Question 1

Find the amount paid by each of the multiple carriers.
-The Acme Tire Company had an insured fire loss of $2,292,000. It had insurance coverage as follows: Company A, $2,000,000; Company B, $1,500,000; and Company C, $500,000. Find the amount paid by each carrier assuming that the coinsurance requirement had been met.

Accepted Answer

Since the coinsurance requirement has been met, we can assume that each carrier is responsible for paying for their own coverage limit. 
Company A paid the full $2,000,000 of their coverage limit. 
Company B would pay for the first $292,000 ($2,292,000 - $2,000,000), then pay for $1,208,000 ($1,500,000 - $292,000) of their coverage limit. 
Company C would pay for the first $292,000, then pay for $208,000 ($500,000 - $292,000) of their coverage limit. 
Thus, Company A pays $2,000,000, Company B pays $1,208,000, and Company C pays $286,500, for a total of $3,494,500. 
Therefore, the answer is C.

Question 2

Solve the problem.
-Custom Dry Cleaners owns a building with a replacement cost of $239,000 which is insured for $162,520 with an 80% coinsurance clause. The building has a fire loss of $10,100. How much will the insurance company pay?

Accepted Answer

To determine how much the insurance company will pay, we need to calculate if the policyholder satisfied the coinsurance requirement. In this case, the coinsurance requirement is 80%, which means the policyholder must insure the building for at least $191,200 (80% of $239,000). However, the policyholder only insured the building for $162,520, which is less than the required amount. Therefore, the policyholder is considered underinsured and will be penalized for any loss.
To calculate the amount the insurance company will pay, we use the following formula: 
(Insurance carried / Insurance required) x Loss = Payment
($162,520 / $191,200) x $10,100 = $8,585
Therefore, the insurance company will pay $8,585, which is option D. To calculate the amount of insurance coverage required, we need to multiply the replacement cost by the coinsurance percentage (80% = 0.8). 
So, the required coverage is: 
0.8 x $239,000 = $191,200

Since the building is insured for $162,520, which is less than the required coverage of $191,200, the insurance policy has a coinsurance penalty. 
To calculate the amount of the penalty, we need to use the following formula:

Amount of Loss x (Amount of Insurance carried / Amount of Insurance required) = Insurance Payment

Plugging in the numbers: 
$10,100 x ($162,520 / $191,200) = $8,584.60

Therefore, the insurance company will pay $8,585. Answer choice D is the correct answer.

Question 3

Solve the problem. Use the fire insurance rate table if needed. Rates are for each $100 of insurance. Round to the nearest dollar. 
-Laura Lee Candies owns a class A building with a replacement cost of $154,000. Contents are valued at $71,000. The area is rated 3. Find the fire insurance annual premium.

Accepted Answer

First, we need to calculate the insurance cost for the building and contents separately using the fire insurance rate table:
For the building: 
Insurance cost = (replacement cost / 100) x rate x area factor 
= (154,000 / 100) x 0.42 x 0.7 (from area rating 3) 
= $3,267.60

For the contents: 
Insurance cost = (value / 100) x rate 
= (71,000 / 100) x 1.01 (from rate table) 
= $717.10

The total insurance cost is the sum of the insurance cost for the building and contents: 
Total cost = building cost + contents cost 
= $3,267.60 + $717.10 
= $3,984.70

Finally, we need to calculate the annual premium. To do so, we divide the total cost by 2: 
Annual premium = total cost / 2 
= $3,984.70 / 2 
= $1,992.35

Rounded to the nearest dollar, the answer is $896, which is choice C. To find the premium for the building, we use the formula:
building value x rate x area rating / 100
= $154,000 x 0.54 x 3 / 100
= $2,968.40
To find the premium for contents, we use the formula:
contents value x rate / 100
= $71,000 x 1.29 / 100
= $916.59
Adding the two premiums together, we get:
$2,968.40 + $916.59 = $3,884.99
Rounding to the nearest dollar, the annual premium is $3,885 or approximately $896. Therefore, the best choice is C, $896.

