Question

A fire in Sarah’s factory causes her to shut the factory doors for 50 days. To limit her loss of income and keep production going, Sarah spends $125,000 renting equipment and another building. Sarah's commercial property policy doesn't have Business Income Coverage, but it does include Extra Expense Coverage. The limit on her Extra Expense coverage is $100,000 and she has Limits of Loss Payment of 40%/80%/100% during her period of restoration. How much indemnification will Sarah receive for her extra expenses?

Answer 1

$80,000

Step-by-step explanation:

Calculation to determine How much indemnification will Sarah receive for her extra expenses

First step is to determine her Limits of Loss Payment

Limits of Loss Payment=$100,000/$125,000

Limits of Loss Payment=0.80*100

Limits of Loss Payment=80%

Now let calculate her Indemnification amount using this formula

Indemnification amount =Extra Expense coverage*Limits of Loss Payment

Let plug in the formula

Indemnification amount =$100,000*80%

Indemnification amount =$80,000

Therefore the amount of indemnification that Sarah will receive for her extra expenses is $80,000