199k views
4 votes
"Ross and Amanda Troutman own a $200,000 home that's insured with a $120,000 policy that includes an 80% coinsurance requirement. What amount will they receive from the insurance company if they sustain a loss of $175,000?

User BoltKey
by
7.6k points

1 Answer

0 votes

Answer:

$120,000

Step-by-step explanation:

The coinsurance requirement means that the insurance is responsible for X% (80% in this case) of the value of the property.

In this case, the value of the property is $200,000, so 80% would be $160,000. That would have been the maximum amount covered by the policy, but since the Troutman's policy only covered a smaller value, then it should cover:

$120,000 / $160,000 = 0.75 or 75%, then you multiply that amount by the total damage = 75% x $175,000 = $131,250

Since $131,250 is still higher than their policy, he Troutmans will only receive $120,000 which is the maximum amount covered by the policy.

User ZeissS
by
7.8k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.