In Texas, how should adjusters handle claims when a policy may provide replacement cost or actual cash value?

• A. Adjusters must always pay replacement cost
• B. They may ignore policy provisions if claim is large
• C. Policies may provide replacement cost or actual cash value; adjusters must apply policy provisions and fair valuation
• D. They must always pay actual cash value

Answer: (C)

The important idea here is that how a claim is valued depends on what the policy actually provides. In Texas, a property policy may offer replacement cost or actual cash value, and the adjuster must look at the specific policy language to determine which method applies and then value the claim fairly under those terms. If replacement cost coverage is in the policy, the settlement is generally for the cost to repair or replace with like kind and quality up to the policy limits, often without subtracting depreciation, but usually subject to conditions such as proof of replacement and compliance with policy requirements. If the policy provides actual cash value, the payment reflects replacement cost minus depreciation, again within the policy’s deductible and any other stated terms. The key is to apply the contract and arrive at a fair valuation based on those provisions rather than defaulting to one method or ignoring the policy terms.