Albert and Tanya are married and own a home situated on 40 acres (16.19 hectares) of land.

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Question:

Albert and Tanya are married and own a home situated on 40 acres (16.19 hectares) of land. The house is insured for $200,000 under a standard householders insurance policy (not a replacement value policy). The property is currently worth $750,000 with the land valued at $400,000. The replacement cost of the home is $350,000. Personal property is fully insured under the same policy for $75,000. The combined policy does not have any policy excess. Tanya has jewelry and furs valued at $10,000, while Albert has a coin collection valued at $15,000 and a high-speed motor boat valued at $20,000.

In answering the following questions assume you are a financial adviser with the necessary authorization under you license to advise you general insurance.

Required

a) You are asked to evaluate the couple's householders policy. Based on the above facts, do you believe their present coverage's are adequate? If not, make several recommendations for improving the coverage.

b) A fire damaged one bedroom, which causes damage amounting to $16,000. How much will the insurer pay for the loss?

c) A burglar broke into the home and stole a new television set, a DVD player and several paintings. The actual cash value of the stolen property is $4,000. The cost of replacing the property is $9,000. In addition, the coin collection is also taken. Using the information provided in the text, indicate the extent, if any, to which their householders will cover these losses.

d) Assume that Albert and Tanya have a disagreement with their insurer concerning the value of the above losses. Discuss how the dispute would be resolved? e) Assume that Tanya operates an accounting business from her home. Her home business office contains a computer used solely for business, office furniture, filing cabinets and other business property. Explain whether her householders policy will cover her business property and activities.

f) One of Tanya's clients sues her for negligent accounting advice. The suit alleges damages of $75,000. Discuss whether her householders policy will cover her.

g) A friend of Albert visits and falls over a stack of books he has left on the floor while he cleans the book shelves. Albert takes his friend to a local medical clinic where treatment is received costing $750. Will the householders policy pay for this cost?

h) Tanya's horse kicks a person crossing her property causing severe injuries to the person. The injured person's lawyer issues her with a notice of claim against Albert and Tanya asserting damages for $500,000. Discuss whether their householders policy will cover them for this claim?

i) Neighborhood children often run through Tanya's and Albert's yard. Recently a group did just that, with one child falling over a rock hidden in the grass. The child needed stitches and an overnight stay in the hospital. It is not clear if the child's parent will sue. If the parents due sue, will Tanya and Albert be covered by their policy?