Which statement BEST distinguishes a loss-settlement clause that pays on an actual cash value (ACV) basis from one that pays on a replacement-cost (RC) basis?

Explanation

ACV pays the cost to repair or replace minus a fair and reasonable deduction for physical depreciation. RC pays the cost to repair or replace with materials of like kind and quality without subtracting depreciation, typically conditioned on actually replacing the damaged property and subject to the policy limit. RC settlements often pay ACV first and the depreciation holdback after the insured replaces the property.