FIN 1103-3 FIN1103-3 Individual Week 9

FIN 1103-3 FIN1103-3 Individual Week 9


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FIN 1103-3 Individual Week 9

Problem 1.

Assume that Mary Boyle had a homeowner’s insurance policy with $150,000 of coverage on the dwelling. Would a 90 percent co-insurance clause be better than an 80 percent clause in such a policy? Give reasons to support your answer.

Problem 4.

Sarah Kavenna’s luxurious home in in Washington, D. C., was recently gutted in a   fire. Her living and dining rooms were completely destroyed, and the damaged personal property had a replacement value of $27,000. The average age of the damaged personal property was 5 years, and its useful life was estimated to be 15 years. What is the maximum amount the insurance company would pay Sarah, assuming that it reimburses losses on an actual cash- value basis?

Problem 5.

David Salter has a personal automobile policy (PAP) with coverage of $25,000/$50,000 for bodily injury liability, $25,000 for property damage liability, $5,000 for medical payments, and a $500 deductible for collision insurance. How much will his insurance cover in each of the following situations? Will he have any out-of-pocket costs?

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