Question

Sufficient dwelling coverage. Mullai and Sri have owned their home for 17 years. When they purchased it for $497,000 in 2002, they bought a $397,600 homeowner’s insurance policy. They still own that property, even though the replacement cost of the home is now $614,200.

#1 If Mullai and Sri suffered a $21,462 fire and smoke damage loss to the home, what percentage and dollar amount of the loss would be covered by their policy? (5 points)

R = (L – D) x [I ÷ (RV x 0.80 or 1.00)]

R = reimbursement payable

L = amount of loss

D = deductible, if any

I = amount of insurance actually carried

RV = replacement value of the dwelling

#2 How much insurance on the home should Mullai and Sri carry now to be fully reimbursed for a fire and smoke damage loss? (5 points)

Answer 1