To obtain replacement cost coverage on the dwelling with no depreciation, the insured must carry a dwelling limit of at least what percent of the building's actual cash value?

To obtain replacement cost coverage on the dwelling with no depreciation, the insured must carry a dwelling limit of at least what percent of the building's actual cash value?

• A. 70 Percent
• B. 80 Percent
• C. 90 Percent
• D. 100 Percent

Answer: (B)

To get replacement cost coverage on the dwelling without depreciation, you must carry a dwelling limit equal to at least 80% of the dwelling’s replacement cost. This 80% threshold is the coinsurance rule that determines whether you receive replacement cost payments without depreciation. If your coverage is at least 80% of replacement cost, a covered loss is paid at replacement cost (no depreciation) up to the policy limit. If your limit is below 80% of replacement cost, the insurer applies a coinsurance penalty and pays a proportion of the loss based on your coverage relative to the required amount. The key idea is meeting that 80% of replacement cost benchmark; the question’s reference to actual cash value is not the basis for this rule. Therefore, the minimum is 80 percent.

To get replacement cost coverage on the dwelling without depreciation, you must carry a dwelling limit equal to at least 80% of the dwelling’s replacement cost. This 80% threshold is the coinsurance rule that determines whether you receive replacement cost payments without depreciation. If your coverage is at least 80% of replacement cost, a covered loss is paid at replacement cost (no depreciation) up to the policy limit. If your limit is below 80% of replacement cost, the insurer applies a coinsurance penalty and pays a proportion of the loss based on your coverage relative to the required amount. The key idea is meeting that 80% of replacement cost benchmark; the question’s reference to actual cash value is not the basis for this rule. Therefore, the minimum is 80 percent.