How much would be paid for a $60,000 loss? - ProProfs Discuss
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How much would be paid for a $60,000 loss?

A commercial building valued at $300,000 is insured for $200,000.The policy is written with an 80% coinsurance percentage and a standard deductible.

Asked by Cedrick, Last updated: Nov 29, 2021

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

$49,500-answer b is correct. the coinsurance requirement is for the insured to carry 80% of the $300,000 building value, or $240,000 of coverage. because the insured only has $200,000 of coverage, a penalty applies. the formula is that the amount actually carried ($200,000) is divided by the amount required ($240,000) to produce a fraction that will be multiplied by the loss. in this case, the fraction is 5/6 and the loss was $60,000, so the result is a $50,000 covered loss. however, the standard deductible is $500 per occurrence, so the net amount paid will be $49,500.
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