Question

Application Question 2-5: An office building with an actual cash value (ACV) of $300,000 is covered under a BPP, subject to an 80 percent coinsurance provision.

1. What is the minimum amount of insurance that must be purchased on this building on an ACV basis to avoid a coinsurance penalty?

2. Assume that the owner purchased $180,00 coverage (ACV) on the building. What amount would the owner be paid in the event of a $100,000 covered loss (ACV) to the building? Disregard any deductible that might apply.

Application Question 3-4: Sadie owns a call center business in Rochester, New York, and insures her building and personal property under a BPP. Because communications technology changes so rapidly, she leases all of her phone equipment. According to the lease agreement, she is responsible for the replacement cost of the leased phone equipment in the event it is damaged. What should Sadie do to ensure that she has insurance coverage sufficient to meet the obligations of her lease agreement?

Application Question 5-1: A two-story antique store owned by Chris was damaged by fire. The building is a restored Victorian mansion insured on an actual cash value (ACV) basis under the Building and Personal Property Coverage Form. The features of the building include original hardwood floors, hand-carved woodwork, and a slate roof. The limit of insurance is $280,000. The policy has an 80 percent coinsurance requirement and a $1,000 deductible that applies to all covered losses. The fire caused $72,000 in damages (ACV) to Chris’s building. At the time of the fire, the building had an ACV of $400,000, a market value of $500,000, and a functional replacement cost of $250,000. Calculate the dollar amount Chris will be paid for this loss.

Application Question 6-8: Etchley Clothing owns a red brick building that it occupies as a retail clothing store. Etchley is purchasing a commercial property policy from Radley Insurance Company with a Causes of Loss - Broad Form for this building. Etchley has selected a policy with a limit of $500,000 on the building on a replacement cost basis with a 90 percent coinsurance clause and a $1,000 deductible. Because Etchley’s building is located fifteen miles from the nearest fire department and twenty miles from a police station, it has installed a sprinkler system and a burglar alarm.

1. In rating Etchley’s commercial property policy, what factors will Radley consider?

2. How will the factors you identified affect the premium for this policy?

Please help answer all questions and show work for a like. Thank you.

Answer 1

Application Question 2-5:

the minimum amount of insurance that must be purchased on an ACV basis to avoid a coinsurance penalty is = (percent coinsurance provision the prop is subjected to/100) * actual cash value (ACV) =
= (80/100) x $300,000 = $240,000

the amount the owner would be paid in the event of a $100,000 covered loss (ACV) is as follows:
$180,000/$240,000 x $100,000= $75,000

Application Question 3-4:

Sadie must take up replacement cost optional coverage - coverages for losses to most types of property on a replacement cost basis (with no deduction for depreciation or obsolescence) instead of on an actual cash value basis.

Please POST the questions individually for all of them to be answered.