If Jerry had a replacement cost policy, how much would he be indemnified for the destroyed video recorder?

When assessing a replacement cost policy, the concept is to indemnify the insured for the cost to replace the lost or damaged item without factoring in depreciation. This means that the policy aims to cover the full amount it would take to obtain a new item of similar kind and quality, rather than just the actual cash value, which subtracts depreciation from the original purchase price.

In Jerry's case, since he holds a replacement cost policy for the video recorder, he would be indemnified at the full cost of replacing that item. If the value determined for a new, similar video recorder is $5,000, then that is the amount he would receive from the insurer to replace the lost video recorder. Thus, obtaining a replacement would not require him to outlay any additional funds beyond this indemnity.

This comprehensive coverage ensures that the insured can replace the destroyed property without incurring financial loss based on the item’s previous value or condition.