Help with a review question for Unit 6

Help with a review question for Unit 6

by Sarah Beall -
Number of replies: 1

Could anyone assist me with understanding how the answer was reached for the question below?

The insured's covered building, with a value of $125,000, insured for $100,000, was a total loss from a covered cause of loss. Cost of removing debris, after loss, was $7,000. The policy deductible is $5,000. With no other coverage issues, how much is payable to the insured?

Ans: $107,000. The deductible applies to the loss ($125,000), not to the amount of insurance.

 

Thanks!

In reply to Sarah Beall

Re: Help with a review question for Unit 6

by Jan Bradburn- -

Sarah,

The property in this question was a total loss which means the insured lost $125,000.  So $125,000 is payable minus the $5000 deductible.  However, the insured only has $100,000 in coverage.  Instead of collecting $120,000 the insured will collect $100,000 plus they can recover the $7000 for debris removal because debris removal is paid "in addition to" the policy limit.

I hope this helps.  Let me know if you have other questions.

Jan