Which of the following statements about problems arising from the use of a coinsurance clause is (are)true?
I.The amount of insurance should be periodically evaluated to avoid a coinsurance penalty because of inflation.
II.An agreed value coverage option is one method used to solve the problem of values that fluctuate throughout the policy term.
A)I only
B)II only
C)both I and II
D)neither I nor II

Question

Quizplus · Accepted Answer

Statement I is true because coinsurance clauses require the insured to carry a certain percentage of the property's value as insurance, and failure to do so can result in a penalty. As inflation can increase the property's value, the amount of insurance should be periodically evaluated.

Statement II is true because agreed value coverage is an option in which the insured and insurer agree on the property's value at the time of policy issuance, and this amount is not subject to change throughout the policy term. This removes the risk of fluctuating values affecting coinsurance penalties.

Which of the Following Statements About Problems Arising from the Use