Question

Cheyenne has a home insured for $300,000. It would cost $320,000 to rebuild her home. If she has home insurance that provides personal property coverage at 70% of value, how much of her household belongings would be covered?

Answer 1

Answer:

E) $210,000

Explanation:

In his case, Cheyenne has a policy that covers actual cash value which means that the insured policy is valued by a percentage of the insured amount. In this case, the policy covers 70% of the insured amount = $300,000 x 70% = $210,000.

The other method valuing insured property is the replacement cost which considers the value of replacing an existing construction.