evaluating the extent of damages, and negotiating a fair settlement with the
insured or their representative .
3. What is Replacement Cost?
A) The cost to repair or replace property using new materials of like kind and
quality with no deduction for depreciation
B) The cost to replace property with new property of like kind and quality less
depreciation
C) An asset's historical cost minus accumulated depreciation
D) The price at which a particular piece of property could be sold on the open
market
Correct Answer: A. The cost to repair or replace property using new materials of
like kind and quality with no deduction for depreciation. Rationale: Replacement
cost is the cost to repair or replace property using new materials of like kind and
quality with no deduction for depreciation.
4. What is Actual Cash Value (ACV)?
A) The cost to repair or replace property using new materials with no deduction
for depreciation
B) The cost to replace property with new property of like kind and quality less
depreciation
,C) An asset's historical cost minus accumulated depreciation
D) The price at which a particular piece of property could be sold on the open
market
Correct Answer: B. The cost to replace property with new property of like kind
and quality less depreciation. Rationale: Actual cash value (ACV) is the cost to
replace property with new property of like kind and quality less depreciation.
5. What is the Functional Valuation Approach?
A) A valuation method in which the insurer is required to pay no more than the
cost to repair or replace the damaged property with property that is its functional
equivalent
B) A method of valuing property in which the insurer and insured agree on the
maximum amount that will be paid in the event of a total loss
C) An accounting method of calculating depreciation by taking an equal amount of
an asset's cost as an expense for each year
D) The price at which a particular piece of property could be sold on the open
market
Correct Answer: A. A valuation method in which the insurer is required to pay no
more than the cost to repair or replace the damaged property with property
that is its functional equivalent. Rationale: Functional valuation approach is a
valuation method in which the insurer is required to pay no more than the cost to
repair or replace the damaged or destroyed property with property that is its
functional equivalent .
6. In some structures, especially those with older or more ornate finishes such
as plaster walls, insurance coverage for property losses is provided to repair or
replace property using current construction methods and materials. This is
called a:
, A) Functional valuation approach
B) Limited ACV approach
C) Limited replacement cost approach
D) Contemporary valuation approach
Correct Answer: A. Functional valuation approach. Rationale: When older or
ornate finishes cannot be matched, the functional valuation approach pays no
more than the cost to repair or replace with property that is its functional
equivalent .
7. Net depreciated value is an asset's historical cost minus accumulated
depreciation, and is more commonly known as:
A) Replacement cost
B) Book value
C) Actual cash value
D) Street value
Correct Answer: B. Book value. Rationale: Book value (net depreciated value) is
an asset's historical cost minus accumulated depreciation.
8. What is Straight-line depreciation method?
A) Depreciation that occurs more rapidly when an item is first purchased and then
more slowly in subsequent years
B) An accounting method of calculating depreciation by taking an equal amount of
an asset's cost as an expense for each year of the asset's expected useful life
C) Depreciation that occurs slightly for a given time period and then increases
rapidly
D) The loss of value caused by changes in technology or fashion
Correct Answer: B. An accounting method of calculating depreciation by taking
an equal amount of an asset's cost as an expense for each year of the asset's
expected useful life. Rationale: Straight-line depreciation method is an accounting
