Chapter 10 Homework Fall 2015

1. Most home insurance policies cover jewelry for $1,000 and silverware for $2,500 unless items are covered with additional insurance. If $3,800 worth of jewelry and $2,800 worth of silverware were stolen from a family, what amount of the claim would not be covered by insurance?

2. What amount would a person with actual cash value (ACV) coverage receive for two-year-old furniture destroyed by a fire? The furniture would cost $1,000 to replace today and had an estimated life of five years.

3. What would it cost an insurance company to replace a family’s personal property that originally cost $28,000, assuming the family has replacement insurance? The replacement costs for the items have increased 15 percent.

4. For each of the following situations, what amount would the insurance company pay? a. Wind damage of $835; the insured has a $500 deductible. b. Theft of a stereo system worth $1,300; the insured has a $250 deductible. c. Vandalism that does $425 of damage to a home; the insured has a $500 deductible.

5. When Carolina’s house burned down, she lost household items worth a total of $50,000. Her house was insured for $160,000 and her homeowner’s policy provided coverage for personal belongings up to 55 percent of the insured value of the house. Calculate how much insurance coverage Carolina’s policy provides for her personal possessions and whether she will receive payment for all of the items destroyed in the fire.

6. Matt and Kristin are newly married and living in their first house. The yearly premium on their homeowner’s insurance policy is $450 for the coverage they need. Their insurance company offers a 5 percent discount if they install dead-bolt locks on all exterior doors. The couple can also receive a 2 percent discount if they install smoke detectors on each floor. They have contacted a locksmith, who will provide and install dead-bolt locks on the two exterior doors for $60 each. At the local hardware store, smoke detectors cost $8 each, and the new house has two floors. Kristin and Matt can install them themselves. What discount will Matt and Kristin receive if they install the dead-bolt locks? If they install smoke detectors?

7. In the preceding example, assuming their insurance rates remain the same, how many years will it take Matt and Kristin to earn back in discounts the cost of the dead-bolts? The cost of the smoke detectors?

8. Becky Fenton has 25/50/10 automobile insurance coverage. If two other people are awarded $35,000 each for injuries in an auto accident in which Becky was judged at fault, how much of this judgment would the insurance cover?

9. Kurt Simmons has 50/100/15 auto insurance coverage. One evening he lost control of his vehicle, hitting a parked car and damaging a storefront along the street. Damage to the parked car was $5,400, and damage to the store was $12,650. What amount will the insurance company pay for the damages? What amount will Kurt have to pay?

10. Beverly and Kyle Nelson currently insure their cars with separate companies, paying $650 and $575 a year. If they insured both cars with the same company, they would save 10 percent on the annual premiums. What would be the future value of the annual savings over 10 years based on an annual interest rate of 6 percent?