Georgia Property & Casualty Practice Exam

What valuation basis did the contractor explain to Mrs. Grant for repairing her home after a fire?

1. Replacement value

2. Market value

3. Actual cash value

4. Agreed value

The correct answer is: Replacement value

The correct answer, replacement value, refers to the cost to replace damaged property with new materials of similar kind and quality, without deducting for depreciation. In the context of home repairs after a fire, a contractor would likely explain that the repairs will not just account for what the house was worth before the fire or its current market conditions but instead focus on the expenses required to restore the home to its original condition or better. This valuation method ensures that Mrs. Grant understands she can expect her home to be repaired to current standards with new materials and labor, which is a critical consideration for homeowners looking to return their property to its habitable state after such an event. By emphasizing replacement value, the contractor aligns the repair process with the homeowner's expectation of having a fully functional and safe living environment once again.