Chapter 10

Financial Planning Exercise 2 Evaluating homeowners policy coverage

Last year, Thea and Rory Brown bought a home with a dwelling replacement value of $240,000 and insured it (via an HO-5 policy) for $204,000. The policy reimburses for actual cash value and has a $250 deductible, standard limits for coverage C items, and no scheduled property. Recently, burglars broke into the house and stole a 4-year-old television set with a current replacement value of $900 and an estimated useful life of 8 years. They also took jewelry valued at $2,000 and silver flatware valued at $3,200.

1. If the Browns policy has an 80% co-insurance clause, do they have enough insurance? -Select-Yes or No
6. Assuming a 50% coverage C limit, calculate how much the Brown family would receive if they filed a claim for the stolen items. Do not round intermediate calculations. Round the answer to two decimal places. $
8. What advice would you give the Brown family about their homeowner's coverage?