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.
-Under the co-insurance clause,the insurer would be required to pay only 80 percent of the face amount of the policy if the building was totally destroyed by fire.

Question

Quizplus · Accepted Answer

The co-insurance clause requires the insured to carry a certain percentage of the property's value in insurance. If the building was totally destroyed, the insurer would pay the full face amount of the policy ($100,000) because the insured amount is less than the required 80% of the building's value.

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