Under a coinsurance requirement of 80 percent,property with a replacement cost of $120,000 and an actual cash value of $90,000 is adequately insured with a policy for $80,000.

Question

Quizplus · Accepted Answer

To determine if the property is adequately insured under coinsurance, we need to calculate the minimum amount of insurance required as:
Minimum Insurance = (Coinsurance Percentage x Replacement Cost) / 100
Minimum Insurance = (80% x $120,000) / 100
Minimum Insurance = $96,000

Since the policy limit is only $80,000, it does not meet the minimum insurance requirement of $96,000. Therefore, the property is not adequately insured and the answer is B (False).

Under a Coinsurance Requirement of 80 Percent,property with a Replacement