City Parking Garage (CPG) is insured under a Business Income (and Extra Expense) Coverage Form with a limit of $1 million and 70 percent coinsurance. Ten months into the policy period, CPG's garage is damaged by earthquake, a covered cause of loss under CPG's policy. Repair of the garage will take four months, during which time CPG will sustain a business income loss of $680,000. CPG's net income and operating expenses for the twelve months following policy inception (minus those expenses that can be excluded for coinsurance purposes) would have been $2 million.

a)Does the amount of insurance carried by CPG meet coinsurance requirements? Show your calculations.

b)How much will CPG be able to recover under its policy for the loss described? Show your calculations, and ignore any dollar or time deductibles that could apply.

Answer rating: 100% (QA)

a Coinsurance Requirement Calculation 1 Determine the value at risk Annualized net income and operat... View the full answer