Insurance policies provide replacement value coverage

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Dottie had a shop in which she made wind chimes for her business. It burned to the ground after a stray skyrocket from a nearby neighborhood landed on the roof. The shop was 5 years old and cost $50,000 to construct. It showed up on the books as being worth $42,500 after depreciation. However, the replacement cost would be $55,000. Which of the following statements is most likely to be true of Dottie's payout from the insurance company?

a. They will not pay because the fire was started by someone else. 

b. Dottie will have to find who set off the firework and sue them in order to get paid. 

c. They will pay $42,500 because that is the actual cash value of the building. 

d. They will pay $55,000 because in general most property insurance policies provide replacement value coverage. 

Reference no: EM132294118

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