Registered Insurance Brokers of Ontario (RIBO) Exam 2026 – 400 Free Practice Questions to Pass the Exam

When a completely insured home is destroyed and the policy limit matches current construction costs, the insurer generally pays the replacement cost without depreciation. This means that the amount paid would cover the expenses needed to rebuild the home to its original condition using similar materials and construction methods, regardless of the home's current market or actual cash value.

The actual cash value less deductible would apply in cases where a policy defines compensation based on the cash value after accounting for depreciation, which is not the case here since the policy is fully insured and clearly specified to cover replacement costs. Options describing the market value of the home also miss the mark, as market value can fluctuate based on location and economy, whereas the replacement cost focuses specifically on construction expenses. Understanding that the insurer pays based on the property’s replacement cost provides clarity on how insurance policies are designed to protect homeowners from the financial implications of total losses.