Adonis and Eustacia Andino are planning to buy a $200,000 home near Bethel Corners, New York. The home is in snow country, about a mile from Lake Ontario, and is situated on the Salmon River, which overflows its banks about every 2 years. They estimate that their personal property is worth $150,000, but they really arent sure. This includes nearly $25,000 of computer and other electronic equipment, a $20,000 coin collection inherited from Adoniss father, and $40,000 in irreplaceable artwork. The Andinos net worth, including their current $250,000 home, is about $750,000. The Andinos have asked their insurance agent to find them the best coverage, taking advantage of all possible cost-saving measures. They do not want a lot of out-of-pocket expenses if their home or personal property is damaged or lost, and they want their insurance to keep pace with increasing costs.

Questions

1. What type of homeowners insurance policy is best for the Andinos? Which covered perils would be of greatest interest living in their location?

2. What is the minimum amount of Coverage A that the Andinos should purchase on their new home? What risks do they face if they purchase only the minimum required coverage? How much insurance should they purchase in order to reduce their financial risks?

3. Given the value and nature of their personal property and the restrictive Coverage C limits, what other supplemental coverages would you recommend that the Andinos purchase? Document your recommendations in terms of both the protection offered and the cost of coverage.

4. Given the winter snow and ice common to upstate New York, what recommendations would you make for their Section II coverage?

5. Should the Andinos buy flood insurance? If so, how do they go about purchasing it? If not, explain why.

6. Should the Andinos consider purchasing an umbrella policy? Why or why not?