If the value of the property is $250,000, the coinsurance percentage for the property is 80%, the limit of insurance for the property is $100,000, and the deductible is $250.Calculate the amount paid by the insurer if the amount of loss of property is $40,000.
A)$38,750
B)$40,000
C)$98,750
D)$100,000
E)$19,750

Question

Quizplus · Accepted Answer

The insurer pays the loss amount minus the deductible, but only if the insurance limit meets the coinsurance requirement. The required insurance is 80% of $250,000, which is $200,000. Since the limit is $100,000, which is less than $200,000, the insurer pays a proportion of the loss: ($100,000/$200,000) * $40,000 = $20,000. After the deductible, the insurer pays $20,000 - $250 = $19,750.

If the Value of the Property Is $250,000, the Coinsurance