What does "replacement cost" refer to in property insurance?

What does "replacement cost" refer to in property insurance?

• A. The market value of the property before damage
• B. The cost to replace or repair damaged property without depreciation
• C. The amount received after an insurance claim
• D. The profit margin on the insurance policy

Answer: (B)

Replacement cost in property insurance specifically refers to the amount it would take to replace or repair damaged property without accounting for depreciation. This means that if a property sustains damage, the insurance would cover the full cost of repairing or replacing the damaged item to restore it to its original condition. This approach is particularly beneficial for policyholders because it ensures that they are not penalized for the loss of value that a property might experience over time due to age or wear and tear. This concept emphasizes the current cost to restore the property, thus providing comprehensive coverage for the insured.

Replacement cost in property insurance specifically refers to the amount it would take to replace or repair damaged property without accounting for depreciation. This means that if a property sustains damage, the insurance would cover the full cost of repairing or replacing the damaged item to restore it to its original condition. This approach is particularly beneficial for policyholders because it ensures that they are not penalized for the loss of value that a property might experience over time due to age or wear and tear. This concept emphasizes the current cost to restore the property, thus providing comprehensive coverage for the insured.