Alphonse Owns Property Worth $250,000 and Carries $150,000 of Insurance

question 43

Essay

Alphonse owns property worth $250,000 and carries $150,000 of insurance subject to an 80% co-insurance clause. Given a $20,000 loss to the property, calculate the indemnity to be paid by the insurer, and explain the significance of the co-insurance clause as it affects Alphonse.

---

Definitions:

Mean

The average value of a set of numbers, calculated by adding all the numbers and dividing by the count of numbers.

Exponentially Distributed

A statistical distribution used to model the time between events in a Poisson process, describing the time until some specific event occurs.

Probability

The assessment of the probability of an event happening.

Poisson Model

A statistical model used to predict the count of events that happen independently and with a known constant mean rate.