1. Given the position of the insurance company, what is the smallest reimbursement the Pages can expect?
2. Is there any chance they can collect for the destroyed auto? How much and from whom?
3. Suppose the Pages disagree with the insurer's cost estimates. What course of action should they follow?
It was around midnight when the smoke alarm woke Peter and Barbara Page. The fire had started in the attached garage and was already flaming when the fire department arrived.
By the time it was out, the Pages' home had sustained damages that would take $20,000 to repair. In addition, their Honda, with a market price of $8,000, was totally destroyed.
When the Pages purchased their home, they took out a homeowner's policy with $60,000 worth of dwelling protection. Since then they have received several letters from the insurance company suggesting they increase the dwelling coverage. For one reason or another they just never got around to responding. Now the insurer tells them that because their coverage was for less than 80 percent of the home's replacement value, as determined by the replacement cost provision, the insurance company probably will not pay the full cost of repairs. To avoid coinsurance payments, they should have been carrying at least $90,000 in dwelling protection.