Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law)General InsuranceMedium
A Florida General Lines Agent is reviewing a client's property insurance policy. The policy includes a clause that states if the insured property is underinsured at the time of loss, the insurer will only pay a proportion of the loss. This clause is commonly known as the:
- AAssignment clause
- BCo-insurance clause
- CAppraisal clause
- DSubrogation clause
Show answer & explanationAnswer & explanation
Correct answer: B. Co-insurance clause
The co-insurance clause is a common provision in property insurance policies that requires the insured to carry insurance equal to a specified percentage of the property's value (e.g., 80%). If the insured fails to do so, they will share in the loss as a co-insurer.
Why the other options are wrong
- A. The assignment clause addresses the transfer of policy ownership or benefits.
- C. The appraisal clause outlines a method to resolve disputes regarding the amount of a loss.
- D. The subrogation clause allows the insurer to recover payment from a third party responsible for the loss.
Co-insurance Clause (Property)
A provision in property insurance that requires the insured to carry insurance equal to a specified percentage of the property's value. If underinsured, the insured shares in the loss.
- Encourages adequate insurance coverage
- Applies to partial losses
- Formula: (Amount of Insurance Carried / Amount of Insurance Required) x Loss = Payout
Memory trick: Co-insurance: Cover OR Share.