Which of the following indicates a formula for loss settlement when the policy is less than 80% of the property's value?

The formula that indicates a method for loss settlement when the amount of insurance is less than 80% of the property's value is indeed (Insurance Limit/80% property value) x covered damage.

This formula is grounded in the principle known as the "Coinsurance Clause." When a property is insured for less than a specified percentage (commonly 80%) of its total value, the insurer may apply a penalty during the loss settlement, which is aimed at encouraging policyholders to carry an adequate amount of insurance.

Using the formula, by dividing the actual insurance limit by 80% of the property's value, you determine the proportionate insurance available to cover the damage incurred. This approach ensures that the settlement reflects the actual risk taken by the insurer because it adjusts the payout based on the insured amount versus the value of the property. Essentially, it helps protect the insurer from losses associated with underinsurance.

Thus, when the claim arises, the covered damage is multiplied by the computed ratio, which effectively reduces the amount the policyholder is entitled to claim since they opted for inadequate coverage. This method of calculation reinforces the importance of maintaining proper coverage levels to avoid financial penalties in the event of a loss.