Question

Last year, Thea and Rory Brown bought a home with a dwelling replacement value of $200,000 and insured it (via an HO-5 policy) for $166,000. The policy reimburses for actual cash value and has a $250 deductible, standard limits for coverage C items, and no scheduled property. Recently, burglars broke into the house and stole a 2-year-old television set with a current replacement value of $900 and an estimated useful life of 8 years. They also took jewelry valued at $2,100 and silver flatware valued at $4,200.

a. If the Browns’ policy has an 80% co-insurance clause, do they have enough insurance?

b. Assuming a 50% coverage C limit, calculate how much the Brown family would receive if they filed a claim for the stolen items. Do not round intermediate calculations. Round the answer to two decimal places.

c. What advice would you give the Brown family about their homeowner's coverage?

Answer 1

a)

200000*80%

= $160,000

They have a coverage of $166,000 which is enough.

b)

Coverage is actual cash value with $250 deductible standard limit is 50%

The total coverage $166000 which is equal to $83,000

Tv = 900*50%

= $450

Jewels = 2100*50% = $1050

Silver flatwave = 4200*50%

= $2100

The value they would be received.

= 450+1050+2100

= $3600

c)

They can change their insurance policy to cover upto 70% og items

Even can furture increase the insured amount so that it may be helful but subject to greater than 80% of replacement value.