Final answer:
Under a homeowners policy, for a claim over $2,500 on the dwelling to be paid on a replacement cost basis, the repairs must be completed. This requirement ensures the insurance is used for intended purposes and prevents payout on depreciated value of damaged property.
Step-by-step explanation:
Under a homeowners policy, for a claim of more than $2,500 on the dwelling to be paid on a replacement cost basis, the repairs must be completed. Homeowners insurance is designed to protect against damage or loss to property.
When a covered dwelling is damaged or burglarized, homeowners policies typically pay out to cover the costs.
However, in order to receive payment on a replacement cost basis rather than actual cash value, which factors in depreciation, policyholders are often required to complete the repairs for claims above a certain threshold, such as $2,500, as part of the insurance agreement terms.