Eric Fowler and his wife Susan just purchased their first home, which cost $130,
ID: 2772662 • Letter: E
Question
Eric Fowler and his wife Susan just purchased their first home, which cost $130,000. They purchased a homeowner’s policy to insure the home for $120,000 and personal property for $75,000. They declined any coverage for additional living expenses. The deductible for the policy is $500. Soon after Eric and Susan moved into their new home, a strong windstorm caused damage to their roof. They reported the roof damage to be $17,000. While the roof was under repair, the couple had to live in a nearby hotel for three days. The hotel bill amounted to $320. Assuming the insurance company settles claims using the replacement value method, what amount will the insurance company pay for the damages to the roof?
Explanation / Answer
Answer:
Under replacement value method the current market value of the item damaged would be paid by the insurer.
The roof damaged is reported to be of value $17,000, it is the value the insurer pay on replacement of the roof on providing receipt of the same.
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