Question

Sufficient Dwelling Coverage? Colton Gentry of Lancaster, California, has owned his home for ten years. When he purchased it for $178,000, Colton bought a $160,000 homeowner's insurance policy. He still owns that policy, even though the replacement cost of the home is now $300,000.a. If Colton suffered a $15,000 fire loss to the home, what percentage of the loss would be covered by his policy? Round your answer to one decimal place 89.9 What dollar amount of the loss would be covered by his policy? Enter the amount of the loss as a positive number. Round your answer to the nearest dollar. $13485 b. How much insurance on the home should Colton carry now to be fully reimbursed for a fire loss? Round your answer to the nearest dollar. $125000 Hide Feedback Incorrect Check My Work (No more tries available)

Answer 1

Answer:

a. $17,978

b. $300,000

Explanation:

Conditions

• The  cotton country of lancaster, california has owned his home for ten years
• purchased it for $178,000, cotton bought a $160,000 homeowner's insurance policy

• the replacement cost of the home is now $300,000

a.    hence,

the proportion of the house insured = $\frac{InsuranceAmount}{PriceOfThe Home} \times 100$%

                                                             $= \frac{160000}{178000}\times 100$

                                                             =   89.89%

Percentage amount covered by the policy

= proportion of the house insured = 89.89%

Amount covered by the policy in dollars

= $20,000 × 89.89%

= $17,978

b

Amount of insurance on the home that cotton should now carry to be fully reimbursed for a fire loss  = current value of the home

= $ 300,000