Question

An insured's dwelling purchased two years ago for $58,000 has a replacement value of $60,000. In order to qualify for replacement cost coverage in the event of loss, for what amount of insurance MUST the Homeowners Policy be written?

a. 100% of Coverage A.
b. 80% of Coverage A plus 10% of Coverage B.
c. 80% of Coverage c.
d. 80% of Coverage A

Answer 1

To qualify for replacement cost coverage on a homeowners policy, the policy must be written for at least 80% of the dwelling's replacement value, not its original purchase price. The correct option is 'd. 80% of Coverage A'.

Step-by-step explanation:

In order to qualify for replacement cost coverage in the event of loss, the homeowner policy must be written for 80% of Coverage A (the replacement value of the dwelling). This means that the insurance must be for $48,000 (80% of $60,000).

To secure replacement cost coverage for a dwelling in the event of loss, an insured's homeowners policy must be written for at least 80% of the replacement value of the dwelling. In this instance, if an insured's dwelling has a replacement value of $60,000, the minimum amount of coverage to qualify for replacement cost coverage would be 80% of that amount, which equals $48,000. Therefore, the answer is 80% of Coverage A, which makes the correct option'd. 80% of Coverage A'.