## Property, Casualty and Liability Insurance - Replacement Values of Lost Property

Replacement Cost versus Actual Cash Value
For loss coverage under a typical homeowners policy, the insurer will pay the greater of:
1) Actual Cash Value, or
2) Replacement Cost Formula
[Insurance carried/Insurance required x Loss] less deductible= amount paid by insurance

Practice Question:
Peter owns a home with a current replacement cost of \$300,000. His homeowners policy has an 80% coinsurance covering the home for \$216,000 with a \$1,500 deductible on all perils. A fire in the home caused \$25,000 of covered damages. How much will the insurance company apportion for this loss?

A. \$20,500
B. \$21,000
C. \$21,500
D. \$22,000

Replacement Cost (\$300,000) x Coinsurance (80%)= Insurance required (\$240,000) [Insurance carried (\$216,000) divided by Insurance required (\$240,000)] times the loss (\$25,000) less the deductible (\$1,500) equals the Amount paid by insurance (\$21,000)

Practice Question:
Which of the following are exclusions that apply to an HO-3 policy?

I. Neglect
II. Windstorm
III. Intentional Loss
IV. Theft

A. I only
B. I and II only
C. I and III only
D. I, II, and III

Neglect and Intentional loss are two of the eight general exclusions.

Homeowner Endorsements and Auto Insurance

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