Registered Insurance Brokers of Ontario (RIBO) Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the Registered Insurance Brokers of Ontario Exam with comprehensive quizzes, flashcards, and expert tips. Build your confidence and knowledge to succeed in your licensing journey!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

A property insured for $100,000 with a 90% coinsurance clause incurs a $90,000 loss. How much will the insurer pay?

$60,000
$66,667
$75,000
$90,000

The correct answer is: $90,000

To determine the payment from the insurer when a property has a coinsurance clause, you need to understand how coinsurance works. In this scenario, the property is insured for $100,000 with a 90% coinsurance requirement. This means the policyholder must carry insurance equal to at least 90% of the property's value to receive full coverage. First, calculate the minimum required coverage based on the coinsurance clause. The required coverage would be 90% of $100,000, which equals $90,000. Since the property is indeed insured for $100,000, the policyholder meets the coinsurance requirement perfectly. In the case of a $90,000 loss, the insurer will cover the entire amount since the insured value ($100,000) meets the necessary threshold for coinsurance and the loss does not exceed the insured amount. Therefore, the full amount of the loss, $90,000, will be paid out by the insurer. This scenario illustrates the principle of coinsurance effectively, demonstrating that when proper insurance levels are maintained, the insured can recover losses without penalties or deductions associated with underinsurance.