coinsurance

coinsurance

by Lacey Stephens -
Number of replies: 3

I have a question regarding coinsurance.

Determine the amount of settlement if the insured has 40,000 insurance coverage on a building that is valued at $50,000. an 80% coinsurance applies. a 20,000 loss occurs. there is a 500.00 deductible.

I see that the 40,000 was the minumum required to insure the $50,000 building, so there should not be a coinsurance penalty? the answer they got was 19,000 I got 20,000...what is the correct formula on this type of problem?

In reply to Lacey Stephens

Re: coinsurance

by Jan Bradburn- -
Lacey, This question is a little tricky because it is not a coinsurance question. The "80% coinsurance applies" was added to see if you would determine if coinsurance applies. You are correct in stating that property valued at $50,000 is insured to 80% of the value so you do not have to use the coinsurance formula. This is a standard deductible question. The answer I got was $19,500. The loss was $20,000 with a $500 deductible. Did this question come from the online course? I couldn't find it in the unit exam. Please advise so I can make sure the answer is corrected. Thanks Jan
In reply to Jan Bradburn-

Re: coinsurance

by Lacey Stephens -

Yes this question came from the online course. unit 2.

In reply to Lacey Stephens

Re: coinsurance

by Jan Bradburn- -
Hi Lacey I checked the question in the online course. It is showing the correct answer of $19,500. The correct answer: 19,500 The Question: Determine the amount of settlement if an insured has $40,000 insurance coverage on a building that is valued at $50,000. An 80% coinsurance applies. A $20,000 loss occurs. A $500 deductible applies. Jan