Determining What Amount the Insurance Company will Pay for the Damages. Eric and Susan just purchased their first home, which cost $130,000. They purchased a homeowner’s policy to insure the home for $120,000 and personal property for $75,000.

They declined any coverage for additional living expenses. The deductible for the policy is $500.

Soon after Eric and Susan moved into their new home, a strong windstorm caused damage to their roof. They reported the roof damage to be $17,000. While the roof was under repair, the couple had to live in a nearby hotel for three days. The hotel bill amounted to $320. Assuming the insurance company settles claims using the replacement value method, what amount will the insurance company pay for the damages to the roof?

LO10-6