Elvisco,Inc.owns the building that houses its business.Elvisco obtained a property insurance policy on the building from Graceland Mutual Insurance Co.The policy,whose face amount was $200,000,contained a 75 percent coinsurance clause.The building had a fair market value of $400,000.While the policy was in effect,the covered peril of fire caused $90,000 of damage to the building.Elvisco has filed a claim and proof of loss with Graceland Mutual.How much is Graceland Mutual obligated to pay Elvisco?

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Quizplus · Accepted Answer

The policy had a 75 percent coinsurance clause but the face amount is only $200,000.Therefore,the amount would be calculated by dividing the insurance amount by the insurance required,multiplied by the amount of loss.