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 the amount the insurance company will pay on a fire that causes $210,000 worth of damage, we need to consider the coinsurance clause.

The coinsurance clause is set at 80%, which means Al should insure his property for at least 80% of its actual value. In this case, Al's insurance policy is for $180,000.

To find out if Al met the coinsurance requirement, we need to calculate the minimum amount Al should have insured his property for. We can do this by dividing the insurance coverage by the coinsurance percentage and multiplying it by 100:

Minimum Insurance = (Insurance Coverage / Coinsurance Percentage) * 100
Minimum Insurance = ($180,000 / 80%) * 100
Minimum Insurance = ($180,000 / 0.8) * 100
Minimum Insurance = $225,000

Since Al's insurance policy is for $180,000, which is less than the minimum insurance of $225,000, Al did not meet the coinsurance requirement.

Now, let's calculate the amount the insurance company will pay for the fire damage of $210,000.

Since Al did not meet the coinsurance requirement, there will be a penalty. To determine the amount, we need to calculate the insurance-to-value ratio:

Insurance-to-value Ratio = (Insurance Coverage / Property Value) * 100
Insurance-to-value Ratio = ($180,000 / $300,000) * 100
Insurance-to-value Ratio = 60%

The insurance company will pay for the fire damage based on this ratio. We can calculate the amount they will pay by multiplying the damage caused by the insurance-to-value ratio:

Insurance Payment = Damage × Insurance-to-value Ratio
Insurance Payment = $210,000 × 60%
Insurance Payment = $126,000

Therefore, the insurance company will pay $126,000 for the fire damage.

If Al had met the coinsurance requirement and insured his property for at least $225,000, the insurance company would have paid based on the actual damage without applying a penalty. In that case, they would have paid the full amount of $210,000.