In which loss scenario is recovery based on the insured value rather than market value?

In which loss scenario is recovery based on the insured value rather than market value?

• A. Total loss
• B. Partial loss
• C. Replacement cost
• D. Market value

Answer: (A)

When the aircraft is a total loss, the insurer settles based on the insured value rather than the market value. If the airplane is completely destroyed or deemed a constructive total loss, the payout matches the amount the policy was written for (the sum insured or agreed value), up to policy terms. The market value of the wrecked aircraft isn’t what determines the settlement because there’s no usable asset left to sell. In partial loss scenarios, settlements are usually based on actual cash value or replacement costs for the damaged portion, and replacement-cost coverage aims to cover the cost to replace, again not simply the market value.

When the aircraft is a total loss, the insurer settles based on the insured value rather than the market value. If the airplane is completely destroyed or deemed a constructive total loss, the payout matches the amount the policy was written for (the sum insured or agreed value), up to policy terms. The market value of the wrecked aircraft isn’t what determines the settlement because there’s no usable asset left to sell. In partial loss scenarios, settlements are usually based on actual cash value or replacement costs for the damaged portion, and replacement-cost coverage aims to cover the cost to replace, again not simply the market value.