Answer D is correct.
Carl did not maintain the required 80% of the value of the home in coverage to qualify for full replacement cost. The value of the home at the time of loss was $125,000. 80% of $125,000 is $100,000. Had he maintained the required $100,000 (80%), he would simply receive the full payment of the claim. But since he had $75,000 in coverage at the time the loss occurred, he will be penalized for not maintaining the 80% required. Therefore, The amount of actual coverage;$75,000 is 3/4 or 75% of the $100,000 in coverage that he should of had, therefore he will only receive 75% of the amount of loss: $50,000 x 75% = $37,500.