Section 1: Lesson 7.3 "Coinsurance" Flashcards
Which of the following is one reason for the coinsurance requirement?
To encourage property owners to insure their property for its fair market value.
Why would a home owner request a higher coinsurance requirement?
Higher coinsurance requirements can often be negotiated in exchange for a reduction in premium.
If a homeowner under-insures his property, what effect does the coinsurance requirement have?
the carrier receives credit if a loss occurs to underinsured property, and have property owner is penalized by a reduction in the loss payment.
What is the most common coinsurance % requirement under most residential insurance policies?
80%
Coinsurance percentages of 90% percent are only found where?
Commercial property policies
Which of the following is not required to calculate a coinsurance penalty?
The property;s market value, i.e. how much it would sell for today.
In assessing the value of the property what should be considered?
the cost to replace the building only , not including land, foundation or footings
Last year John bought a home for $410,000, secured insurance with Coverage A limits of $350,000 and $1000 deductible. Last month a car ran off the rd into living room causing $32,000 in damage. An appraisal of the cost to replace the buliding was calculated to be $320,000. Consider John 80% coinsurance requirement and select form the following how much he would recieve in payment of this loss.
$31,000. There would be no coinsurance penalty, as his limits execeed the cost to replace the building.
Mary purchased a home last year for $300k, and at the time of closing the sale, she purchased insurance with coverage A limits of $270k and $1000 ductile. Real estate boomed and home make value increased to $450k. Unfortunately m Mary’s home was recently damage by a tornado that caused $32k in damages to exterior and interior of the dwelling. A new appraisal found that the cost to replace the one had increased to %350k. How much will Mary receive, given the increase in value of home?
$29,760, or 96% of his loss ( $270,000/$280,000)
When calculating the amount of loss payment under a coinsurance requirement, the deductible should be taken when?
The first step in the calculation loss with coinsurance is two reduce the amount of the loss by the deductible.
Jack owns a printing shop in a building that has ben in the family for 50 yrs. he was reviewing his insurance portfolio and found that the property value had increased form $250k to $1,500,000. His current coverage is $200k and the coinsurance requirement is 90%. To be smart , how much should he increases his building limit to?
$1,350,000
In which of the following scenarios would coinsurance not likely be applied by the insurance carrier?
An ice storm strikes the Midwest, causing wide spread damage across the states. Governors of all three states declare the event a major disaster. Your home suffer three broke water pipes and resulting damages of $22,350.
Why is the application coinsurance penalizes in the aftermath of a catastrophe generally waived?
Application coinsurance can often result in lack of understanding disappointment, and controversy , none of which a carrier has time for when responding to a catastrophe.
Which is the primary reason for a carrier towage the coinsurance requirement when responding to a catastrophic loss event, such as a hurricane?
The need for speed in the inspection, evaluation and settlement oof claims and good PR.
Which of the following is an example of specific coverage?
Jane’s home is insured for $250,000.
