Registered Insurance Brokers of Ontario (RIBO) Practice Exam

What is the actual cash value coverage for electronic accessories under OAP 1 Owner's Form?

1. Replacement cost

2. Full actual cash value if factory installed

3. No coverage

4. Market value

The correct answer is: Full actual cash value if factory installed

The correct choice indicates that electronic accessories that are factory installed in a vehicle are covered for their full actual cash value under the OAP 1 Owner's Form. This means that in the event of a loss or damage, the insured would receive compensation equivalent to the depreciated value of those accessories at the time of the incident, rather than a replacement cost or a simple market value. In the context of insurance, actual cash value is generally calculated as replacement cost minus depreciation, so having full actual cash value means that the insured gets a fair assessment based on the item’s condition prior to the loss. Considering alternative options, replacement cost typically refers to the amount needed to replace the item with a new one of similar kind and quality, which does not accurately describe the coverage for factory installed accessories under this specific policy. "No coverage" would imply that there is absolutely no protection for electronic accessories, which is not the case with factory-installed items. Lastly, "market value" doesn't adequately reflect the compensation principle that is usually applied in insurance policies, as it would take into account external market factors that may not accurately represent the depreciated worth of the accessories at the moment of loss.