State Farm Fire Independent Policy Practice Exam

What is the total amount payable for replaced furniture and appliances with an actual cash value of $6,135 and replacement cost of $8,325 under a policy with Coverage B of $80,000?

1. $8,325

2. $8,000

3. $6,135

4. $5,885

The correct answer is: $8,000

The amount payable in this situation is calculated by considering the actual cash value (ACV) and the replacement cost of the property, along with the coverage limits of the policy. In this case, the actual cash value of the replaced furniture and appliances is $6,135, while the replacement cost is $8,325. Coverage B, which is for personal property, is set at $80,000, which implies that there is sufficient coverage to handle the replacement costs. In standard policies, if a policyholder opts for replacement cost coverage, they can generally receive the full replacement cost amount, provided they replace the items, as long as the amount does not exceed the coverage limit. Therefore, with a replacement cost of $8,325 being within the policy's Coverage B limit of $80,000, the total amount payable for the replaced items would indeed be the replacement cost, which is $8,325. The option chosen must reflect the policy’s intent and limitations. The answer indicating $8,000 may represent a calculation mistake or misunderstanding of coverage, as it does not accurately reflect the amounts provided for actual cash value or replacement cost in relation to the coverage limit.