Property Insurance FundamentalsQuestion 212 of 474
A covered fire causes damage with a replacement cost of $32,000; the actual cash value of that damage is $23,000 and the deductible is $1,000. What does the insurer pay before any repairs are made?
a.$22,000
b.$31,000
c.$23,000
d.$9,000
Explanation
The first payment on a replacement cost policy is the actual cash value of the damage less the deductible: $23,000 minus $1,000 is $22,000. The $23,000 figure forgets the deductible. The $31,000 total becomes payable only after the repairs are finished and receipts are submitted, when the $9,000 of recoverable depreciation is released.
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