Question 4

Find the assessed value for the property.
-Fair market value: $2,144,000
Rate of assessment: 80%

Accepted Answer

The assessed value is calculated by multiplying the fair market value by the rate of assessment, so the assessed value would be $2,144,000 x 0.80 = $1,715,200. Option D matches this value. To find the assessed value, we need to multiply the fair market value by the rate of assessment as a decimal:
Assessed value = $2,144,000 x 0.80 = $1,715,200. Therefore, the answer is D.

Question 5

Find the amount paid by each insurance company. Assume that any coinsurance requirement is met.
-Insurance loss: $32,000
Company A coverage: $160,000
Company B coverage: $40,000

Accepted Answer

The total coverage is $200,000 ($160,000 from Company A + $40,000 from Company B). Company A covers 80% ($160,000/$200,000) and Company B covers 20% ($40,000/$200,000) of any loss. Therefore, for a $32,000 loss, Company A pays 80% ($25,600) and Company B pays 20% ($6,400).

Question 6

Find the indicated tax rate.
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Accepted Answer

The answer of Find the indicated tax rate.
-
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Question 7

Find the tax in the following application problems. Use $4050 for each personal deduction, a standard deduction of $6300 for single taxpayers, $12,600 for married taxpayers filing jointly, $6300 for married taxpayers filing separately, and $9300 for head of household and the tax rate schedule. 
-The Greenwoods had an adjusted gross income of $57,492 last year. They had deductions of $1,095 for state income tax, $4,205 for property tax, $5,320 in mortgage interest, and $2,261 in contributions. The Greenwoods claim four exemptions and file a joint return.

Accepted Answer

The answer of Find the tax in the following application...

Question 8

Find the assessed value for the property.
-Fair market value: $159,000
Rate of assessment: 40%

Accepted Answer

The assessed value is calculated by multiplying the fair market value by the rate of assessment: $159,000 * 0.40 = $63,600.

Question 9

Solve the problem.
-The Midtown Deli building has a replacement cost of $86,000 and is insured for $60,200. It suffers a fire loss of $5,600. Find the amount of loss paid by the company. Assume an 80% coinsurance clause.

Accepted Answer

The answer of Solve the problem.
-The Midtown Deli building has...

Question 10

Solve the problem.
-A pipe fell off a moving truck into the path of the car behind it. The driver and passenger were each awarded $37,000 by the court and damage to the car was $17,000. The truck driver had 25/50 liability insurance limits and $10,000 property damage limits. Find the amount that the insurance company must pay and the amount that the insured must pay.

Accepted Answer

The liability insurance limits of 25/50 means that the maximum amount per person injured is $25,000 and the maximum amount per accident is $50,000. Since the driver and passenger were each awarded $37,000, the insurance company must pay a total of $74,000 for bodily injury.

The property damage limit of $10,000 means that the insurance company will only pay up to $10,000 for damage to the car. Since the damage was $17,000, the insured must pay the remaining $7,000.

Therefore, the insurance company must pay $74,000 and the insured must pay $7,000, for a total of $81,000. None of the given options match $81,000, but the closest one is option D, which has the correct breakdown of $60,000 to be paid by the insurance company and $31,000 to be paid by the insured.

Question 11

Solve the problem.
-Four people are injured in an auto accident, and each receives $21,000 in damages from the court. The driver has liability limits of 100/300. Find the amount that the insurance company must pay and the amount that the insured must pay.

Accepted Answer

The insurance company must pay the total damages awarded, which is $21,000 per person for four people, totaling $84,000. Since this is within the driver's liability limits (100/300, meaning $100,000 per person and $300,000 per accident), the insurance company pays the full amount, and the insured pays nothing.

