A dwelling with a replacement cost of $150,000 was insured under a Homeowners 3 policy for $100,000 at the time the roof was destroyed by a windstorm.The actual cash value of the loss was $9,000,but it will cost $12,000 to replace the roof.Assuming no deductible,what will the insurer pay to settle this loss?
A)$8,000
B)$9,000
C)$10,000
D)$12,000

Question

Quizplus · Accepted Answer

The insurer will pay up to the limit of the policy, which in this case is $100,000. The actual cash value of the loss is $9,000, but since the policy is a replacement cost policy, the insurer will pay the full cost of $12,000 to replace the roof. Therefore, the insurer will pay the lesser of the policy limit or the cost to replace the roof, which is $10,000 in this case.

A Dwelling with a Replacement Cost of $150,000 Was Insured