Personal Financial Planning 13th Edition by Lawrence Gitman,Michael Joehnk,Randy Billingsley

Exercise 15

Joaquin and Pilar Salazar, ages 30 and 28, were recently married in Houston. Joaquin is an electrical engineer with Advanced Systems, a computer component design firm. Pilar has a master's degree in education and teaches at a local middle school. After living in an apartment for six months, the Salazars have negotiated the purchase of a new home in a rapidly growing Houston suburb. Lone Star Savings and Loan Association has approved their loan request for $270,000, which represents 90 percent of the $300,000 purchase price. Before closing the loan, the Salazars must obtain homeowner's insurance for the home. The Salazars currently have an HO-4 renter's insurance policy, which they purchased from Joaquin's bridge partner, Tim Gardner, who is an agent with the Harris Insurance Company. To learn about the types of available homeowner's insurance, Joaquin has discussed their situation with Tim, who has offered them several homeowner's policies for their consideration. He has recommended that the Salazars purchase an HO-5 policy because it would provide them with comprehensive coverage.
Critical Thinking Questions
1. What forms of homeowner's insurance are available Which forms should the Salazars consider
2. What are the perils against which the home and its contents should be insured
3. Discuss the types of loss protection provided by the homeowner's policies under consideration.
4. What advice would you give the Salazars regarding Tim's suggestion What coverage should they buy