Question

1.A house worth $250,000 has an coinsurance clause of 90 percent. The owners insure the property for $191,250. They then have a fire that causes $80,000 in damage. How much money will they receive from insurance?

2.A house worth $180,000 has a coinsurance clause of 75 percent. The owners insure the property for $101,250. They then have a loss that results in a $50,000 claim. How much money will they receive from insurance?

Answer 1

1. They will receive $72,000 in insurance.

2. They will receive $37,500 in insurance.

Explanation:

1.Given that the coinsurance is 90 percent.

For the fire that caused a $80,000 in damage, 90 percent of $80,000 will be received in insurance.

90 percent of $80,000 will be received in insurance

90 percent of $80,000 = 0.9 * 80000

= 72,000

Therefore, they will receive $72,000 in insurance

2. The coinsurance is 75 percent, given that they have a loss that results in a $50,000 claim.

they will received 75 percent of $50,000

75 percent of $50,000 = 0.75 * 50000

= 37.500

Therefore, they will receive $37,500

Answer 2

1. Multiply the value of the house by the percent:

250,000 x 0.9 = 225,000

Divide the amount the owner insured by the clause amount:

191,250/225,000 = 0.85

Multiply that by the amount of damage:

0.85 x 80,000 = 68,000

They will receive $68,000

2. Follow the same steps as above:

180,000 x 0.75 = 135,000

101,250 / 135,000 = 0.75

0.75 x 50,000 = 37,500

They will receive $37,500