Which loss will be settled on an Actual Cash Value basis according to homeowners policies?

The appropriate answer is the theft of a personal computer. Homeowners policies typically settle losses based on Actual Cash Value (ACV) for personal property items. ACV is calculated as the replacement cost of an item minus depreciation.

In the case of the theft of a personal computer, when it is reported as a total loss, the insurer would assess what the computer is worth at the time of the loss, considering its age and condition. This means that the settlement would reflect the current market value of the computer, rather than simply replacing it with a new one.

When it comes to the loss of a diamond ring, while it may be personal property, its settlement might be subject to special coverage provisions that could allow for different methods of evaluation. The replacement of the insured's antique doll house may also involve a more complex valuation due to its collectible nature, possibly leading to a replacement cost coverage situation instead. Finally, the fire damage to a family photo album tends to reflect sentimental value, and its coverage would typically focus more on physical damage rather than market value.

Understanding Actual Cash Value is crucial in homeowners insurance as it clarifies how different types of losses will be settled and what policyholders can expect to receive in the event of a claim.