Revision as of 16:53, 14 May 2023 by Admin (Created page with "An individual purchases a homeowners policy with an 80% coinsurance clause. The home is insured for 150,000. The home was worth 180,000 on the day the policy was purchased. Li...")
May 14'23
Exercise
An individual purchases a homeowners policy with an 80% coinsurance clause. The home is insured for 150,000. The home was worth 180,000 on the day the policy was purchased. Lightning causes 20,000 worth of damage. On the day of the storm the home is worth 250,000.
Calculate the benefit payment the individual receives from the policy.
- 15,000
- 16,000
- 17,500
- 18,000
- 20,000
May 14'23
At the time of the loss the coverage is 150,000/250,000 = 60% < 80%. Then the benefit payment is
[[math]]
\min \{ 150,000, \frac{150,000}{0.8(250,000)} 20,000\} = 15,000.
[[/math]]
Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.