Please post your answer to the question below directly beneath the question. Then, post a comment to at least one answer posted by a classmate. You must post your own answer before seeing those of your classmates.
When you respond to a classmate’s answer, please identify that classmate in your response.
Fred and Susan Melrose insured their home and personal property under an unendorsed Homeowners 3 policy. The home has a current replacement cost of $800,000. The policy contains the following limits:
⦁ Coverage A – Dwelling $480,000
⦁ Coverage B – Other Structures $48,000
⦁ Coverage C – Personal Property $240,000
⦁ Coverage D – Loss of Use $144,000
⦁ Coverage E – Personal Liability $100,000 (Each Occurrence)
⦁ Coverage F – Medical Payments to Others $1,000 (Each Person)
What dollar amount, if any, is payable under their Homeowners 3 policy for the following losses. Treat each loss as a separate occurrence. Ignore any deductible. Please show your calculations. If the loss is covered, you must indicate under which coverage(s) the claim would be paid, and show your calculations. If a loss is not covered, you must indicate why the loss is not covered.
⦁ Three bedrooms and the attached garage were totally destroyed in the fire. The replacement cost of restoring the bedrooms and the garage is $120,000. The actual cash value of the loss is $100,000. Please show your calculations.
⦁ The fire destroyed all the furniture in the three bedrooms. The furniture was 5 years old and was 50% depreciated. When the furniture was five years ago, it cost $30,000. Today, the cost to replace the furniture today is $50,000. Please show your calculations.
⦁ The Melrose’s family car, which was stored in the garage, is also a total loss. The family car has a replacement cost of $30,000 and an actual cash value of $25,000.
⦁ The furnished apartment above the garage, which the Melrose family had been renting to a visiting professor, suffered extensive smoke damage from the fire. It took three months to clean-up the smoke damage. During these three months, the tenant was not required to pay the rent of $800 per month. In addition, the apartment’s furnishings were completely ruined by the smoke damage. The furniture has an actual cash value of $7,500 and a replacement cost of $10,000.
⦁ While the garage was being repaired, the family motor boat had to be stored in the driveway. It was totally destroyed by a severe wind and hail storm. The actual cash value of the motorboat was $12,000. The replacement cost is $18,000.
For more information on Personal Liability read this: https://en.wikipedia.org/wiki/Liability_insurance
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