Akiko$$s Story : Actual Cash Value vs$.$ Replacement Cost Coverage

Akiko owns a house in and last week suffered some damage to her house. Specifically, a portion of her home was damaged by a fire and the damage to the structure and her personal property is expected to have a replacement cost of $$5,000.$ The same items, which had an original cost of $$1,500$ when she$$d bought them seven years ago, had an estimated useful life of ten years.

After calling her insurance agent, Akiko was reminded that she carries full insurance on$,$ or $80\%$ of the replacement cost value of$,$ the house. However, to save $$60$ per year in her premium, she $$d only covered her possessions for their actual cash value. Given this information, Akiko can expect to receive only in compensation for her loss. In contrast, if she had carried replacement cost, instead of actual cash, coverage, then she would have received $.$