Assume James owns a HO3 policy with the following limits:

Coverage A: $120,000

Coverage B: $ 12,000

Coverage C: $ 60,000

Coverage D: $ 36,000

Coverage E: $100,000

Coverage F: $ 5,000

The replacement cost of James home is $130,000, and depreciation on the home is set at 30%.

Assume that the policy has 80% coinsurance requirement. Indicate the extent to which each of

the following losses would be covered under James Homeowners 3. Assume there is no

deductible.

7. A living room window is broken in a hailstorm. The curtain (personal property) is water stained and must be replaced. The actual cash value of the damaged curtain is $200.

Replacement cost is $300.

a) Is hailstorm 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: $200 or $300

c) If no, explain why.

8. 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 or $1600

c) If no, explain why.