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

Since Jamil and Vicky have replacement coverage, the insurance company will pay for the cost of repairing or replacing their home up to the policy limit of $275,000. The $50,000 loss will be covered by the insurance company after subtracting the $1,000 deductible, resulting in a payment of $49,000. Therefore, the answer is C) $57,000 less the deductible.

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