Personal Finance (MindTap Course List)
13th Edition
ISBN: 9781337099752
Author: E. Thomas Garman, Raymond Forgue
Publisher: Cengage Learning
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Please help me understand this question?Kevin recently purchased a board form HO-2 policy with no deductible. The policy value is $174,000. A year later, his roof is damaged by vandalism and he suffers a loss of $139,200.
If the replacement value of Kevin’s house is $290,000 and the insurance policy includes a replacement cost requirement of 80%, he will receive a reimbursement
Barbara has homeowner’s insurance with $100001 face amount.She recently incurred fire damage of $50000 during the policy period. If the insurer values the home to be $150000, what would her insurance benefit before the deductible?
Choices:
$33334
$100000
$0
$50001
1. Which two types of natural disasters are not normally covered in a homeowner’s policy?
6. Kim just paid off her house and is thinking about no longer having homeowners insurance (her bank required it as part of her mortgage agreement). Her house is worth $300,000. What are the pros and cons of this decision?
7. Would your answer to the previous question change if you found out that Kim has $3,000,000 in the bank?
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- Will purchased a home for $350,000 five years ago. He did significant renovations and additions increasing the value to $425,000. He forgot to update his original policy limits of $280,000. He incurred a $100,000 loss by fire. He has a $2,500 deductible. How much will he be responsible for after accounting for the amount his insurer will pay? In other words, how much of the loss will his insurer not pay?arrow_forwardHowie Homeowner has owned his home for 8 years. He purchased it for $250,000 and the insurance company required a policy with 80% minimum coverage so Howie bought a $200,000 HO-3 homeowner's insurance policy. He has a $2,500 deductible on his policy. He still owns that policy, even though the replacement cost of the home is now $320,000. If Howie suffer a $40,000 fire loss to the home, what is the dollar amount: 1. The loss that would be covered by his policy (paid by the insurance company) 2. The amount Howie must pay out of pocket 1) $29,297; 2) $10,703 1) $31,250; 2) $2,500 1) $40,000; 2) 0 1) $37,500; 2) $2,500 1) $20,000; 2) $20,000arrow_forwardLO.2 Alfred owned a term life insurance policy at the time he was diagnosed with a terminal illness. After paying $18,300 in premiums, he sold the policy to a company that is authorized by the state of South Carolina to purchase such policies. The company paid Alfred $125,000. When Alfred died 18 months later, the company collected the face amount of the policy, $150,000. As a result of the sale of the policy, how much is Alfred required to include in his gross income?arrow_forward
- Mr. Ali purchased a fire insurance policy with a Sum Assured RO. 10,000. The value of his house is RO 20,000. A fire happened in his house and the estimated loss is RO 15,000. How much Mr. A can claim from the insurance company?arrow_forwardAndre has an unendorsed HO-3 policy. His roof is torn off by a tornado. His limit on Coverage A is $100,000. RC of the roof is $25,000, and ACV of the roof is $22,000. RC of the covered contents damaged is $65,000, and ACV of the contents is $55,000. Ignoring the effect of any deductible, how much will his insurer pay for this loss? Please show your work.arrow_forwardJohn owns a second home in Palm Springs, CA. During the year, he rented the house for $5,000 for 56 days and used the house for 14 days during the summer. The house remained vacant during the remainder of the year. The expenses for the home included $5,000 in mortgage interest, $850 in property taxes, $900 for utilities and maintenance, and $3,500 of depreciation. What is John's deductible rental loss, before considering the passive loss limitations? $200 $875 $2,500 $3,200 $0arrow_forward
- You have an HO policy with the following limits: A $75,000 (dwelling) B-$ 7,500 (other structures) C-$25,000 (personal property). A tornado strikes your property. You lose your house, which is worth $65,000 at the time of the loss. You also lose an unattached shed worth $8,000, and personal property worth $30,000. You will collect? (assume $0 deductible, ignore the ACV calculation and assume there is no fraud or other unusual circumstances surrounding the loss.) OA$107,500 OB. $97,500 OC.$103,000arrow_forwardMy father purchased his home in 1974 for $38,000. He sold it in 2020 for $225,000. What rate of appreciation (interest) did the price of his home experience?arrow_forward1. Alex owns a home with a replacement value of $320,000. The homeowners policy has an 80% coinsurance clause and a face value of $240,000. Damage caused by a fire costs $125,280 to repair. What compensation will the insurance company pay? 2. Using Table 19-5 and 19-6, find the annual premium for an automobile insurance policy for Sandra who has a good credit rating. She lives in Territory 1 and buys 50/100/50 coverage for her liability protection. Sandra's vehicle is Model Class 2 and is five years old. In addition to the liability coverage, she purchased comprehensive and collision insurance with a $250 deductible on comprehensive and a $500 deductible on collision. TABLE 19-5 Annual Automobile Liability Insurance Premiums Territory 1 Territory 2 Liability Limits BAD GOOD ОСС GOOD ОСС BAD 50/100/50 385 600 846 354 552 778 100/300/100 425 682 961 391 627 884 250/500/250 460 750 1036 423 690 953 500/1000/500 530 843 1208 488 776 1111 GOOD = good credit; OCC = occasional payments past…arrow_forward
- What Do You Recommend? George and Emily Cosgrove of Athens, Georgia, recently had a fire in their garage that destroyed two of their cars and did considerable damage to the garage and to the outside of their home. After receiving their reimbursements from their homeowner's and automobile insurance policies, the Cosgroves realized that they were severely underinsured. One vehicle was not insured for fire, and the insurance on their dwelling amounted to only 60 percent of its current replacement value. What do you recommend to George and Emily about managing property and liability risk regarding: 1. The risk-management steps they should take to update their insurance coverages?arrow_forwardWhat Do You Recommend? George and Emily Cosgrove of Athens, Georgia, recently had a fire in their garage that destroyed two of their cars and did considerable damage to the garage and to the outside of their home. After receiving their reimbursements from their homeowner's and automobile insurance policies, the Cosgroves realized that they were severely underinsured. One vehicle was not insured for fire, and the insurance on their dwelling amounted to only 60 percent of its current replacement value. What do you recommend to George and Emily about managing property and liability risk regarding: 1. The risk-management steps they should take to update their insurance coverages? 2. The relationship between severity and frequency of loss when deciding whether to buy insurance?arrow_forwardThe Blacks moved from Maine to Nevada. As a result, they sold their house in Maine on January 4, 2022. They originally paid $80,000 for the home on July 3, 1996, but managed to sell it for $598,000. They spent $14,000 on improvements over the years. How do I fill out the Form 8949?arrow_forward
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