Risk Mgt HW Ch. 20

Risk Mgt HW Ch. 20 - are part of the main dwelling. B) They...

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Chapter 20 AQ’s 1. Under HO-3, all losses are covered except those losses specifically excluded. Under the 80% rule of replacement cost, Heather will not be able to receive the full amount of coverage because her home is not 80% insured. ($400,000*.8= $320,000) Heather will receive 88% ($280,000/$320,000) of the full replacement of $20,000 because that is all she in insured for. $20,000*.88= $17,500. She will receive $17,500, not $10,000(actual cash value) because $17,500 is the greater of the two. 2. Michelle would only receive $3750, ($5,000*.75) for her television which is 25% depreciated. For personal property we use the actual cash value at the time of loss, so she will not receive as much as she may like. It would cost her $5,000 to replace the TV, but since she didn’t place a special replacement cost endorsement, she will not receive the full $5,000. 3. A) They will receive the full replacement cost of $80,000 for the bedrooms because they
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Unformatted text preview: are part of the main dwelling. B) They will not receive anything on their monthly mortgage payment because that has nothing to do with the insurance company. C) The motel room rental would be covered under the policy because this payment of $6,000 is an expense that the family would not normally incur if there was not a fire. D) The meals expense would cover the family for the additional money they have to pay while not living in the home. This means that the insurance company will cover $40 of meals per day because they have to pay that on top of the normal $20 they consume at home. The total is $2,400. E) A storage unit is also above and beyond the normal expenses that they family would incur. Since they had to store items for 2 months, they would receive $200 monthly or a total of $400....
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