Registered Insurance Brokers of Ontario (RIBO) Practice Exam

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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!

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How much will an insurer pay for a building valued at $120,000 insured for $60,000 that sustains $24,000 worth of damage?

$30,000
$15,000
$24,000
$60,000

The correct answer is: $15,000

When determining how much an insurer will pay for a claim under a property insurance policy, it's important to take into account both the policy limit and the actual cash value of the damage in relation to the insured value of the building. In this scenario, the building is valued at $120,000 but is insured for only $60,000. This means that the coverage is at 50% of the actual value of the building. When evaluating the loss, the insurer will apply the principle of coinsurance, which in this case leads to a calculation of the claim payment based on the ratio of the insured amount to the actual value. Here’s the breakdown: 1. The total value of the claim (damage) is $24,000. 2. The amount insured is $60,000. 3. The total value of the building is $120,000. The ratio of insurance coverage to building value is 50% ($60,000/$120,000). Therefore, the insurer will only pay a portion of the actual damages incurred based on that same ratio. Calculating the payout: - Insured limit divided by actual value: $60,000 / $120,000 = 0.5 (or 50%). - Taking