Carl and Alexandra 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: Assume Carl and Alexandra have a standard HO-3 policy with personal property covered at 50% and landscaping covered for 10%.How much will the insurance pay for the losses of their personal property and landscaping?

Question

Quizplus · Accepted Answer

The first step is to find out how much is covered under their policy. They have replacement coverage, so we can assume that they have enough coverage for the replacement value of their home, which is now $275,000.

Their policy covers personal property at 50%, so they have coverage for up to $137,500 ($275,000 x 0.50) in personal property losses.

Their policy covers landscaping at 10%, so they have coverage for up to $27,500 ($275,000 x 0.10) in landscaping losses.

The damages to their personal property and landscaping are not given, so we cannot calculate a specific amount that the insurance will pay. However, we do know that the insurance will pay up to the coverage limits for those types of losses.

Therefore, the maximum amount the insurance will pay for the losses of their personal property and landscaping is $137,500 x 0.50 + $27,500 x 0.10 = $9,700.

Therefore, the best choice is B.

Carl and Alexandra Purchased a $200,000 Homeowners Policy for Their