Henderson owned a concrete block building valued at $20,000. Because it was virtually fireproof, he insured it for only $10,000 under a policy of insurance which contained an 80% co-insurance clause. Some time later, the building was damaged by fire. Assuming that the fire completely destroyed the building, Henderson would only be entitled to claim for $10,000 under his insurance policy.

Question

Quizplus · Accepted Answer

The 80% co-insurance clause requires the building to be insured for at least 80% of its value ($16,000 in this case). Since Henderson insured it for only $10,000, he is underinsured and can only claim up to the insured amount, which is $10,000.

Henderson Owned a Concrete Block Building Valued at $20,000