Lonnie and Paula have a homeowner's policy with $75,000 coverage and a $250 deductible.Their home recently suffered extensive fire damage in the amount of $50,000.Assuming the replacement value of the home was $85,000,how much will the insurance company pay on this loss?
A)$74,750
B)$50,000
C)$49,750
D)$44,750

Question

Quizplus · Accepted Answer

The insurance company will pay the difference between the replacement value of the home and the deductible.

Replacement value - deductible = amount paid by insurance company

$85,000 - $250 = $84,750

However, the insurance policy only covers up to $75,000, so the insurance company will pay the lower of the two amounts:

$75,000 - $250 = $74,750

Therefore, the answer is C) $49,750, which is the amount that the insurance company will pay on this loss.

Lonnie and Paula Have a Homeowner's Policy with $75,000 Coverage