Dwelling Policy (DP)Question 319 of 531
Fire damages a dwelling insured on a basic form. Rebuilding the damaged portion costs $60,000, depreciation on it is $18,000, and the deductible is $1,000. The insurer pays:
a.$42,000
b.$41,000
c.$60,000
d.$59,000
Explanation
The basic form settles building losses at actual cash value, which is replacement cost minus depreciation: $60,000 less $18,000 is $42,000. The deductible then comes off that settlement, leaving a check for $41,000. Taking the deductible off replacement cost and ignoring depreciation would produce $59,000, which is not how the basic form settles a loss.
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