Last year, Paul and Joanna Stillman bought a home with a dwelling replacement va

Question

Last year, Paul and Joanna Stillman bought a home with a dwelling replacement value of $180,000 and insured it (via an HO-5 policy) for $153,000. 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 2-year-old television set with a current replacement value of $900 and an estimated useful life of 7 years. They also took jewelry valued at $2,900 and silver flatware valued at $4,200.

a. If the Stillman' policy has an 80% co-insurance clause, do they have enough insurance?

b. Assuming a 50% coverage C limit, calculate how much the Stillmans would receive if they filed a claim for the stolen items. Round the answer to two decimal places.

Explanation / Answer

a) For a property of value $180000, a 80% coinsurance means that they need to have a coverage of $144000 (180000 × 80%). They have a coverage of $153000, which is enough.

b) Coverage C means coverage for personal property and the policy states that the coverage is actual cash value with a $500 deductible. Standard limit is 50% of the total coverage of $153000 which equals to $76,500.

These coverage limits are within the total dollar amount of coverage C and in no way act to increase that total. Loss from jewelry theft is limited to $1000 limit and payment for theft ofsilverware, goldware, and pewterware has a $2500 limit.

2 year old television $900 replacement value less 2/7 or $257.14 yields actual cash value of $642.86 Jewellery $2900 limited $1000 Silver Flatware $4200 limited to $2500 Total cash value after applying limits $4142.86 Deductible Amount $500 Amount to be received from insurance $3642.86

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