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.

9. The home is badly damaged in a severe earthquake. The actual cash value of the damaged structure is $50,000. The cost to replace the damaged portion is $70,000

a) Is earthquake 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: $50,000 or $70,000

c) If no, explain why.

10. A guest of the house accidentally slips on the kitchen floor and breaks an arm. The accident is not James fault. The medical bill incurred by the injured guest is $3,000. Would the expenses be covered? If so, by which section of policy? Circle your answer.

Not covered

Covered by Coverage E

Covered by Coverage F