Question

An insurance provision that requires a business to insure its property for at least 80 percent of value to avoid a penalty for any covered loss is called

a. the 80/20 rule.
b. a liability provision.
c. a coinsurance clause.
d. a named-peril provision.

Answer 1

The insurance provision referred to is a coinsurance clause, where a business must insure its property for a minimum percentage, typically 80%, of its value to avoid reduced payouts for losses.

Step-by-step explanation:

The insurance provision that requires a business to insure its property for at least 80 percent of its value to avoid a penalty for any covered loss is known as a coinsurance clause. This is a method of cost sharing where both the insurance policyholder and the insurance company pay a portion of the loss. In the context of property insurance, if the property is underinsured (i.e., insured for less than the minimum required percentage, which is usually 80%), the policyholder may face a penalty in the form of a reduced payout in the event of a claim.

In the context of insurance, an insurance provision that requires a business to insure its property for at least 80 percent of its value to avoid a penalty for any covered loss is called a coinsurance clause. This provision ensures that the business shares a portion of the risk by covering a percentage of the loss, while the insurance company pays the remaining cost. For example, if a property is insured for less than 80% of its value and a covered loss occurs, the business may be subject to a penalty.