Escrow & TitleIntermediateDelaware Exam

What is 'replacement cost' versus 'actual cash value' in property insurance?

AReplacement cost pays to rebuild at current costs; actual cash value pays replacement cost minus depreciationCorrect

BBoth types pay the same amount; the terms are interchangeable

CReplacement cost is for residential; actual cash value is for commercial

DActual cash value pays to rebuild at current costs; replacement cost pays for the original construction value

Why Replacement cost pays to rebuild at current costs; actual cash value pays replacement cost minus depreciation Is Correct

Answer A: Replacement cost pays to rebuild at current costs; actual cash value pays replacement cost minus depreciation

Replacement cost coverage pays to rebuild or repair the property at current construction costs without deducting for depreciation. Actual cash value (ACV) coverage pays replacement cost minus depreciation, often resulting in a lower payout.

Exam Tip: Escrow & Title

Escrow questions test the neutral third-party role and the sequence of closing events. Remember that the escrow agent acts as a dual agent for both buyer and seller and cannot advocate for either side.