Question

Your friends recommend you to insure the house to its partial value.

i) Which provision is related with this action?What's the purpose of this provision?

ii)

You insured it for 150， 000 under a commercial property insurance policy containing a 500 deductible and an 80 percent

coinsurance clause. The house sustained a 50， 000 loss because of ad we ling fire. The actual cash value of the house the time of loss is$150， 000. How much should the insurer pay you

Answer 1

1. The provision related to insuring house to its partial value is by Coinsurance clause,.Depending on the  co-insurance percentage selected, the insurer will be able to save money on the premium and can affect the payout of a claim.

• If a property owner insures for less than coinsurance clause amount, they agree to retain a part of the risk.
• if the owner becomes a "co-insurer" then based on the coinsurance formula, it will share any loss with the insurance co.

2. The insurer will pay an amount of $49,500.