A company purchases a commercial insurance policy with a property policy limit of 70,000. The actual value of the property at the time of a loss is 100,000. The insurance policy has a coinsurance provision of 80% and a 200 deductible, which is applied to the loss before the limit or coinsurance are applied. A storm causes damage in the amount of 20,000.

Calculate the insurance company’s payment.

• 15,840
• 16,000
• 17,300
• 17,325
• 19,800

Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.

Key: D

[[math]] \min \{ 70,000, \frac{70,000}{0.8(100,000)} (20,000 -200)\} = 17,325. [[/math]]

Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.