If Simon suffers a £50,000 loss on his garage valued at £200,000 but insured for £150,000, how much will the insurer pay?

In this scenario, the insurer will apply the principle of average, which states that if a property is underinsured, the insurance payout at the time of a loss will be reduced proportionately according to the level of underinsurance.

Simon's garage is valued at £200,000 but is only insured for £150,000. In the event of a loss, the insurer needs to determine how much they will pay based on the proportion of coverage to the actual value of the property.

First, we calculate the level of insurance compared to the actual value:

• The insurance amount is £150,000.
• The actual value is £200,000.

Now, we find the ratio of the insured value to the actual value: £150,000 (insured) / £200,000 (actual value) = 0.75 or 75%.

This means that Simon has covered 75% of the garage's actual value. When he suffers a loss of £50,000, the insurer will cover only 75% of that loss because he is underinsured.

Now, we apply this ratio to the loss: £50,000 (loss) x 75% = £37,500.

Thus, the insurer will pay Simon