Question

1. Consider your house or your parent’s house is 45 years old
2. 2. Assume that the house has a useful life of 75 years; what is the percentage of depreciation?

3. If it would cost $100,000 to rebuild the house today, what is the Actual Cash Value of the house?

2. A drunk driver ran a red light and smashed into Josie’s car. The cost to repair the car is $8,000. She is unable to collect from the drunk driver. She has collision insurance on her car with a $500 deductible.
   1. Explain how the principle of subrogation would be relevant in this case.

2. Explain how subrogation supports the principle of indemnity.

Answer 1

Consider your house or your parent’s house is 45 years old

1. Assume that the house has a useful life of 75 years; what is the percentage of depreciation?
2. If it would cost $100,000 to rebuild the house today, what is the Actual Cash Value of the house?

Answer.

1. Computation of % of depreciation = Age of house/ Useful life of house * 100 = 45/75 * 100 = 60%

2. Actual cash value of house = Cost to rebuild house today - Depreciation till date

ACV = 100,000 - (60%*100,000) = $40,000

Please note that we are allowed to solve one question or at most 4 sub-parts of dependent question. In order to get your question answered, please poat them separately.