What term describes coverage that pays to replace damaged property with new items at replacement cost?

What term describes coverage that pays to replace damaged property with new items at replacement cost?

• A. Agreed value
• B. Replacement cost
• C. Market value
• D. Actual cash value

Answer: (B)

Replacement cost coverage pays to replace damaged property with a new item at current replacement cost, without subtracting depreciation, and usually up to the policy limit. This means you’re reimbursed for the amount needed to buy a new item today, not for the item’s diminished value due to age or use, provided the claim meets the policy’s replacement and limit requirements. This differs from actual cash value, which deducts depreciation; market value, which is what the item could fetch in a sale; and agreed value, where a preset amount is paid regardless of current replacement cost. For example, a damaged television would be replaced with a new model at today’s price under replacement cost coverage, rather than receiving a depreciated amount or whatever a seller would pay for a used unit.

Replacement cost coverage pays to replace damaged property with a new item at current replacement cost, without subtracting depreciation, and usually up to the policy limit. This means you’re reimbursed for the amount needed to buy a new item today, not for the item’s diminished value due to age or use, provided the claim meets the policy’s replacement and limit requirements. This differs from actual cash value, which deducts depreciation; market value, which is what the item could fetch in a sale; and agreed value, where a preset amount is paid regardless of current replacement cost. For example, a damaged television would be replaced with a new model at today’s price under replacement cost coverage, rather than receiving a depreciated amount or whatever a seller would pay for a used unit.