Arizona Adjuster Practice Exam

Mark's aircraft sustained total loss with a hull coverage limit of $20,000, while its actual cash value at the time of loss was $25,000. How much will the insurer pay Mark?

1. 25,000

2. 30,000

3. 20,000

4. 15,000

The correct answer is: 20,000

In this scenario, the insurance payout is determined by the hull coverage limit and the terms of the insurance policy. Since Mark's aircraft sustained a total loss, the insurer will pay up to the limit specified in the insurance policy for hull coverage. Here, that coverage limit is set at $20,000. Even though the actual cash value of the aircraft at the time of loss is $25,000, insurance policies typically do not pay out beyond the policy limit, regardless of the market value or actual cash value of the item insured. Therefore, the insurer will only reimburse Mark up to the coverage limit, which is $20,000. This adherence to policy limits highlights the importance of ensuring the coverage adequately reflects the value of the asset to avoid being underinsured.