Chap 6 Quiz

Chap 6 Quiz

by Magalie Octave -
Number of replies: 2
Dear Jan, 
can you explain this question, please?
Thank you.
 
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?
Select one:
A. $100,000
B. $102,000
C. $125,000
D. 107,000. The deductible applies to the loss, not to the amount of insurance.
In reply to Magalie Octave

Re: Chap 6 Quiz

by Jan Bradburn- -

Magalie,

The deductible is always subtracted from the loss.  In this case the loss is the value of property, or $125,000. Subtract the deductible - $125,000 - $5000 = $120,000.  The amount payable would be $120,000, but the insured only has $100,000 coverage, so $100,000 is payable for the loss.  The cost of debris removal is paid  "in addition to" the loss.  The total payable is $107,000.  

jan