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How will Missy be indemnified for the loss of her grain drill after a tornado?

  1. She will receive the total replacement cost of the new grain drill

  2. She will get the actual cash value of the drill and an additional amount after replacement

  3. She will only be compensated for the repair costs of the drill

  4. She will receive nothing because it was a natural disaster

The correct answer is: She will get the actual cash value of the drill and an additional amount after replacement

When Missy experiences a loss due to a tornado, she is eligible for indemnification based on the application's coverage and the principle of indemnity, which aims to restore her to her pre-loss financial position without allowing for profit. The correct answer indicates that Missy will receive the actual cash value of the grain drill, which reflects its current market value considering depreciation, along with an additional amount after she replaces the drill. This approach acknowledges the loss's fair market value prior to the incident and provides further indemnification after replacement, ensuring she can acquire a new grain drill without suffering financial loss due to depreciation or the expense of replacing the lost item. This method is beneficial because it compensates for both the loss incurred and assists in the acquisition of a new tool necessary for her operations, aligning with fair insurance practices. In an event involving a covered peril like a tornado, the challenge of meeting replacement costs is mitigated through this dual compensation, balancing the need for immediate compensation with the long-term goal of complete restoration.