An insured holds a $32,000 fire insurance policy on a building which is valued at $40,000,and on which there is an 80% co-insurance clause.If the building is totally destroyed by fire,the policyholder will receive:
A) $40,000.
B) $32,000.
C) $30,000.
D) $25,600.

Question

Quizplus · Accepted Answer

The policyholder will receive the face value of the policy, which is $32,000, since the loss exceeds the policy limit. The co-insurance clause requires the insured to carry insurance equal to a specified percentage of the value of the property to receive full payment on a partial loss, but in the case of a total loss, the policy will pay out up to its face value.

An Insured Holds a $32,000 Fire Insurance Policy on a Building