Not-So-Happy Holidays During the holidays, David and Mary Costanza’s Christmas tree caught fire, and they sustained significant damage to their home and personal property. They had to clean and repaint their living room and replace the living room carpet and furniture for \($7,000\). While the work was being done, the family stayed in a motel for three days, at a total cost of \($300\). The Costanzas had an actual cash value homeowner’s insurance policy with a deductible of \($250\). The insurance company’s adjuster came to the Costanzas’ home and looked at the damage. He estimated the actual cash value of the furniture, hand-me-downs from Mary’s parents, at

\($750\) and of the carpet, which had needed to be replaced for some time, at $350.

1. How much do you estimate the insurer will pay the Costanzas?

2. If the Costanzas had purchased replacement cost insurance, how much would they have received from their insurer after the loss?