Which loss settlement method applies to single-family dwellings under the dwelling form?

Which loss settlement method applies to single-family dwellings under the dwelling form?

• A. Replacement cost
• B. Special loss settlement
• C. Actual cash value
• D. Market value

Answer: (A)

The key idea is how losses for the dwelling itself are settled. Under the dwelling form for a single-family dwelling, the dwelling coverage is settled on a replacement-cost basis when you carry at least 80% of the dwelling’s replacement cost in insurance. This means after a covered loss, the insurer will pay to replace the dwelling with new materials of like kind and quality, up to the policy limit, without deducting depreciation. If you insure for less than 80% of replacement cost, the payout is reduced proportionally by the coinsurance rule. Special loss settlement and market value aren’t the standard methods used for dwelling coverage, and actual cash value would apply only if you don’t meet the replacement-cost/80% requirement or are dealing with other coverages. So, replacement cost is the correct method for the dwelling itself when adequate coverage is carried.

The key idea is how losses for the dwelling itself are settled. Under the dwelling form for a single-family dwelling, the dwelling coverage is settled on a replacement-cost basis when you carry at least 80% of the dwelling’s replacement cost in insurance. This means after a covered loss, the insurer will pay to replace the dwelling with new materials of like kind and quality, up to the policy limit, without deducting depreciation. If you insure for less than 80% of replacement cost, the payout is reduced proportionally by the coinsurance rule. Special loss settlement and market value aren’t the standard methods used for dwelling coverage, and actual cash value would apply only if you don’t meet the replacement-cost/80% requirement or are dealing with other coverages. So, replacement cost is the correct method for the dwelling itself when adequate coverage is carried.