Chapter 10 Financial Planning Exercise 2 Evaluating homeowner\'s policy coverage

Question

Chapter 10 Financial Planning Exercise 2

Evaluating homeowner's policy coverage

Last year, Brett and Amber Walsh bought a home with a dwelling replacement value of $240,000 and insured it (via an HO-5 policy) for $209,000. The policy reimburses for actual cash value and has a $250 deductible, standard limits for coverage C items, and no scheduled property. Recently, burglars broke into the house and stole a 3-year-old television set with a current replacement value of $400 and an estimated useful life of 6 years. They also took jewelry valued at $1,700 and silver flatware valued at $4,200.

Assuming a 50% coverage C limit, calculate how much the Walshes would receive if they filed a claim for the stolen items. Round the answer to two decimal places.

Explanation / Answer

Claim on actual cash value basis:-

Assuming Current price of Television after considering depreciation of 3 years $ 400

Jeweley price $1,700

Silver Flatware Valued $4,200 but coverage is limited to $2,500

Total Cash value of items damaged = $4,600 ($400+$1700+$2,500)

Claim receivable $4,600

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