Question

Acme is a manufacturer that makes seasonal products and insures its business personal property with a Business and Personal Property Coverage Form (BPP) with a Value Reporting Form. The amount of insurance is $1,000,000 with a $1,000 deductible. Reports are due monthly. Acme suffered a business personal property loss of $500,000 caused by an insured peril, and the prior monthly report made was $400,000. The actual value of business personal property at the time of this report was $400,000. What amount would Acme’s insurer pay for the described loss?

Answer 1

Answer:

$399,000

Explanation:

We need to understand that deductible is a portion of a loss that is covered in the policy but must be paid by the insurance purchaser, these terms stated in the insurance contract.

Here, the actual value of the business personal property at the time of this report was $400,000. (Only the actual value is covered)

Deductible is = $1,000

Acme's insurer will pay an amount of $399,000 ($400,000 - $1,000) for the described loss.