If an insured's roof depreciates at $200 per year and costs $4,000 to install, how much will an actual cash value policy pay to replace the roof after 5 years?

To determine the payment from an actual cash value (ACV) policy after 5 years for a roof that depreciates at $200 per year, you first need to calculate the total depreciation over those 5 years.

Given that the roof costs $4,000 to install and depreciates at a rate of $200 per year, you would multiply the yearly depreciation by the number of years:

$200 (depreciation per year) x 5 (years) = $1,000 (total depreciation after 5 years).

Next, to find the actual cash value at the end of these 5 years, you must subtract the total depreciation from the original installation cost:

$4,000 (original cost) - $1,000 (total depreciation) = $3,000.

This calculation means that the actual cash value of the roof after 5 years is $3,000. Since the correct answer must be the amount the insurance would pay to replace the roof, the questioning of various amounts provided in the options does not accurately reflect the ACV calculation.

The ACV policy pays the insured the replacement cost minus depreciation at the time of the claim, based on the value assessed at the time of the loss. Therefore,