Property Insurance FundamentalsQuestion 149 of 158
Which statement BEST distinguishes replacement cost from actual cash value?
a.Replacement cost includes a deduction for sales tax; ACV does not
b.Replacement cost is always limited to 80% of the policy limit
c.Replacement cost pays to repair or replace with like kind and quality without deduction for depreciation; ACV deducts depreciation
d.Both methods are identical in California after the 2018 wildfires
Explanation
Replacement cost pays the current cost to repair or replace with like kind and quality, with NO depreciation deducted. ACV subtracts depreciation from that amount. The difference is what makes RC valuable for older homes and roofs.
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