Narang Palk 2.Your client, Narang Park, has coverage of $90,000 on a dwelling. T

Question

Narang Palk 2.Your client, Narang Park, has coverage of $90,000 on a dwelling. The replacement value of the dwelling is 5125,000. The policy coinsurance requirement is 80 percent. The client has chosen a $500 deductible. Calculate the amount of loss reimbursement a client should receive for each of the following losses. a. The amount of the loss is $60,000 b. The amount of the loss is $90,000 c. The amount of the loss is $120,000. Now assume that the client increases the amount of coverage to $105,000. To offset some of the premium increase, the client chose to increase the deductible to $1,050. The policy coinsurance requirement is 80 percent. The replacement value of the dwelling is $125,000. Calculate the amount of loss reimbursement for each of the following losses. a· The amount of the loss is $90,000. b. The amount of the loss is $105,000. c. The amount of the loss is $120,000.

Explanation / Answer

Insurance Coverage=90,000

Replacement value(To get a new Dwelling)=125,000

Coinsurance requirement=80%

Amount of loss=60,000

Reimbursement=

The value of the property is $125,000 The coinsurance percentage for it is 80%

The limit of liability is $100,000 The deductible is $500 The amount of loss is $60,000

Step (1) $125,000 x 80% = $100,000 (the minimum amount of insurance to meet your coinsurance

$100,000 ÷ $100,000 = 1.00

Step (3) $60,000 x 1.00 = $60,000

Step (4) $60,000 - $,500 = $59,500

We will pay $59,500 of the loss.

Same Method, loss=90,000

Direct Step 3 90,000*1=90,000

Paid=90,000-500=89500

For loss of 120,000

However insurance is limited to 100000

Therefore reimbursed=100000-500

99500$

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