Property Insurance FundamentalsPregunta 211 de 474
Under a replacement cost settlement, why does the insurer first pay only the actual cash value of the damage?
a.Depreciation is recoverable once the repairs are done
b.Depreciation is the insured's share of every repair
c.Depreciation is kept by the insurer as its salvage
d.Depreciation is released only if the mortgagee agrees
Explicación
Replacement cost policies pay the depreciated amount first and hold the depreciation back, releasing it after the insured completes the repair or replacement and submits proof of the cost. Calling that hold-back salvage confuses the insurer's right to damaged property with a timing device. The held-back sum is not a permanent share of the loss borne by the insured, provided the work is done.
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