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John owns a home with a replacement cost of $400,000 that is insured under a Homeowners...

John owns a home with a replacement cost of $400,000 that is insured under a Homeowners 3 policy for $280,000. The roof was badly damaged in a severe windstorm, and it will cost $20,000 to repair the roof. The ACV (actual cash value) of the loss is $10,000. Ignoring any deductible, how much will John collect from the insurer? ( Use the formula)

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Expert Solution

Use the loss settlement formula as follows:

= (280000 / (80%*400000)) * 20000

= $17,500

Now the collection from the insurer excluding any deductible will be Max(Actual cash value of loss, Settlement amount) = Max (10000, 17500) = $17,500

keosha answered 2 years ago
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