OLT-Breakroom: assistance needed please

Can someone please help explain this to me in more detail I am confused.

answer:

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

The Question:

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?

can you please explain this i am confused. is the value not an important fact ? and how does the deductable come into play regarding commercial property ? i wish the learning material provided more examples, I am an old fashioned learner and struggling a bit with this online self learning. prefer the classroom environment, but working on adapting to this online environment.

thank you again

unit 6

thank you

cindy

Re: assistance needed please

by Jan Bradburn- - Tuesday, 29 September 2015, 10:24 AM

Cindy,

With insurance you always subtract the deductible from the loss. In this question the insured loses their home which is valued at $125,000. The loss is $125,000 so you subtract the $5000 deductible from the loss: $125,000 - $5000 = $120,000. The insured should be paid $120,000 for their loss, but the limit on their policy is only $100,000 so they will only receive $100,000 against a $125,000 loss.

Debris removal is an additional coverage which means it is paid above the policy limit, so insurance will also pay the $7000 charge to remove debris. The insured is paid $107,000 total for this loss.

Please let me know if you have other questions.

Jan