A building valued at $500,000 carries an 80% coinsurance clause. The owner insured it for $300,000 and suffers a $100,000 loss. Ignoring any deductible, how much will the insurer pay?

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Multiple choice — select the best answer

A$100,000
B$75,000
C$60,000
D$48,000

✓ Correct answer: B. $75,000 Required amount is 80% of $500,000 = $400,000. The payment equals (carried / required) x loss = ($300,000 / $400,000) x $100,000 = $75,000. The insured shares the remainder as a coinsurance penalty.

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Topic: Property Insurance

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A building valued at $500,000 carries an 80% coinsurance clause. The owner insured it for $300,000 and suffers a $100,000 loss. Ignoring any deductible, how much will the insurer pay?

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