Regular Business,Inc.(RBI),obtains a fire insurance policy from Statistical Insurance Company on a $400,000 warehouse.The policy includes an 80-percent coinsurance clause.RBI insures the property for $320,000.In a fire,the warehouse suffers $200,000 in damage.RBI can recover

Question

Quizplus · Accepted Answer

Since RBI insured the property for $320,000 which is less than the 80% requirement, they are considered underinsured. The calculation to determine the amount RBI can recover is:
Amount of insurance carried ($320,000) divided by the amount of insurance required (80% of $400,000 = $320,000) multiplied by the amount of the loss ($200,000) = $200,000
Therefore, RBI can recover $200,000 which is Option C.