What will the insured recover based on a $40,000 loss if her coverage is $60,000 with an 80% coinsurance clause and the building's value at the time of loss is $100,000?

To determine what the insured will recover based on a $40,000 loss under a policy with a $60,000 limit and an 80% coinsurance requirement given that the building's value at the time of loss is $100,000, the coinsurance formula must be applied.

The coinsurance clause requires the policyholder to maintain a certain percentage of insurance compared to the actual value of the property to avoid a penalty in the event of a loss. In this case, the required insurance would be 80% of the building's value, which calculates as follows:

Required coverage = 80% of $100,000 = $80,000.

The insured has $60,000 in coverage. Therefore, they are underinsured because their coverage is less than the required amount of $80,000. To find out how much they can recover, we apply the following formula:

Recovery = (Amount of insurance carried ÷ Amount of insurance required) × Loss.

Substituting the values we have:

Recovery = ($60,000 ÷ $80,000) × $40,000 = 0.75 × $40,000 = $30,000.

Thus, the insured will recover $30,000 for the $