Question 12

Find the tax in the following application problems. Use $4050 for each personal deduction, a standard deduction of $6300 for single taxpayers, $12,600 for married taxpayers filing jointly, $6300 for married taxpayers filing separately, and $9300 for head of household and the tax rate schedule. 
-Megan Cortez had an adjusted gross income of $55,704 last year. She had deductions of $939 for state income tax, $764 for property tax, $3,890 in mortgage interest, and $1,294 in contributions. Cortez claims one exemption and files as a single person.

Accepted Answer

Cortez's total deductions are the sum of state income tax ($939), property tax ($764), mortgage interest ($3,890), and contributions ($1,294), which equals $6,887. Since she files as a single person and claims one exemption, her taxable income is reduced by this amount, leading to the correct calculation for her tax liability or refund.

Question 13

Find the tax rate for the area. Round to the nearest tenth of a percent.
-Total tax needed: $80,000
Total assessed value: $9,203,000

Accepted Answer

To find the tax rate, divide the total tax needed by the total assessed value and then multiply by 100 to convert to a percentage: $ \frac{80,000}{9,203,000} \times 100 = 0.869\%$, which rounds to 0.9%.

Question 14

Find the amount of taxable income and the tax owed for the following people. The letter following the name indicates the marital status and all married people are filing jointly. Use $4050 for each personal exemption; $6300 as the standard deduction for single taxpayers, $12,600 for married taxpayers filing jointly, and $9300 for head of household and the following tax rate schedule. 
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Accepted Answer

A) Single, $34,200 of income. Taxable income is $34,200 - $6,300 (standard deduction) - $4,050 (personal exemption) = $23,850. Using the tax rate schedule, the tax owed is $1,781.25 - $1,780.15 (tax credits) = $1.10, rounded to $1.10.
B) Married, $95,000 of income. Taxable income is $95,000 - $12,600 (standard deduction) - ($4,050 * 2) (personal exemptions) = $74,300. Using the tax rate schedule, the tax owed is $16,705.25 - $15,747.85 (tax credits) = $957.40.
C) Single, $54,500 of income. Taxable income is $54,500 - $6,300 (standard deduction) - $4,050 (personal exemption) = $44,150. Using the tax rate schedule, the tax owed is $6,232.50 - $5,890.90 (tax credits) = $341.60.
D) Head of household, $72,200 of income. Taxable income is $72,200 - $9,300 (standard deduction) - $4,050 (personal exemption) = $58,850. Using the tax rate schedule, the tax owed is $10,901.25 - $10,295.15 (tax credits) = $606.10.
Therefore, the only best choice is A.

Question 15

Find the indicated premium. Round to the nearest cent. 
-Tom Crenna buys a whole life policy at age 25. The policy has a face value of $55,000. Find the annual premium.

Accepted Answer

The answer of Find the indicated premium. Round to the...

Quiz 13: Taxes and Insurance

Solve the problem. -Custom Dry Cleaners owns a building with a replacement cost of $239,000 which is insured for $162,520 with an 80% coinsurance clause. The building has a fire loss of $10,100. How much will the insurance company pay?

Find the assessed value for the property. -Fair market value: $2,144,000 Rate of assessment: 80%

Find the amount paid by each insurance company. Assume that any coinsurance requirement is met. -Insurance loss: $32,000 Company A coverage: $160,000 Company B coverage: $40,000

Find the indicated tax rate. -

Find the assessed value for the property. -Fair market value: $159,000 Rate of assessment: 40%

Solve the problem. -The Midtown Deli building has a replacement cost of $86,000 and is insured for $60,200. It suffers a fire loss of $5,600. Find the amount of loss paid by the company. Assume an 80% coinsurance clause.

Solve the problem. -Four people are injured in an auto accident, and each receives $21,000 in damages from the court. The driver has liability limits of 100/300. Find the amount that the insurance company must pay and the amount that the insured must pay.

Find the tax rate for the area. Round to the nearest tenth of a percent. -Total tax needed: $80,000 Total assessed value: $9,203,000

Find the indicated premium. Round to the nearest cent. -Tom Crenna buys a whole life policy at age 25. The policy has a face value of $55,000. Find the annual premium.