Question

Jessie bought and moved into a condominium. She furnished her house with quite expensive, valuable furniture. She lives in a region of the country not known for any oarticular natural hazards like toronadoes or earthquakes; but it is in the Midwest, where ice storms can be destructive. Jessie takes out a homeowners insurance policy, with the policu specificaions listed in the table below. For two years, she filed no claims with her homeoweners insurance. In the third year, tow unfortunate incidents occurred, both in the winter:

- An ice strom caused a large section of a tree in her yard to break off and fll on her roof. Damage to the roof and the room below cost $90, 000 to repair.

- A door-to-door salesman slipped on ice on Jessie's front walkway. He broke an arm and successfully sued Jessie for the medical costs of $2,500 as well as two weeks in lost wages, values at $1,500

In the fourth year, Jessie filed no claims.

a- How much soes Jessie spend per year to keep her policy active?

b- The damage from the ice strom and the resulting costs were the first claim Jessie filed. How much would the insurance comapany pay of the $9,000?

c- How much would the insurance company pay for the damages claimed by the door-to-door salesman?

d- Over four years, how much has Jessie paid on these accidents, and for insurance?

e- Over four years, how much has the insurance company paid out in claims filed by Jessie?

Annual Premium: $1,000

Policy Specifications Coverage Limit Deductible

Dwellin Protection $400,000 $600   

Personal Property $100,000 $600

Loss-of-Use Living Expenses Up to 12 months N/A

Family Liability Pretection $150,000 per incident N/A

Answer 1

A. $1000 because annual premium amount is the amount which is paid to keep active insurance policy.

B. Jessie can claim for $90000 because here policy amount is given but property amount is not given so we can not say exactly that here is short policy. so we assume policy is made for full amount of property.

C. Door to Door expenses not allowed because this is an out of coverage of policy. because it is covered under third party policy and here it is not mentioned that whether it is third party policy or not.

D. Jassie paid $2500+$1500= $4000 because this is not covered in insurance policy so jassie has to pay as he is sued. and insurance company has to pay $90000.

E. Insurance company has to pay $90000.