Best Insurance Company provides Eve Erickson with property insurance that contains an 80% coinsurance clause.

Best Insurance Company provides Eve Erickson with property insurance that contains an 80% coinsurance clause. The coinsurance clause states that if Eve insures the property up to 80% of its value, she will recover any loss up to the face amount of the policy. Eve purchases an $80,000 property insurance policy for property valued at $200,000. Due to a fire, Eve suffers a loss of $10,000.

In Fact Pattern #2, what dollar amount will Eve recover from the insurance company? Explain and show your calculation of Eve's insurance recovery.

Expert Solution

The amount of coverage there should have been = 200000 * 80 % = 160000 (Considering 80% insured clause)

Amount of coverage present = $80000

Ratio of AMount of coverage present / Amount of coverage required = 80000 / 160000 = 0.5

Amount of loss that Eve can recover = 0.5 * $10000 = $5000

keosha answered 2 years ago

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