Homeowners Policy (HO)Question 323 of 474
A dwelling would cost $400,000 to replace and carries Coverage A of $340,000. A covered fire causes $50,000 of repair cost, whose depreciated value is $38,000. The policy pays:
a.$50,000
b.$38,000
c.$44,000
d.$42,500
Explanation
The dwelling settles at replacement cost with no deduction for depreciation when the amount of insurance is at least 80% of full replacement cost, and $340,000 divided by $400,000 is 85%. That clears the test, so the full $50,000 repair cost is paid. The $38,000 answer is the actual cash value, which is how contents rather than the dwelling would settle.
This topic, taught in full in the Personal Lines Insurance Producer guide. Personal Lines Insurance Producer — Complete Study Guide (2026) — PDF + EPUB, $19.99 · 14-day refund →
Practice all 474 questions free — no signup required.
Own the complete Personal Lines Insurance Producer guide — PDF + EPUB, $19.99 →
Related questions on this topic
- A city condemns and demolishes a house for a zoning violation. On a Homeowners policy this loss is:
- Which of these is excluded from Coverage C on a Homeowners policy?
- A homeowner rents a spare bedroom to an unrelated boarder. The boarder's furniture and clothes are:
- A home has a replacement cost of $300,000 and Coverage A of $210,000. A covered loss costs $30,000 to repair and has an actual cash value of $18,000. Before the deductible, the settlement is:
- A six-year-old sofa would cost $2,400 to replace and has depreciated by half. On an unendorsed Homeowners form the contents claim settles at:
- A windstorm causes $8,400 of covered damage to a dwelling and the Section I deductible is $1,500. The insurer pays:
Last reviewed: · editorial process
PrepPass team · Verified against California Personal Lines Insurance License Exam · How we review