Homework
1. How much would a homeowner receive with actual cash-value coverage and
replacement cost coverage for a 2-year-old sofa destroyed by a fire? The sofa
would cost $5,000 to replace today, cost $3,500 two years ago, and has an
estimated life of 3 years.
2. Carmella Estevez has a homeowner’s insurance policy with $100,000 of liability
insurance. She’s concerned about the risk of lawsuits because her property
borders a neighborhood park. What can she do to increase her liability coverage?
3. Ray Denton has a $270,000 home (replacement cost) that’s insured for $180,000.
If he has a $35,000 claim due to a kitchen fire, how much will his homeowner’s
insurance policy pay? How much would be paid if his home were totally
destroyed?
4. Larry Simmons has 100,000/200,000/50,000 automobile liability insurance. Four
passengers injured in a serious accident are awarded $65,000 each because Larry
was found to be at fault. How much of this judgment will Larry’s insurance
policy cover? What amount will Larry have to pay?
5. Donna Greene has 25,000/50,000/15,000 auto insurance coverage and no other
coverage. Driving home from work in a snowstorm, she hit a Mercedes Benz,
slid into a guard rail, and knocked down a telephone pole. Damage to the
Mercedes, the guard rail, and the telephone pole are $7,000, $4,000, and $3,000,
respectively. How much will Donna and her insurance company each have to
pay?
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