Property Insurance FundamentalsQuestion 221 of 474
When a coinsurance penalty applies to a property loss, the deductible is:
a.Subtracted before the coinsurance ratio is applied
b.Reduced by the same ratio as the loss payment
c.Subtracted after the coinsurance ratio is applied
d.Waived once a coinsurance penalty is charged
Explanation
The loss is first multiplied by the carried-over-required fraction, and the deductible then comes off that reduced figure, so the insured absorbs both. Taking the deductible off first changes the base the ratio is applied to and yields a different number. The deductible is neither prorated by the ratio nor forgiven because a penalty was assessed.
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