A policy with an 80% coinsurance clause protects a building valued at 100,000. The insured carries 85,000 of coverage, and a 30,000 loss occurs. How much will the insurer pay?

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Study for the New Jersey Property and Casualty Insurance Test. Enhance your knowledge with flashcards and practice questions. Gain confidence for your exam!

Multiple Choice

A policy with an 80% coinsurance clause protects a building valued at 100,000. The insured carries 85,000 of coverage, and a 30,000 loss occurs. How much will the insurer pay?

Coinsurance means you must carry at least a stated percentage of the property's value to receive full payment for a loss. Here, 80% of the building’s value (100,000) is 80,000. The insured carries 85,000, which meets and exceeds the required amount, so no coinsurance penalty applies.

When a 30,000 loss occurs, the insurer pays the loss in full up to the policy limit, since the coverage carried is adequate and the loss is within the limit. The policy limit is 85,000, which is more than the 30,000 loss, so the insurer pays 30,000.

A policy with an 80% coinsurance clause protects a building valued at 100,000. The insured carries 85,000 of coverage, and a 30,000 loss occurs. How much will the insurer pay?

Study for the New Jersey Property and Casualty Insurance Test. Enhance your knowledge with flashcards and practice questions. Gain confidence for your exam!

A policy with an 80% coinsurance clause protects a building valued at 100,000. The insured carries 85,000 of coverage, and a 30,000 loss occurs. How much will the insurer pay?

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