A store's water-damaged interior would cost $30,000 to replace and is worth $18,000 on an actual cash value basis. The replacement cost policy carries a $1,000 deductible. Before any repair work is done, the insurer's first payment is:

解析

A replacement cost policy normally advances the actual cash value and holds back the recoverable depreciation until the property is actually repaired or replaced. The advance here is $18,000 of actual cash value less the $1,000 deductible, or $17,000, and the $12,000 gap between $30,000 and $18,000 is the recoverable depreciation still held back. Paying $29,000 up front would release that holdback before any work was done.