Last yea, Paul and Joanna Stillman bought a home with a dwelling replacement val
ID: 2627823 • Letter: L
Question
Last yea, Paul and Joanna Stillman bought a home with a dwelling replacement value of $250,000 and insured it (via an HO-5 policy) for $210,00. The policy reimburses for actual cash value and has a $500 deductible, standard limits for coverage C items, and no scheduled property. Recently, burglars broke into the house and stole a two-year-old television set with a current replacement value of $600 and an estimated useful like of eight years. They also took jewelry valued at $1,850 and silver flatware valued at $3,000.
a. If the Stillman's policy has an 80 percent co-insurance clause, do they have enough insurance?
b. Assuming a 50 percent coverage C limit, calculate how much the Stillmans would receive if they filed a claim for the stolen items
c. What advice would you give the Stillmans about their homeowner's coverage?
Explanation / Answer
1. The replacement value of home = $250,000
Stillmans are having the co-insurance clause of 80%.
80% of $250,000 = $200,000
Insurance coverage of $210,000 is higher than $200,000. Hence, they have enough insurance.
2.
Useful life of television = 6 years
Life already used = 2 years
Actual cash value of television = $600 - $600*2/6 = $400
Actual cash value of total loss = $400 + $1,850 + $3,000 = $5,250
Coverage limit = 50%
Deductible amount = $500
Hence amount stillmans receive = $5,250*0.50 - $500 = $2,125
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