Question

Brian’s Toy Store building is worth $600,000.00 and is insured for $420,000.00. Assuming an 80 percent coinsurance clause and that a fire caused $170,000.00 damage, the liability of the insurance company is

$148,750.00. $119,000.00. $148,570.00. $191,000.00.

Answer 1

I would have to say D, $191,000.00

Answer 2

Option A is the answer.

Explanation:

We will begin by dividing the actual amount of coverage on the house by the amount that should have been carried i.e $480000.

80% of $600,000 is =
`0.80*600000` =$480000

So,
`(420000)/(480000)= 0.875`

Now, we will multiply this amount by the amount of the loss;

`0.875*170000=148750`

Therefore, the liability of the insurance company is $148,750.