A DP-3 dwelling insured for $300,000 (which equals 100% of its replacement cost) burns to the ground. The loss is total. Ignoring deductibles, what does the insurer pay?
Explanation
Coinsurance penalties apply to partial losses, not total losses. On a total loss the policy limit is the maximum the insurer will pay; here the limit is $300,000 and the insured was carrying insurance equal to 100% of replacement cost. The insurer pays up to the $300,000 policy limit (subject to deductible, which the question said to ignore). California's Insurance Code §2051 governs how total losses are valued.
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