In coinsurance, if property value is 100k and the minimum required is 80k, with the insured carrying 60k, the loss is paid how?

In coinsurance, if property value is 100k and the minimum required is 80k, with the insured carrying 60k, the loss is paid how?

• A. The loss is paid in full
• B. Loss payment is capped at the amount carried
• C. The loss is paid proportionally based on the ratio of the insured amount carried to the required amount
• D. The loss is paid proportionally based on the ratio of the actual amount carried to the minimum required

Answer: (D)

Coinsurance requires carrying at least a specified portion of the property’s value to receive full protection. When you fall short, the loss is paid only in the same proportion as the coverage you actually carry compared to the minimum required. In this scenario, the property value is 100,000 and the minimum required is 80,000, but the insured carries 60,000. The ratio is 60,000 / 80,000 = 0.75. So the loss is paid at 75% of its amount (payout = 0.75 × loss), up to the policy limit. For example, a 40,000 loss would yield 30,000; a 100,000 loss would yield 75,000.

Coinsurance requires carrying at least a specified portion of the property’s value to receive full protection. When you fall short, the loss is paid only in the same proportion as the coverage you actually carry compared to the minimum required.

In this scenario, the property value is 100,000 and the minimum required is 80,000, but the insured carries 60,000. The ratio is 60,000 / 80,000 = 0.75. So the loss is paid at 75% of its amount (payout = 0.75 × loss), up to the policy limit. For example, a 40,000 loss would yield 30,000; a 100,000 loss would yield 75,000.