Homeowners Policy (HO)Question 324 of 474
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.$18,000
b.$30,000
c.$21,000
d.$26,250
Explanation
Because $210,000 is only 70% of replacement cost, the insured falls under the 80% requirement and the policy pays the greater of actual cash value or the proportion the limit bears to 80% of replacement cost. Eighty percent of $300,000 is $240,000, and $210,000 divided by $240,000 is 0.875, so 0.875 times $30,000 gives $26,250, which beats the $18,000 actual cash value.
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