Guaranteed replacement cost in a homeowner’s insurance
policy means that the insurance company
A. guarantees they’ll replace the lost items for you.
B. guarantees they’ll pay the current value of items lost.
C. will pay you what it costs to replace the items new.
D. will pay you something for lost items, but the amount
can’t be determined, so they guarantee an average
market value.
To determine the correct answer, let's break down the options and explain what each one means.
A. "Guarantees they'll replace the lost items for you." This option implies that the insurance company will replace the lost items with brand new ones. However, it does not necessarily mean that the replacement cost will be covered in full.
B. "Guarantees they'll pay the current value of items lost." This option suggests that the insurance company will pay the current market value of the lost items. This value may be less than what it would cost to replace the items with new ones, as it takes into account depreciation.
C. "Will pay you what it costs to replace the items new." This option implies that the insurance company will reimburse you for the cost of replacing the lost items with new ones. This means that the full replacement cost would be covered, disregarding any depreciation.
D. "Will pay you something for lost items, but the amount can't be determined, so they guarantee an average market value." This option suggests that the insurance company will pay a certain amount for the lost items, but it may not be the full replacement cost. Instead, they provide an average market value as a guaranteed payment.
Based on the explanations provided, the correct answer is C. In a homeowner's insurance policy, guaranteed replacement cost means that the insurance company will pay you what it costs to replace the items new, covering the full replacement cost without factoring in depreciation.