Question

Assume that you have a property insurance contract, which contains a 75% coinsurance provision. The insured building is worth $5,000,000 and you bought $4,000,000 worth of coverage. If you suffered an insured loss of $5,000,000, how much would you expect from the insurer?

Answer 1

they will receive $5333,333 from insurance

Step-by-step explanation:

given data

coinsurance provision = 75 %

building worth = $5,000,000

bought = $4,000,000

loss = $5,000,000

solution

we apply here loss settlement formula that is express as

Loss settlement =
`\frac{\text{Loss}*\text{Limit of insurance}}{\text{Actual cash value}* \text{Coinsurance}\%}` .......................1

put here value and we will get

Loss settlement = \frac{5000000\times 4,000,000}{5000000\times 0.75}

Loss settlement = $5333,333

they will receive $5333,333 from insurance