A dwelling insured at $320,000 met the 80% test when written, but replacement cost has since risen to $450,000. At the next loss the form:
Explanation
The 80% test looks at replacement cost at the time of the loss, not at the figure that satisfied it when the policy was written, so rising building costs can quietly push an insured under the threshold. Here $320,000 against $450,000 is about 71%, and a partial loss would settle by the proportion rather than at full replacement cost. An inflation guard endorsement exists to lift the limit through the term for this reason.
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