1) Ludovic was thinking about putting his home on the market
when it was partially destroyed by a fire. His home has a
replacement cost of $500,000, but his insurance coverage totals
$380,000 in replacement cost. The fire caused $250,000 worth of
damage to Ludovic home. Note that Ludovic
did not purchase sufficient insurance coverage equal to at least
80% of the house’s total replacement value. What amount would the
insurance company cover due to this fire damage?
2)Les and Liz are purchasing their first home today and looking to
withdraw from their Registered Retirement Saving Plans (RRSPs) for
the down payment under the Home Buyer’s Plan (HBP). To date, Les
has contributed $25,000 while Liz has contributed $37,000. With the
downturn in the markets, as of today, April 29, 2020, the market
value of Les’ RRSP is at $24,322 and Liz’s is at $35,798. What is
the maximum amount they can withdraw today from their respective
RRSPs to put towards their down payment on a home under the HBP?
Note for withdrawals made after March 19, 2019, each can withdraw
up to a maximum of $35,000 from their own RRSP.
1.
80% of replacement cost = $500,000 * 80% = $400,000.
Proportion of cover = $380,000 / $400,000 = 95%
Amount paid by the insurance company = $250,000 * 95% = $237,500.
Amount paid by the insurance company = $237,500.
2.
Withdrawal limit from RRSP = $35,000
The amount withdrawable by Les = $24,322
Market value of Liz's RRSP is higher than the maximum withdrawable limit. So, the amount withdrawable by Liz is $35,000.
Total amount of withdrawal = $24,322 + $35,000 = $59,322.
Total amount of withdrawal = $59,322.
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