Rachel Forman owns a building in New York that she has insured on a replacement

Question

Rachel Forman owns a building in New York that she has insured on a replacement cost basis for $2.4 million under a fire insurance policy that contains an 80 percent coinsurance clause. Assume that the building has a replacement cost of $4 million. How much will Rachel collect if the building sustains a covered fire loss with a replacement cost of $80,000?

$50,000

$60,000

$66,667

$80,000

Debby holds the position of senior risk and compliance manager of Distler Company, located in Florida. Debby wants to obtain protection for direct physical loss under the business and personal property (BPP) coverage form. Which causes of loss form should Debby complete to obtain this coverage?

special form

basic form

standard form

broad form

$50,000

$60,000

$66,667

$80,000

Explanation / Answer

Ans 1) Insurance taken= $ 2,40,000

Amount of insurance required= 80% of $4,00,000= $3,20,000

Loss = $80,000

Amount received from insurer= (Insurance Amt / Insurance required) * Loss sustained

( $240000 / 320000) * 80000 = $ 60,000

Ans 2) Special form/: This form covers all that which is not coevered in basic and braod forms. Special form provides protection against all accidental risk to other person's property,

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