Unit 6 question

Unit 6 question

by Grisel Padron -
Number of replies: 4
Property is valued at $125,000 but insured at $100,000 with a $5,000 deductible and Debris Removal coverage of $7,000. There was a total loss. Why does the insured receive $107,000 instead of $102,000? If the deductible is is taken from the LOSS and the total loss was $100,000? The correct answer shows as $107,000 where deductible was not taken out.
In reply to Grisel Padron

Re: Unit 6 question

by Jan Bradburn- -

Grisel,

The loss to the insured was $125,000.  You take the deductible from the $125,000 which means, after the deductible, the insurer would pay $120,000 for the loss.  But the insured only has $100,000 worth of coverage so they receive $100,000 plus debris removal.  The insured is out-of-pocket $25,000 for being underinsured.

Jan

In reply to Jan Bradburn-

Re: Unit 6 question

by Deleted user -

Jan,

So deductibles are always substracted from the loss?..not from the amount to be paid? Does this apply to all deductibles as a general rule?

In reply to Deleted user

Re: Unit 6 question

by Jan Bradburn- -

Allenda,

Yes, deductibles are always subtracted from the loss.  If you are involved in an at-fault accident resulting in $3000 damages to your vehicle.  Assuming you have a PAP with $500 deductible, yoiu subtract the $500 from the $3000 loss. The same is true with property loss.

Jan