The functional replacement provision in some property insurance policies is used when:
A) replacing a lost item is impossible
B) replacing a lost item is much cheaper than expected
C) replacing a building will cost much more than its market value
D) an insured set of objects is collectively worth more than the sum of its individual components

Question

Quizplus · Accepted Answer

The functional replacement provision is used when replacing a building will cost much more than its market value. This provision allows the insurer to provide coverage for a building that is functionally equivalent to the original building, rather than paying for the cost of rebuilding the original building. This can be more cost-effective for both the insurer and the insured.

The Functional Replacement Provision in Some Property Insurance Policies Is