Smith owned a concrete block building valued at $200,000.Because it was virtually fireproof,he insured it for only $100,000 under a policy of insurance,which contained an 80 percent co-insurance clause.Some time later,the building was damaged by fire.
-Assuming that the fire completely destroyed the building,Smith would be entitled to claim for only $100,000 under his insurance policy.

Question

Quizplus · Accepted Answer

The insurance policy covers only $100,000, which is the amount Smith insured the building for, despite the 80% co-insurance clause requiring him to insure at least $160,000 (80% of $200,000) to avoid penalties. Since the building was completely destroyed, he can only claim the insured amount.

Smith Owned a Concrete Block Building Valued at $200,000