Tony Verdello's 4-year old property located on a fault line was recently severely affected by an earthquake. The total replacement value of Tony's property including contents at the time of the earthquake was $400,000. The percentage of the property damaged by the earthquake was estimated by the insurance company claims officer to be 60%. The property was originally built by Tony at a total cost including contents of $245,000. The specific information included in Tony's home and contents insurance policy relating to claims made are as follows:
? insurance is provided on a 'new for old' basis
? the total sum insured is $280,000
? a co-insurance clause operates which is set at 80% of the current replacement value of the home and contents.
Advise Tony as to the amount of the total home and contents claim payable by the insurance company and how this would compare to the maximum claim otherwise available.

Question

Quizplus · Accepted Answer

The Answer of Tony Verdello's 4-year old property located on a fault line was recently severely affected by an earthquake. The total replacement value of Tony's property including contents at the time of the earthquake was $400,000. The percentage of the property damaged by the earthquake was estimated by the insurance company claims officer to be 60%. The property was originally built by Tony at a total cost including contents of $245,000. The specific information included in Tony's home and contents insurance policy relating to claims made are as follows:
? insurance is provided on a 'new for old' basis
? the total sum insured is $280,000
? a co-insurance clause operates which is set at 80% of the current replacement value of the home and contents.
Advise Tony as to the amount of the total home and contents claim payable by the insurance company and how this would compare to the maximum claim otherwise available.

Tony Verdello's 4-Year Old Property Located on a Fault Line