If an insured under a standard HO-4 policy suffers a loss totaling $20,000 but depreciation of 20% has occurred, what amount is the insurer obligated to pay?

In the context of a standard HO-4 policy, which is designed for renters and provides coverage for personal property, the calculation for the amount the insurer is obligated to pay after a loss takes into account depreciation. When a loss amount of $20,000 occurs and there is a depreciation rate of 20%, it affects the payout.

To calculate the depreciated value, you first determine the amount of depreciation: 20% of $20,000 is $4,000. This amount is subtracted from the original loss to find the payout. Thus, the amount the insurer is obligated to pay is:

$20,000 (total loss) - $4,000 (depreciation) = $16,000.

This calculation highlights that the insurer will pay out the actual cash value of the property at the time of loss, which is the original value minus depreciation. Therefore, the correct answer to the question reflects the impact of depreciation on the insurer's obligation.