§ 58-43-5. Limitation as to amount and term; indemnity contracts for difference in actual value and cost of replacement; functional replacement. - North Carolina Statutes

§58‑43‑5.  Limitation as to amount and term; indemnity contracts fordifference in actual value and cost of replacement; functional replacement.

No insurance company or agentshall knowingly issue any fire insurance policy upon property within this Statefor an amount which, together with any existing insurance thereon, exceeds thefair value of the property, nor for a longer term than seven years: Provided,any fire insurance company authorized to transact business in this State may,by appropriate riders or endorsements or otherwise, provide insuranceindemnifying the insured for the difference between the actual value of theinsured property at the time any loss or damage occurs, and the amount actuallyexpended to repair, rebuild or replace on the premises described in the policy,or some other location within the State of North Carolina with new materials oflike size, kind and quality, property that has been damaged or destroyed byfire or other perils insured against:  Provided further, that the Commissionermay approve forms that permit functional replacement by the insurance company,at the insured's option.  Functional replacement means to replace the propertywith property that performs the same function when replacement with materialsof like size, kind, and quality is not possible, necessary, or less costly thanobsolete, antique, or custom construction materials and methods.  Forms andrating plans may also provide for credits when functional replacement costcoverage is provided.  Policies issued in violation of this section are bindingupon the company issuing them, but the company is liable for the forfeitures bylaw prescribed for such violation. (1899, c. 54, ss. 39, 99;1903, c. 438, s. 10; Rev., s. 4755; C.S., s. 6418; 1949, c. 295, s. 1; 1991, c.644, s. 5.)