Asked by Gaspar Francisco on May 04, 2024
Verified
Riverside Storage obtains a fire insurance policy from Security Insurance Inc., on a $400,000 warehouse. The policy includes an 80-percent coinsurance clause. Riverside insures the property for $320,000. In a fire, the warehouse suffers $200,000 in damage. The insured can recover
A) $400,000.
B) $320,000.
C) $200,000.
D) $80,000.
Coinsurance Clause
A provision in an insurance policy requiring the policyholder to bear a portion of the costs of a claim, reducing the insurer’s risk.
Fire Insurance Policy
A contract that provides compensation for damage or loss of property due to fire.
Recover
To regain or obtain compensation or restitution through legal means, often after a loss or injury.
- Discern between different insurance policies relevant to professional, entrepreneurial, and individual circumstances.
- Understand the implications and mechanics of policy terms like coinsurance clauses and their impact on claims recovery.
Verified Answer
JB
Janae BrownMay 09, 2024
Final Answer :
C
Explanation :
The insured can recover $200,000 because the policy covers the actual damage up to the insured amount, and since the insured amount ($320,000) is at least 80% of the value of the property ($400,000), the coinsurance clause is satisfied, allowing for full coverage of the actual damages incurred.
Learning Objectives
- Discern between different insurance policies relevant to professional, entrepreneurial, and individual circumstances.
- Understand the implications and mechanics of policy terms like coinsurance clauses and their impact on claims recovery.