Jamil and Vicky purchased a $200,000 homeowners policy for their house in 1988.They have renewed the policy each year since and have replacement coverage.This policy has a $1,000 deductible.Their home now has a replacement value of $275,000.Last week they came home to find a small fire which caused the following damages:
How much will the insurance company pay for the $50,000 loss to their home?

Question

Jamil and Vicky purchased a $200,000 homeowners policy for their house in 1988.They have renewed the policy each year since and have replacement coverage.This policy has a $1,000 deductible.Their home now has a replacement value of $275,000.Last week they came home to find a small fire which caused the following damages: 
How much will the insurance company pay for the $50,000 loss to their home?

Quizplus · Accepted Answer

The insurance company will pay for the loss up to the policy's replacement value of $275,000 minus the deductible of $1,000, which equals $274,000. The loss amount of $50,000 is less than $274,000, so the insurance company will pay the full amount of the loss, which is $50,000 less the deductible. Therefore, the correct answer is C) $57,000 less the deductible.

Jamil and Vicky Purchased a $200,000 Homeowners Policy for Their