Question

Which of the following clauses states that full payment of damages to structures under the homeowners policy will be made only if the insurance equals 80 or more percent of the replacement cost of the structure and is carried on the property at the time of the loss?
a. Coinsurance clause.
b. Inflation rider clause.
c. Reinsurance clause.
d. Replacement clause

Answer 1

Answer: coinsurance clause

Explanation:

A coinsurance clause is a provision in the home insurance policy which requires the individual to carry coverage that is worth a certain percentage of the home's value. The failure to meet requirement will reduces the compensation after a loss.

Under the coinsurance clause, the insurance company will reimburses the value of damages to an insured asset for at least 80% of the replacement value of the asset. The reinsurance clause allows an insurer to take the reinsurance based on the original insurance.