Mandren Inc. has a fire insurance policy from the Blundi Insurance Company with a $90\%$ coinsurance clause based on replacement cost. The replacement cost of the building is $$600,000.$ The face amount of the policy Mandren purchases is $$400,000.$ What face amount would Mandren need to purchase if they wanted to be fully covered for all losses, regardless of size?

Selected Answer:

$80\%$ of Replacement Cost

$90\%$ of Replacement Cost

correct answer: $100\%$ of Replacement Cost

$100\%$ of Actual Cash Value

$80\%$ of Actual Cash Value

why is that the correct answer