GFOA CPFO Exam - Topic 8 Question 95 Discussion

Actual exam question for GFOA's CPFO exam

Question #: 95
Topic #: 8

If a building originally valued at $160,000 appreciates to $300,000 and is insured by an 80% coinsurance clause, then 80% of the value ($320,000) must be insured. If the building is still insured at only $160,000 and a $100,000 loss occurs, the loss would be:

A$ 40,000

B$50,000

C$44,000

D$60,000

Show Suggested Answer

Suggested Answer: C

by Rebecka at Aug 25, 2024, 07:28 AM

Limited Time Offer

25%

Off

Get Premium CPFO Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Kris

8 months ago

Wait, how can they only cover $40k of a $100k loss? That doesn’t add up!

upvoted 0 times

...

Dino

8 months ago

I agree, this seems unfair if they only insured for $160k.

upvoted 0 times

...

Nickolas

9 months ago

I think the loss calculation is tricky here.

upvoted 0 times

...

Kiley

9 months ago

80% coinsurance means $320k should be insured, not $160k!

upvoted 0 times

...

Nohemi

9 months ago

The building's value increased from $160k to $300k.

upvoted 0 times

...

Rex

9 months ago

I feel like I might be mixing up the calculations, but I think the loss would be calculated based on the proportion of the insured value to the required value. Maybe it's around $50,000?

upvoted 0 times

...

Mitsue

9 months ago

If I recall correctly, the coinsurance clause means we need to insure at least 80% of the value, which in this case is $320,000. Since it's only insured for $160,000, I think that affects the payout significantly.

upvoted 0 times

...

Felix

10 months ago

I think I practiced a similar question where we had to determine the loss based on the insured amount versus the actual value. I might be leaning towards option A.

upvoted 0 times

...

Brigette

10 months ago

I remember something about coinsurance and how it affects the payout, but I'm not sure how to calculate the actual loss here.

upvoted 0 times

...

Elmer

10 months ago

I'm pretty confident I know how to solve this. The coinsurance clause requires 80% of the $320,000 value to be insured, which is $256,000. But it's only insured for $160,000, so the insurer will only pay 160/256 of the $100,000 loss, which is $62,500. The actual loss is $100,000, so the amount the insured has to pay is $37,500.

upvoted 0 times

...

Tequila

10 months ago

Okay, I've got this. The key is understanding the coinsurance clause. Since the building is only insured for $160,000 but 80% of the $320,000 value should be insured, that means there's an underinsurance penalty. So the loss would be $100,000, but the insurer would only pay $40,000 since the building is underinsured.

upvoted 0 times

...

Glenna

10 months ago

Hmm, this is a tricky one. I'm a bit confused about how the coinsurance clause works and how that affects the loss amount. I'll need to re-read the question carefully and work through the calculations to figure this out.

upvoted 0 times

...

Lizbeth

10 months ago

Okay, let me think this through step-by-step. The building was originally valued at $160,000 and appreciated to $300,000. The 80% coinsurance clause means 80% of the $320,000 value must be insured, which is $256,000. But it's only insured for $160,000, so I think the loss would be $50,000.

upvoted 0 times

...

Coral

10 months ago

Okay, let's break this down step-by-step. First, install the RHEL system roles package. Then, create a playbook that runs on all hosts and uses the timesync role. In the role, set the time server to 192.168.10.254 (or classroom.example.com in the exam) and enable the iburst parameter. Should be straightforward enough.

upvoted 0 times

...