This a condition in an HO policy that basically requires the
insured to maintain insurance equal to the value of the property – much like
the coinsurance clause.

As for your specific question – if the insured wants to receive
RC, they must verify that they are actually going to replace the damaged
property.  Many insured receive extra money to replace, but they do not
make the repairs.  This protects everyone with an insurable interest in
the property, i.e. lenders, etc.

Jan