Question

Replacement cost is defined as

1) The market value of property of the like kind and quality
2) Full replacement of property with like kind and quality, less an allowance for physical deterioration and depreciation
3) Payment of the full policy limits in the event of a total loss
4) Full replacement of property at its current cost, new and without reduction for depreciation

Answer 1

Replacement cost is the full replacement of property with like kind and quality, without a reduction for depreciation, in the event of a total loss.

Step-by-step explanation:

The question is about the definition of replacement cost, which is related to the field of insurance. Replacement cost refers to the full replacement of property with like kind and quality, at its current cost, new and without reduction for depreciation. It is a term commonly used in property insurance policies. For example, when a homeowner insures their property for the cost of full replacement, it means that in the event of a total loss, the insurance company would cover the cost of replacing the property with a new one of similar kind and quality, without taking into account any depreciation.