What must Bob’s insurer do regarding the full replacement cost after his home is declared a total loss?

When Bob's home is declared a total loss, the correct action for his insurer is to pay the full replacement cost without requiring proof of rebuilding. This is in alignment with many homeowners insurance policies that include replacement cost coverage. This coverage enables the policyholder to receive funds sufficient to replace or repair their damaged property with materials of like kind and quality, regardless of depreciation.

This provision ensures that Bob can rebuild or replace his home without suffering a financial setback due to initial out-of-pocket rebuilding expenses before receiving the insurance payout. The absence of a requirement for proof of rebuilding allows for quicker resolution and financial support for the insured in the event of a total loss, thus facilitating their ability to commence the rebuilding process as promptly as possible without facing unnecessary delays or financial burdens.

In contrast, the other options do not align with the typical practices associated with full replacement cost policies. For instance, the requirement for Bob to notify the insurer or submit receipts within a specified timeframe relates more to indemnity processes rather than a straightforward replacement cost payout. Paying the Actual Cash Value (ACV) without first settling the full replacement cost would also not support the original intent of replacement cost coverage, which is designed to fully restore the insured's property rather than provide only its depreciated value