1. The hot water heater explodes and damages some household contents. The actual cash value of the damaged property is $1000, and the cost of replacing the property is $1600.

a) Is explosion a covered peril here? Circle one: Yes (go to part b) No (go to part c)

b) If yes, how much would the insurer pay? Circle one: $1000 $1600

c) If no, explain why.