The fire insurance policy on a $240,000.00 office building contains an 80% coinsurance clause. If the office is covered by a $200,000.00 policy, how much settlement would be paid after a $17,000.00 fire?

Select one:

a. $17,000.00

b. $13,600.00

c. $16,320.00

d. $16,000.00

a. $17,000.

Step-by-step explanation:

The value of the property = $240,000

the coinsurance clause percentage = 80%

This means that the company should be insured for 80% of 240,000

that is 0.8*240000 = 192,000

While office is actually covered by $200,000 policy which is greater than the required insurance amount.

Therefore the settlement amount after a Loss of $17,000 will be same as $17,000.

hence option a will be correct.