Georgia Adjuster Practice Test

If the Agreed Value option of the Business Income form is selected, what happens to the coinsurance requirement?

1. Increases

2. Remains unchanged

3. Waived

4. Reduced by half

The correct answer is: Waived

When the Agreed Value option is selected for the Business Income form, the coinsurance requirement is waived. This means that the business and insurer agree on a specific amount of coverage for the business's income loss, which eliminates the need to meet a certain percentage of coverage in relation to potential losses. In standard situations where there is no Agreed Value, the coinsurance clause typically requires the insured to carry a minimum level of coverage to avoid penalties in the event of a claim. However, by opting for the Agreed Value, both parties acknowledge and agree upon the coverage amount needed, providing more certainty and protecting the policyholder from potential financial hits if they do not meet the coinsurance percentage. This approach allows businesses to have peace of mind knowing that they won’t face additional penalties even if they underinsure their income.