Holly Purell owned a house that would cost $200,000 to replace today. Holly took out an insurance policy for only $100,000, reasoning that any damage that would take place would likely be under that amount. Subsequently, there was a fire that caused damages of $50,000 to Holly's house.

Required:

a) Explain the problems Holly might run into when she tries to collect $50,000 in damages on her policy.

b) Explain how an insurance contract avoids being void as a wager.