Question

Veronica needs to expand her pottery business and add an extra building to her property for the sole purpose of kiln firing her pottery. She adds Builder's Risk coverage to her commercial property policy to cover the new structure (which is yet to be completed), and finds out she must carry:

A. 125% coinsurance.
B. 80% coinsurance.
C. 100% coinsurance.
D. 50% coinsurance.

Answer 1

Coinsurance in an insurance policy requires the policyholder to cover a certain percentage of a loss. In Veronica's case, while the specific coinsurance requirement isn't given, common clauses require 80% or 100% coverage of the value, with extremes of 125% or 50% being less usual.

Step-by-step explanation:

The question pertains to coinsurance, which is the concept of an insurance policyholder paying a certain percentage of a loss, with the insurance company covering the remaining cost.

In this scenario, Veronica needs to determine the appropriate level of coinsurance for her Builder's Risk coverage, which is added to her commercial property policy to protect a new structure being built for her pottery business.

While the question doesn't provide the exact coinsurance requirement, typical coinsurance clauses for such coverage might require the policyholder to insure the property for a certain percentage like 80% coinsurance or 100% coinsurance of its value; it is rare to see requirements as high as 125% or as low as 50%.

Therefore, without further context, a common requirement might be 100% coinsurance, but Veronica should review her policy documents or speak with her insurance provider to determine the specific requirement she must meet.