What is the minimum amount of Coverage A needed for replacement cost coverage if the replacement value is $60,000?

What is the minimum amount of Coverage A needed for replacement cost coverage if the replacement value is $60,000?

• A. $35,000
• B. $48,000
• C. $60,000
• D. $70,000

Answer: (B)

The minimum amount of Coverage A needed for replacement cost coverage is determined by the concept of insuring the property to a certain percentage of its replacement cost. Generally, most policies require that the property is insured for at least 80% of its replacement cost to fully qualify for replacement coverage without penalties. In this case, if the replacement value is $60,000, calculating 80% of that amount results in $48,000. Therefore, in order to meet the minimum requirements for replacement cost coverage as stipulated by standard insurance practices, the property would need to be insured for at least $48,000. Selecting this amount ensures that, in the event of a claim, the policyholder would receive the appropriate level of coverage to replace the property without facing a co-insurance penalty. This is crucial for ensuring adequate financial protection against potential losses, making $48,000 the correct answer for minimum coverage necessary to ensure replacement cost coverage on the property valued at $60,000.

The minimum amount of Coverage A needed for replacement cost coverage is determined by the concept of insuring the property to a certain percentage of its replacement cost. Generally, most policies require that the property is insured for at least 80% of its replacement cost to fully qualify for replacement coverage without penalties.

In this case, if the replacement value is $60,000, calculating 80% of that amount results in $48,000. Therefore, in order to meet the minimum requirements for replacement cost coverage as stipulated by standard insurance practices, the property would need to be insured for at least $48,000.

Selecting this amount ensures that, in the event of a claim, the policyholder would receive the appropriate level of coverage to replace the property without facing a co-insurance penalty. This is crucial for ensuring adequate financial protection against potential losses, making $48,000 the correct answer for minimum coverage necessary to ensure replacement cost coverage on the property valued at $60,000.