What constitutes the Special Loss Settlement under a flood policy?

The correct choice pertains to the specific parameters set within a flood insurance policy regarding Special Loss Settlement. This provision is designed to determine how claims will be settled concerning damages.

In a Special Loss Settlement under a flood policy, the insurer evaluates the value based on three distinct criteria: the replacement cost of the damaged property, which refers to the cost to replace the property with new materials of like kind and quality; 1.5 times the actual cash value, which considers depreciation in the property's value; or the policy limit, which is the maximum amount of coverage specified in the insurance policy.

This calculation ensures that the policyholder receives compensation that reflects the true value of the loss incurred, balancing between a fair settlement and the limits established by the insurance policy. By setting the settlement at whichever of the three criteria is the lowest, the policy protects both the insurer's financial stability and ensures the insured is compensated fairly for their loss.