Question

John and Jenifer are a married couple, and they jointly own a home insured for $200,000 under an unendorsed HO-3 policy. The replacement cost of the home is $275,000. Personal property is insured for $90,000. Jenifer has jewelry valued at $20,000. John has a coin collection valued at $15,000 and a motorboat valued at $20,000. Assume you are a financial planner who is asked to evaluate the couple’s HO-3 policy.

a)

A burglar broke into the home and stole a new television, jewelry, and several paintings. The actual cash value of the stolen property is $4,000. The cost of replacing the property is $9,000. In addition, the coin collection was taken. Indicate the extent, if any, to which an unendorsed HO-3 policy will cover these losses.

b)

Assume that the couple have a disagreement with their insurer concerning the value of the above losses. How would the dispute be resolved under their HO-3 policy?

(c)

Assume that Jenifer operates an accounting business from the home. Her home business office contains a computer used solely for business, office furniture, file cabinets, and other business personal property. Explain whether her HO-3 policy would cover business personal property used in a home business.

Answer 1

Answer 1) Under HO-3 home insurance contract , all Losses to the dwelling will be paid on simple replacement cost basis while all Losses to personal property will be paid back on actual cash value.

cover from insurance = ACV of personal property + Coin value = $4000 + $15000 = $19,000.

as policy is an  unendorsed policy.

Answer 2)

Discrepancies on difference in the cost and settlement is very common between companies and policyholders. Policy holders always want higher recovery of los while insurance companies pay as little as possible. General process of dispute handling

Step 1: Make a written complain to Agent or insurance Company

Step 2: prepare an Independent Appraisal report

Step 3: file a Complaint against the insurance company

Answer 3)

The HO-3 policy doesn't cover the structures to conduct a business, or to store business property, although may have exceptions but in case of endorsed policy . So , in the case all these loss of business will not be covered or counted.