Under the loss settlement provision in the HO-3 policy, how are building losses on a properly insured structure paid?

In an HO-3 policy, which is a standard homeowners insurance policy, the loss settlement provision for building losses stipulates that losses on a properly insured structure are settled on a Replacement Cost basis, less any applicable deductible.

Replacement Cost refers to the cost to replace or repair the structure with materials of similar kind and quality, without deduction for depreciation. This means that if a loss occurs, the insurer will pay the amount it would take to replace the damaged structure at current market prices, ensuring that the insured receives adequate funds to restore their property to its pre-loss condition.

The deductible applies to each claim, meaning that the insured is responsible for covering that initial portion of the loss before the insurance coverage kicks in. Therefore, the net payment received by the insured will be the Replacement Cost of the damage, with the specified deductible subtracted from this amount.

This provision is designed to provide more comprehensive coverage and financial protection, encouraging homeowners to maintain adequate insurance limits to reflect current rebuilding costs.