L.APply Wnat Youve LearnedManaging Property and Llabilnty RISR Scenario: You own
ID: 350661 • Letter: L
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L.APply Wnat Youve LearnedManaging Property and Llabilnty RISR Scenario: You own a home with a market value of $275,000. Of this amount, $85,000 is apportioned to the land and $190,000 is apportioned to the house. It is estimated that the house would cost $225,000 to rebuild. The personal property in your home is worth $95,000, including a $3,000 diamond ring and a $4,000 computer system. You also own a car worth $35,000. You live in a state where there is a high risk for earthquakes. You have $150,000 in savings and investments that could be drawn on in case of emergency. You currently have a standard HO-3 homeowner's policy with a $500 deductible, which insures your house for $275,000 and your personal belongings for $135,000, and you carry the minimum requirements of your state for car insurance. You have been advised to adjust your insurance coverage based on the large-loss principle. According to the large-loss principal, you should: o transfer all risks possible to insurance o insure your property for the maximum amount available o insure only those risks that you cannot afford to cover using your own financial resources insure your property for minimum amounts only Based on the large-loss principle and your particular situation, a $1,000 deductible deductible is most appropriate for your homeowner's policy. - Given your current insurance coverage, in the event of a fire, your house and household belongings are over-insured by If you were to reduce the coverage on your home to its replacement value of $225,000, then your personal property coverage could also be reduced to ·This is because the minimum personal coverage available on a HO-3 policy is of the home coverage. In what area is the coverage on the home itself severely lacking? oEarthquake damage, which is not included in a standard homeowner's policy Fire damage, which is not included in a standard homeowner's policy Volcano damage, which is not included in a standard homeowner's policy The deductible should be reducedExplanation / Answer
1.According the large-loss principle we can insure only those losses which are un-affordable by us and we pay from our own finances for small losses hence the option selected for this one is correct "insure only those risks which you can not afford to cover using your own financial resources"
5. A standard Home owner insurance policy does not cover earthquake.
6. Here the right answer is "Loss of use and/or additional living expense coverage up to 20% of the value of your home". It provides coverage for additional expenses in case the house becomes unsuitable to live in.
7. If we have a small loss then we decide to not report it to your insurance because in such cases amount of loss is less than deductible.
9. Dogs bites are covered under section II of liability coverage. It will be covered if ann animal owned by the insurer causes bodily injuries.
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