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A 3-year-old professional appraisal in the underwriting file shows that the current replacement cost value of Lenore's medical office building is around $500,000. The building
A 3-year-old professional appraisal in the underwriting file shows that the current replacement cost value of Lenore's medical office building is around $500,000. The building is at a great location, and the commercial real estate market is much stronger now than it was a few years back. It is not clear whether Lenore does not understand the difference between market value and insurable value or whether she plans to expand the building, but Lenore insists on buying insurance with an $800,000 limit. This waves a red flag because (Search Chapter 5) a. construction activities associated with a major addition to Lenore's building would create significant hazards. b. Lenore might not understand the difference between replacement cost and market value. c. the coverage Lenore requests seems excessive relative to her actual exposures. d. the old appraisal appears to be inaccurate
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