A homeowner files a claim for fire damage. The adjuster inspects and estimates replacement cost at $150,000. The insured has an 80% coinsurance requirement on their policy with $90,000 of insurance. What is the maximum the insurer pays?

COINSURANCE FORMULA: Payment = Loss × (Amount Carried ÷ Amount Required). Required coverage = $150,000 × 80% = $120,000. Actual coverage carried = $90,000. Ratio = 90,000 ÷ 120,000 = 0.75. Maximum payment = $150,000 × 0.75 = $112,500. Note this is LESS than the policy limit ($90,000)... wait — actually $112,500 exceeds the policy limit of $90,000 — the insurer would pay the LESSER of the coinsurance calculation ($112,500) and the policy limit ($90,000). So payment = $90,000 (policy limit). The coinsurance calculation shows the maximum the insurer is required to pay without penalty — but the policy limit always caps the payout. The insured is also their own co-insurer for the uncovered portion.