Question

Sufficient Dwelling Coverage? Colton Gentry of Lancaster, California, has owned his home for ten years. When he purchased it for $178,000, Colton bought a $160,000 homeowner's insurance policy. He still owns that policy, even though the replacement cost of the home is now $301,000.

If Colton suffered a $23,000 fire loss to the home, what percentage of the loss would be covered by his policy? Round your answer to one decimal place.

%

What dollar amount of the loss would be covered by his policy? Enter the amount of the loss as a positive number. Round your answer to the nearest dollar.

$

How much insurance on the home should Colton carry now to be fully reimbursed for a fire loss? Round your answer to the nearest dollar.

$

Answer 1

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Answer:

a)Percentage of loss covered by this policy = I / (RV*0.8), where I is the amount of insurance carried and RV is the replacement value of the dwelling unit

Percentage of loss covered by this policy = 160000/(301000*0.8) = 66.45 %

b) Dollar amount of loss covered by this policy, Reimbursement payable, R = (L-D)*I/(RV*0.8)

= (23000-0)*160000/(301000*0.8) = $ 15,282

c)Amount of insurance that Colton should carry now to be fully reimbursed for a fire loss = 30100*0.8 = $ 240,800