Property Insurance FundamentalsQuestion 185 of 215
A 12-year-old roof with a normal life of 20 years is destroyed by a covered windstorm. Under a replacement-cost (RC) loss settlement, how is the loss generally paid?
a.Only the depreciated value of the old roof, with no allowance for a new one
b.The salvage value of the damaged shingles only
c.A flat 50% of the original cost of the roof
d.The cost to replace the roof with new materials of like kind and quality, without deduction for depreciation, subject to the policy limit and any conditions in the loss settlement clause
Explanation
Replacement cost coverage pays the cost to repair or replace with new materials of like kind and quality, without subtracting physical depreciation, subject to the policy limit and any loss-settlement conditions. Actual cash value would subtract depreciation, leaving only the depreciated value.
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