What condition must be met for replacement cost coverage to pay the full replacement value?

• A. The limit of insurance must be at least 80% of the property's replacement cost.
• B. Replacement cost coverage pays full replacement value even if the limit is below 80%.
• C. The insured must prove actual cash value to receive replacement value.
• D. The insurer will never pay full replacement value.

Answer: (A)

Replacement cost coverage will pay the full replacement value only if you carry enough insurance to meet the coinsurance requirement. In practice, that means the policy limit must be at least 80% of the property's current replacement cost. When you meet that 80% threshold, the insurer covers the full replacement cost (minus any deductible). If your limit is below 80%, the payout is reduced proportionally to reflect the underinsurance. So the condition for full replacement value is having at least 80% of the replacement cost insured.