State Farm Fire Independent Policy Practice Exam

How is the total claim for repairing a damaged fence under an HO-3 policy calculated?

1. Based solely on Actual Cash Value

2. Deducting the policy deductible from repair costs

3. Considering both repair costs and replacement costs

4. Only considering depreciation of the fence

The correct answer is: Deducting the policy deductible from repair costs

The total claim for repairing a damaged fence under an HO-3 policy is primarily calculated by deducting the policy deductible from the total repair costs incurred. In an HO-3 policy, the deductible is the amount that the policyholder must pay out of pocket before insurance coverage kicks in. This means that once the cost of the repairs is determined, the insurance company will cover the amount above that deductible. It's essential to understand that while factors like the actual cash value or replacement cost can influence the settlement process for certain types of claims, in this case, the calculation focuses specifically on the incurred repair costs minus the deductible. This approach ensures that the policyholder receives compensation based on the actual costs of repairing the damage they experienced while also adhering to the terms of the policy concerning deductibles.