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?
$________. The deductible applies to the loss ($125,000), not to the amount of insurance.
|
Your answer : |
Please show me how $107,000.00 is the correct answer.
Here's how I believe it works:
The Value of the home is $125,00, BUT $100,000 was the total loss from a covered peril
The debris removal was $7,000
$5,000 is deductable, but doesn't matter because it only applies to the loss Not amount of the insurance
So, $100,000 is paid for covered loss peril and $7,000 for debris removal which = $107,000
I hope that helps alittle.
I believe what i means is the $5,000 deductable applies to a specific loss that may occur. Also the limit of insurance applies in addition to the deductable.
Now the amount of insurance the insured recieves, is in addition to what the insured pays for the deductable. Which the deductable could be payed per event or annually, its up to the insured.
Joan,
The deductible is always applied to the loss. SInce the home is valued at $125000 and it is a total loss, the amount of the loss is $125000. When you subtract the deductible from the loss you get $120,000, but the insured only has $100,000 worth of coverage. The insured will receive $100,000 for his loss and $7000 debris removal which is paid in addition to the policy limit.
I think the confusion is that the deductible applies to the loss and this can be confusing in a total loss that is not insured to full value. It is easier to understand with a partial loss...imagine the same coverage with a partial loss of $20,000. You subtract the deductible from the loss and insurance pays $15,000. If you subtract the loss from the policy limit, the insured would receive $95,000 for a $20,000 loss!!! So - follow the same process for all losses and subtract the deductible from the amount of the loss.
Jan
Grisel,
The point I was trying to make was that you always subtract the deductible from the loss and not from the policy limit. If you subtract a small loss from the policy limit, you would receive a HUGE sum of money from the insurer - and insurance doesn't work that way. Always subtract a deductible from the loss. If you still don't understand, please email me at bradburn@oltraining.com and we can discuss further.
Jan