Property Insurance FundamentalsQuestion 151 of 158
A dwelling with a replacement cost of $500,000 is insured for $300,000 under a policy with an 80% coinsurance clause. A partial loss of $40,000 occurs (ignore the deductible). How much will the insurer pay?
a.$30,000
b.$24,000
c.$32,000
d.$40,000
Explanation
80% of the $500,000 RC = $400,000 required. The insured carries $300,000, so the coinsurance fraction is 300/400 = 75%. Payment = 75% × $40,000 = $30,000. The insured absorbs $10,000 as the coinsurance penalty. Coinsurance applies only to PARTIAL losses; a total loss would be paid up to the $300,000 limit.
Law Reference: Standard property coinsurance conditionPractice all 158 questions free — no signup required.
Related questions on this topic
- An 18-year-old composition-shingle roof with a replacement cost of $24,000 is destroyed by hail. Depreciation is calculated at $14,000. If the policy settles this partial loss on an ACTUAL CASH VALUE basis (no replacement-cost endorsement), the insurer will pay (before deductible):
- Which statement BEST distinguishes replacement cost from actual cash value?
- Under most California homeowners policies that provide replacement-cost settlement on the dwelling, the insurer typically pays:
- Coinsurance penalties under a homeowners policy apply to:
- A homeowner deliberately sets fire to her insured house to collect insurance. The mortgagee on the policy is named under a STANDARD (Union) mortgagee clause. What is the most likely outcome?
- Under the standard mortgagee clause typically used in California, how much advance written notice must the insurer give the mortgagee before cancelling the policy?
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against California Personal Lines Insurance License Exam · How we review