Question

A house worth $180,000 has a coinsurance clause of 75 percent. The owners insure the property for $101,250. They then have a loss that results in a $50,000 claim. They will receive $ ____.00 from insurance.

Answer 1

Answer:

$37,500

Step-by-step explanation:

We have been given that a house worth $180,000 has a coinsurance clause of 75 percent. The owners insure the property for $101,250. They then have a loss that results in a $50,000 claim.

We will use loss settlement formula to solve our given problem.

$\text{Loss settlement}=\frac{\text{Loss}\times\text{Limit of insurance}}{\text{Actual cash value}\times \text{Coinsurance}\%}$

Upon substituting our given values, we will get:

$\text{Loss settlement}=\frac{\ 50,000\times\ 101,250}{\ 180,000\times 75\%}$

$\text{Loss settlement}=\frac{\ 50,000\times\ 101,250}{\ 180,000\times 0.75}$

$\text{Loss settlement}=\frac{\ 5,062,500,000}{\ 135,000}$

$\text{Loss settlement}=\ 37,500$

Therefore, they will receive $37,500 from insurance.