A $40,000 fire insurance policy covers a building, which is valued at $50,000, and there is an 80% co-insurance clause. If the building is totally destroyed by fire, the policyholder will receive:
A) $50,000.
B) $40,000.
C) $32,000
D) $8,000

Question

Quizplus · Accepted Answer

The policyholder will receive the face value of the policy, which is $40,000, since the loss exceeds the policy limit. The co-insurance clause and the building's value are not relevant when the policy limit is less than the loss.

A $40,000 Fire Insurance Policy Covers a Building, Which Is