Arkansas Insurance Adjuster Practice Exam

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Question: 1 / 400

When insuring her business at 60% coinsurance and a fire destroys most of her merchandise, Jane's insurer:

covers the structure and contents on an ACV basis

denies the claim

covers the structure and contents on a replacement value basis

imposes a coinsurance penalty

If Jane's insurer insures her business at 60% coinsurance and a fire destroys most of her merchandise, the insurer will impose a coinsurance penalty. This means that the insurer will only cover a portion of the loss, leaving Jane responsible for the remaining amount. This is because Jane did not insure her business to its full replacement value, which is required for the insurer to cover the full cost of the loss. Options A and C are incorrect because they suggest that the insurer will still cover the loss, when in fact they will impose a penalty. Option B is incorrect because it suggests that the claim will be denied, when it will actually be partially covered with a coinsurance penalty. It is important for business owners to insure their property to its full replacement value to avoid coinsurance penalties in case of a loss.

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