A building with a replacement cost of $600,000 is insured for $360,000 under an 80% coinsurance clause, with a $2,500 deductible. A covered fire causes $90,000 of damage. What does the insurer pay?

Giải thích

The coinsurance formula divides the amount carried by the amount required and multiplies by the loss. The amount required is 80% of $600,000, or $480,000, and the insured carried $360,000, so $360,000 divided by $480,000 is 0.75. That gives 0.75 times $90,000, or $67,500, and the $2,500 deductible then comes off for a payment of $65,000. The $67,500 answer forgets the deductible and the $90,000 answer ignores the underinsurance penalty.