The property of Al’s garage is worth $300,000. Al has a

fire insurance policy of $180,000 that contains an 80%
coinsurance clause. What will the insurance company pay
on a fire that causes $210,000 damage? If Al met the
coinsurance requirement, how much would the insurance
company have to pay?

To determine how much the insurance company will pay on a fire that causes $210,000 damage, we need to consider the coinsurance clause.

The coinsurance clause states that the property owner must insure the property for at least a certain percentage of its value. In this case, the clause specifies an 80% coinsurance requirement.

To calculate the amount the insurance company will pay when the insurance meets the coinsurance requirement, we follow these steps:

Step 1: Determine the minimum amount of insurance coverage required under the coinsurance clause:
80% of the property's value = 0.8 * $300,000 = $240,000

Step 2: Compare the actual insurance coverage with the minimum required coverage:
$180,000 (actual insurance coverage) < $240,000 (minimum required coverage)

Since the actual insurance coverage of $180,000 is less than the minimum requirement of $240,000, Al did not meet the coinsurance requirement.

To calculate how much the insurance company will pay in this case:

Step 3: Calculate the actual payment based on the proportion of insurance coverage:
Insurance payment = (Actual insurance coverage / Minimum required coverage) * Loss amount
Insurance payment = ($180,000 / $240,000) * $210,000
Insurance payment = (0.75) * $210,000 = $157,500

Therefore, if Al did not meet the coinsurance requirement, the insurance company will pay $157,500 on the $210,000 damage.

However, if Al had met the coinsurance requirement, the insurance company would have to pay the full amount of the damage:

Step 4: Calculate the payment if the coinsurance requirement is met:
Insurance payment = Actual insurance coverage * Loss amount
Insurance payment = $180,000 * $210,000
Insurance payment = $37,800,000

Therefore, if Al met the coinsurance requirement, the insurance company would have to pay $37,800,000 on the $210,000 damage.