Question

Sandy has a $292,462 insurance policy with 80% coinsurance clause and a $1,000 deductible. She sustains $58,313 in fire damage to her home when it catches on fire after a lightning strike. It costs $289,285 to replace her home. She has a named storm deductible of 2%. How much will the insurer pay for her damage?

Answer 1

The coinsurance formula is the homeowner's insurance formula that determines the amount of reimbursement that a homeowner will receive from a claim. The coinsurance formula becomes effective when a homeowner fails to keep coverage of at least 80 percent of the home's replacement value. Those in this situation who file a claim will only receive partial reimbursement according to the formula.

Here,

Replacement Cost is $289,285

Coinsurance Requirement is 80% therefore of $231,428

and Coverage is $292,462 which is more than 80% Requirement so, Penalty of $1,000 is not applicable.

Now, Calculation of Amount of deductible

=$292,462*2%

=$5,849.24

Therefore the amount of Claim will be

=Amount of Loss- the Deductible amount

=$58,313 - $5,849.24

=$52,463.76