2. Suffi cient Dwelling Coverage? Adam Barrow of Columbia, Missouri, has owned his home for ten years.

When he purchased it for $178,000, Adam bought a

$160,000 homeowner’s insurance policy. He still owns that policy, even though the replacement cost of the home is now $300,000.

(a) If Adam suff ered a $20,000 fi re loss to the home, what percentage and dollar amount of the loss would be covered by his policy?

(b) How much insurance on the home should Adam carry to be fully reimbursed for a fi re loss?