Commercial Package Policies Questions

Commercial Package Policies Questions

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1. Question
King George’s Pipe and Tobacco Shop has a Business Owners Policy (BOP) with $500,000 of coverage on their building. The actual replacement cost of the building is $600,000. If the shop suffers a fire and “goes up in smoke” totally destroying the building how much will the insured receive as a claims payment on the building?
- the insured will receive the BOP's Building coverage limit of $500,000 as the Building Coverage limit was greater than the required 80%
- he insured will receive $416,667 which is the pro-rata Building coverage to Building value ratio times the loss
- the insured will receive the full $600,000 for the replacement cost because the insured has at least 80% of the value of the building insured
- the insured will receive $100,000 which is calculated as $600,000 Building Value less the $500,000 of Building Coverage