Unit 4-Lesson 2 Question

Unit 4-Lesson 2 Question

by Grisel Padron -
Number of replies: 5

Unit 4 - Lesson 2

An insured has an HO-3, no endorsements, with following limits: A - $70,000, B - $7,000, C - $35,000, D - $14,000. The policy has a $500 deductible ($500 deductible for windstorm/hurricane).

What is the amount payable (if any) when: "A vacation residence in North Carolina owned by the insured burned down. All the furniture, with an ACV of $5,000 was destroyed"?

Ans. $_____ is payable - $5,000 loss less $____ deductible, but the limit on property usually located at a secondary residence is limited to 10% of the Coverage C limit.

I thought it was $3,500 which is 10% of C since the loss was at a secondary residence. However, the correct answer was $4,500 ($5,000-$500 deductible). Why?

In reply to Grisel Padron

Re: Unit 4-Lesson 2 Question

by Christine Morton -

The question is not really clear...  It may be they have a policy on the North Carolina House, so it would be treated as the dwelling property?

I can see your confussion.. I am going through the 440 course, and thought a couple of the answers were wrong there also.

Let me know the answer if you find out?

In reply to Christine Morton

Re: Unit 4-Lesson 2 Question

by Luis Salvador -

The correct answer is $3,500 which is 10% of $35,000.

In reply to Luis Salvador

Re: Unit 4-Lesson 2 Question

by Kurt Matthew Hagen -

I interpret the question that the HO-3 is on the vacation residence (as a secondary residence) There fore: $4500  ($5000 less the $500 deductible)

In reply to Luis Salvador

Re: Unit 4-Lesson 2 Question

by Kurt Matthew Hagen -

If the HO-3 is not the vacation residence, then $3000 10% of C less the $500 deductible.

In reply to Kurt Matthew Hagen

Re: Unit 4-Lesson 2 Question

by Luis Salvador -

Sorry I didn't clarify the answer for others than the one that asked.

We just need to be concerned about the personal property and we know that is not at the property (not on the premise). So the coverage for the personal property out of the premise (anywhere in the world is 10% of Cov C = 35,000*0.10=$3,500.

Loss was 5k minus deductible $500 = 4,500 - which is more than max cov $3,500. Insurer will pay $3,500.