A dwelling would cost $400,000 to replace and carries Coverage A of $280,000. A covered loss costs $60,000 to repair and its actual cash value is $45,000. The settlement is:
Explanation
Because the $280,000 carried is under 80% of the $400,000 replacement cost, the form pays the larger of actual cash value or the amount produced by the ratio of insurance carried to insurance required: $280,000 / $320,000 = 0.875, and 0.875 x $60,000 = $52,500. That beats the $45,000 depreciated figure, so $52,500 is owed. Multiplying the loss by 80% is not the formula the form uses.
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