Dwelling Policy (DP)Question 276 of 474
A dwelling costs $300,000 to replace and is insured on a special form for $180,000 under an 80% loss-settlement condition. A partial building loss is settled:
a.At replacement cost, because this loss is only partial
b.At less than replacement cost; $240,000 was required
c.At market value, since the limit fell below that cost
d.At replacement cost, because a stated limit was purchased
Explanation
The condition requires 80% of $300,000, or $240,000, and the owner carries $180,000. Falling short of that figure drops the settlement to the greater of actual cash value or the proportion of the repair cost that $180,000 bears to $240,000. Buying any limit does not earn replacement cost, and market value is not a settlement basis in these forms.
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