Question

Which provision requires the policyholder to maintain a specific amount of insurance in order to obtain full payment for a loss?

Option 1: Exclusion provision
Option 2: Deductible provision
Option 3: Coinsurance provision
Option 4: Endorsement provision

Answer 1

The provision that requires the policyholder to maintain a specific amount of insurance in order to obtain full payment for a loss is the Coinsurance provision.

Step-by-step explanation:

The provision that requires the policyholder to maintain a specific amount of insurance in order to obtain full payment for a loss is the Coinsurance provision.

Coinsurance is a cost-sharing agreement between the policyholder and the insurance company where the policyholder agrees to pay a certain percentage of the covered costs, and the insurance company pays the remaining percentage.

For example, if a policy has an 80% coinsurance provision and a $10,000 loss occurs, the policyholder would be responsible for paying $2,000 (20% of $10,000), while the insurance company would pay the remaining $8,000 (80% of $10,000).