When reviewing their options for a homeowner’s insurance policy, Bill and Judy must choose between replacement cost or actual cash value as to the property valuation method for purposes of loss settlement. What is the difference between these two types of valuation methods?
a. Physical depreciation is deducted from the replacement cost to arrive at the actual cash value.
b. Physical depreciation is deducted from the actual cash value to arrive at replacement cost.
c. Actual cash value would not be determined until the property is sold.
d. A replacement cost value policy is significantly less expensive than actual cash value policy.