Question

6. Carmen Viers lost everything to a fire and has spent the last eight weeks living in a motel room at a cost of

​$5,478. Her​ dwelling, which was destroyed as a result of a lightning​ strike, was insured with an​ HO-2 policy for $399,417.

Prior to the​ loss, her home was valued at $482,000​,

her detached garage and poolhouse were valued at $51,817​,

and her personal property had an actual cash value of $135,837.

To make matters worse she sustained​ $10,000 in injuries while​ trying, unsuccessfully, to save her three Greyhound dogs valued at​ $6,000 each. How much of her total losses and expenses will be reimbursed if she has a​ $1,000 deductible?

Answer 1

Basic Details:

Value of the home: $482,000

Value of Detached Garage and Poolhouse: $51,817

Value of Personal Property $135,837

Injuries: 10,000

Value of Greyhound Dogs: $18,000 ($6,000*3)

Insured value: $399,417

HO-2 policy covers the fire incident as one of its perils and hence insurance can be claimed for the said incident of damage.

The insurance basically covers home, any other structures like fences, detached garage & personal belongings at the time of the accident/incident specifically named in the policy. The personal belonging includes wardrobe, furniture, TV and any other personal property.

The total value of damages caused due to fire at Carmen's home is as follows:

$(482,000+51,817+135,837) = $669,654

Insured cost:  $399,417

The point to be noted here is that the insurance value is lower than the amount of damage caused by the fire. This is a deductible policy which has $1,000 as deductible. In simple terms it means that $1,000 will be deducted from the total value to be paid by the insurance company. Hence in this case, as the value of damage is more than the insurance value, full amount of insurance less $1,000 will be paid to Carmen ie; $(399,417-1,000) = $398,417

Also what can be noted here is that the Insurance doesn't cover any animals or reimbursements towards self injury and cost of staying at any other place due to the damages caused and hence the motel room expense, injury expense and value of dogs will not be considered for calculation of the cost of damages for insurance purposes.