Registered Insurance Brokers of Ontario (RIBO) Exam 2026 – 400 Free Practice Questions to Pass the Exam

When determining the amount an insurer will pay for a loss, the actual cash value before the loss is a critical factor. Actual cash value, often defined as the replacement cost minus depreciation, considers the property's value at the time of the loss. It reflects the economic reality of the property's worth, taking into account factors such as age, wear and tear, and market conditions leading up to the loss.

This method ensures that the compensation is fair and reflects the real financial impact of the loss on the policyholder. Other factors such as the original purchase price, market value, or expected lifespan may influence a property’s overall evaluation, but they do not provide the most accurate or equitable basis for the insurer's payout. For example, the original purchase price may not reflect current market fluctuations or depreciation, while the expected lifespan pertains more to the usability of the property than its value at the time of the loss.