Question

16) David owns a commercial building with a replacement cost of $4 million. The building is insured on a replacement cost basis for $2.4 million under a fire insurance policy that has an 80 percent coinsurance clause. How much will David collect if the building sustains a covered fire loss with a replacement cost of $80,000? A) $50,000 B) $60,000 C) $66,667 D) $80,000 Answer: B Diff: 2 Question Status:

Answer 1

Answer:

Total indemnified amount = 80,000

Co insurance = 80%

David will collect = [80,000/0.8]*2.4/4= 60,000

Hence david will collect = 60,000