The Wings and Things owns a building valued at $2,154,000 but has decided to insure it for only $1,542,000. Their insurance policy stipulates coinsurance of 80%. If a fire were to cause $685,000 in damage, how much would the insurance company pay on the claim? (Round your answer to the nearest cent)

Question

Quizplus · Accepted Answer

The insurance company would pay based on the coinsurance formula: (Amount of Insurance / (Value of Property * Coinsurance Requirement)) * Loss = Claim Payment. Here, it's ($1,542,000 / ($2,154,000 * 0.80)) * $685,000 = $612,970.06.

The Wings and Things Owns a Building Valued at $2,154,000