Under a fire policy the insurer will pay:

Under a fire policy the insurer will pay:

• A. The least of A, B or C.
• B. Actual cash value.
• C. Amount applicable to the item.
• D. Interest of insured in the property.

Answer: (A)

Under a fire policy, the insurer indemnifies the insured but won’t pay more than the insured’s actual loss under the policy terms. The payment is limited to the least of three figures: the property's actual cash value at the time of loss, the amount of insurance on that item (the policy limit), and the insured’s interest in the property. This valuation rule prevents overpayment and accounts for depreciation and coverage limits. For example, if the actual cash value is 60,000, the policy limit is 75,000, and the insured’s interest is 50,000, the payout would be 50,000. If the actual cash value is 80,000 with a 100,000 limit and a 90,000 insured interest, the payout would be 80,000. The key idea is that the insurer pays the smallest of those three amounts.

Under a fire policy, the insurer indemnifies the insured but won’t pay more than the insured’s actual loss under the policy terms. The payment is limited to the least of three figures: the property's actual cash value at the time of loss, the amount of insurance on that item (the policy limit), and the insured’s interest in the property. This valuation rule prevents overpayment and accounts for depreciation and coverage limits. For example, if the actual cash value is 60,000, the policy limit is 75,000, and the insured’s interest is 50,000, the payout would be 50,000. If the actual cash value is 80,000 with a 100,000 limit and a 90,000 insured interest, the payout would be 80,000. The key idea is that the insurer pays the smallest of those three amounts.