erry​ Carter's home is currently​ valued, on a replacement cost​ basis, at ​$301 comma 000. When he last checked his​ policy, his home was insured for ​$209 comma 571 and he did not have an inflation guard endorsement. If he has a ​$26 comma 188 claim due to a kitchen​ fire, how much will his​ homeowner's insurance policy​ pay? How much would be paid if his home were totally​ destroyed? In order to obtain full replacement​ coverage, how much insurance should Jerry carry on his​ house?

Let's break this down step by step, taking into account the rules of insurance payments and replacement cost coverage.

### Part 1: How much will the homeowner's insurance policy pay for the kitchen fire claim?
The policy typically follows a "coinsurance clause," which means the insurance company expects the homeowner to carry a certain percentage of the home's replacement cost. Usually, this percentage is 80%.

- **Replacement cost of the home**: $301,000
- **Insurance carried by Jerry**: $209,571
- **Coinsurance requirement (usually 80%)**: $ 80\% \times 301,000 = 240,800 $

The formula for how much the insurance company will pay for partial losses, like the kitchen fire, is:

\[
\text{Amount Paid} = \frac{\text{Insurance Carried}}{\text{Coinsurance Requirement}} \times \text{Claim Amount}
\]

Substitute the values:

\[
\text{Amount Paid} = \frac{209,571}{240,800} \times 26,188
\]

Let's calculate this:

\[
\frac{209,571}{240,800} \approx 0.8704
\]
\[
0.8704 \times 26,188 \approx 22,795.96
\]

Thus, the insurance will pay **$22,795.96** for the kitchen fire claim.

### Part 2: How much would be paid if the home were totally destroyed?
If the home were totally destroyed, Jerry would receive the maximum amount covered by the insurance policy, which is:

\[
\text{Insurance Amount} = 209,571
\]

Thus, the policy would pay **$209,571** if the home were totally destroyed.

### Part 3: How much insurance should Jerry carry for full replacement coverage?
To have full replacement coverage, Jerry should insure his home for at least 80% of the replacement cost.

\[
\text{Minimum Insurance for Full Replacement} = 80\% \times 301,000 = 240,800
\]

Therefore, Jerry should carry at least **$240,800** in insurance to obtain full replacement coverage.

---

Do you want more details or have any questions about the steps?

### Related Questions:
1. What is a coinsurance clause, and how does it affect insurance payments?
2. Why is it important to have an inflation guard endorsement on a homeowner’s insurance policy?
3. How do insurance companies determine the replacement cost of a home?
4. What are the advantages and disadvantages of insuring for more than 80% of a home's replacement cost?
5. How would the payment differ if Jerry had an inflation guard endorsement?

### Tip:
Always check your homeowner's insurance policy periodically to ensure it reflects the current replacement value of your home, especially after home improvements or market changes.

Jerry Carter's home is currently valued, on a replacement cost basis, at $301,000. When he last checked his policy, his home was insured for $209,571 and he did not have an inflation guard endorsement. If he has a $26,188 claim due to a kitchen fire, how much will his homeowner's insurance policy pay? How much would be paid if his home were totally destroyed? In order to obtain full replacement coverage, how much insurance should Jerry carry on his house?

Understand how to calculate a homeowner's insurance payout for a kitchen fire claim and how much insurance is needed for full replacement coverage. This example uses a home valued at $301,000 with insurance coverage of $209,571, highlighting coinsurance rules and proportional payouts. Ideal for advanced high school or college-level students.

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