Question

Which one of the following statements is correct with respect to coinsurance used with commercial insurance policies? A. The rates ordinarily used for insuring buildings and personal property are calculated with the assumption that they will be used with a 100 percent coinsurance clause. B. When a policy requires a coinsurance percentage higher than 80 percent, the 80 percent coinsurance rate remains the same. C. When the coinsurance requirement is less than 80 percent, the rate is decreased. D. The 80 percent coinsurance rate is reduced when a policy requires a higher coinsurance percentage.

Answer 1

D. The 80 percent coinsurance rate is reduced when a policy requires a higher coinsurance percentage.

Step-by-step explanation:

Coinsurance is the amount which is fixed cost payable by the insurance seeker in order to provide claim against the risk. The coinsurance rate is decided based on the risk nature. If the risk is high the coinsurance rate will be higher so that insurance coverage is maximum.