Multirisk Management Contracts: Homeowners

Homework – Chapter 13: Multirisk Management Contracts: Homeowners
 
 
 

1. Bill has a homeowners policy with form HO-3. His home has a replacement value of $80,000, and the contents are worth $45,000 at replacement cost or $35,000 at actual cash value. He has a detached greenhouse with heat and humidity control that houses his prized collection of exotic flowers. The flowers are valued at $11,000, and the greenhouse would cost $7,500 to replace at today’s prices. His policy has the following coverages:

 
A property coverage deductible of $250 per occurrence applies. Analyze each of the following situations in light of the above information. Determine all applicable coverage(s) and limit(s), and explain all factors that might affect the coverage provided by the policy.

280. A windstorm causes $20,000 in repair cost damages to the house, and subsequent wind-blown rain causes damage to the contents of the house—$18,000 in replacement cost or $11,000 at actual cash value. The greenhouse is a total loss, as are the exotic plants. Debris removal of the greenhouse to satisfy the city’s health laws costs $350, and further debris removal to clear the way for repairs costs another $280. Two maple trees valued at $600 each are blown down, and their removal costs another $400. Bill must move his family to a nearby rental home for two months while repairs are made to the house. Rental costs are $600 per month, utilities at the rental house are $150 more per month, and the mortgage payments of $550 per month continue to be payable. It costs Bill another $80 per month to commute to work and to drive his children to school. The telephone company charges him $50 to change his telephone to the rental unit and back to his home again.

Answer:
Coverage B–Other Structures is ___ percent of Coverage A, which is ___________
Coverage D–Loss of Use is ___ percent of the limit for Coverage A, which is _________
Now, determine whether Coverages A and B losses will be paid on a replacement cost or actual cash value basis.
Coverage A – Dwelling
Replacement cost = _________________
Insured amount = ________________
Replacement Cost or Actual Cash Value? Circle Correct Answer
How much? ____________________
 
Coverage B – Other Structures
The greenhouse
Replacement cost =__________________
Insured amount = __________________
Replacement Cost or Actual Cash Value? Circle Correct Answer
How much? ____________________
 
Coverage C – Personal Property
Coverage is for actual cash value, so a maximum of ___________________will be paid for damage to contents. Windstorm is the proximate cause of the wind-blown rain damage, so it is covered/not covered?
Trees Shrubs and Other Plants:
This coverage does/does not pay for losses caused by windstorm or rain. The flowers will/won’t be covered.
Debris Removal:
The cost of removing the two maple trees will/will not be paid because coverage did not apply to the peril (windstorm) causing damage to them. Additional Living Expense:
Covered Additional Living Expenses are:
Rental = ________________________
Utilities = ___________________
Commuting = ____________________
One-time telephone charge =_____________
Total additional living expenses = _________________
 
The following is the summary of the payment that Bill will receive: