Answer:
The insurance claim is $22,135
Explanation:
In this question, we are to calculate the amount an insurance company will pay for a damaged house that was insured.
Firstly, it should be noted that at the time of replacement, the insurance company offer the insurance amount at 80% on actual replacement cost.
Thus, the insurance claim is calculated as follows;
Insurance claim = (Estimated damage * amount insured)/ 80% of replacement cost
insurance claim = (25,000 * 85,000)/80% of 120,000
= 2,125,000,000/96,000 = $22,135
