Dwelling PolicyQuestion 77 of 158
A DP-3 dwelling has a replacement cost of $500,000. The landlord carries $300,000 of insurance and suffers a $60,000 partial loss with a $1,000 deductible. Using the coinsurance proportionate formula, what is the insurer's payment?
a.$44,000
b.$59,000
c.$60,000
d.$36,000
Explanation
The 80% coinsurance requirement means the insured should carry at least 0.80 × $500,000 = $400,000. The owner carries only $300,000. Proportionate share = ($300,000 / $400,000) × $60,000 = $45,000, minus the $1,000 deductible = $44,000. The insurer pays the greater of ACV or this proportionate share; assuming ACV is similar or lower, the payment is $44,000. The missing portion is the coinsurance penalty for being under-insured.
Law Reference: ISO Dwelling forms — Loss Settlement; 80% coinsurancePractice all 158 questions free — no signup required.
Related questions on this topic
- A landlord's tenant must move out for three months while fire damage to the rented house is repaired. Which DP coverage reimburses the landlord for the rent the tenant would have paid?
- A landlord insured under a DP-3 is sued by a tenant who slipped on a broken porch step. What does the base DP-3 pay toward the landlord's liability defense?
- A landlord's DP-3 rental house has been vacant for 75 consecutive days while between tenants. Vandals break in and spray-paint the interior. How does the policy respond?
- Under a DP-3 written with $400,000 Coverage A, what is the automatic limit available for Coverage B (Other Structures) such as a detached garage?
- Which of the following is one of the BROAD perils added by the DP-2 Broad Form on top of the basic DP-1 perils?
- Under a standard DP-3 without additional endorsements, how is a covered loss to the named insured's Coverage C personal property settled?
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against California Personal Lines Insurance License Exam · How we review