Question

A fire in John's factory causes him to shut the doors for 90 days. While repairs take place, John rents another building, along with some machinery and manufacturing supplies, for $90,000. John's total loss is $300,000, but by renting the new building and equipment he manages to reduce that loss by $50,000. Assuming John's commercial property policy includes Business Income Coverage With Extra Expense, how much will his insurer indemnify him?

A. $420,000
B. $300,000
C. $340,000
D. $120,000

Answer 1

John's insurer will indemnify him for a reduced loss of $250,000.

Step-by-step explanation:

To calculate the amount John's insurer will indemnify him, we need to subtract the reduced loss from the total loss. John's total loss is $300,000, but by renting the new building and equipment, he reduces the loss by $50,000. Therefore, the insurer will indemnify John for the reduced loss, which is $300,000 - $50,000 = $250,000.