The 80 percent co-insurance clause in a homeowner's policy would cause a reduction in the claim payment for a covered loss to the dwelling of $30,000 in which of the following cases?

Question

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The 80 percent co-insurance clause requires that at least 80 percent of the dwelling's replacement cost value is covered by the policy. If the policy limit falls below this, the claim payment will be reduced.

In this case, option B has a policy limit of $75,000, but the replacement cost of the dwelling is $100,000. To meet the 80 percent co-insurance requirement, the policy should cover at least $80,000 (80% of $100,000) of the replacement cost. However, the policy limit of $75,000 falls short of this. Therefore, the claim payment for a covered loss to the dwelling of $30,000 would be reduced.

The 80 Percent Co-Insurance Clause in a Homeowner's Policy Would