Property Insurance FundamentalsQuestion 216 of 474
The coinsurance formula settles a partial loss by multiplying the loss by:
a.Insurance required over insurance carried
b.The property value over insurance carried
c.Insurance carried over the property value
d.Insurance carried over insurance required
Explanation
The fraction is the amount of insurance carried divided by the amount required, which is the coinsurance percentage times the property's value, and that fraction is applied to the loss. Flipping the fraction so the required amount sits on top produces a payment larger than the loss, which indemnity forbids. Dividing by full value rather than the required amount understates every payment.
This topic, taught in full in the Personal Lines Insurance Producer guide. Personal Lines Insurance Producer — Complete Study Guide (2026) — PDF + EPUB, $19.99 · 14-day refund →
Practice all 474 questions free — no signup required.
Own the complete Personal Lines Insurance Producer guide — PDF + EPUB, $19.99 →
Related questions on this topic
- Functional replacement cost settles a building loss by:
- Insurable value for a dwelling differs from the home's market value chiefly because insurable value:
- A house sold recently for $460,000. A builder puts the cost to rebuild the structure at $310,000, the lot alone is worth $150,000, and the mortgage balance is $370,000. The dwelling limit should be set near:
- A dwelling with a $250,000 replacement cost carries $150,000 of insurance under an 80% coinsurance clause. A covered loss of $40,000 occurs and there is no deductible. The insurer pays:
- A building valued at $400,000 is insured for $280,000 with an 80% coinsurance clause and a $2,500 deductible. A covered loss of $50,000 occurs. The insurer pays:
- A dwelling with a $320,000 replacement cost is insured for $300,000 under a 90% coinsurance clause with a $1,000 deductible. A covered $60,000 loss occurs. The insurer pays:
Last reviewed: · editorial process
PrepPass team · Verified against California Personal Lines Insurance License Exam · How we review