Homework Assignment #5

This assignment is based upon the material in Chapter 22, Homeowners Insurance Section I.

Fred and Ethel Mertz insured their home and personal property under an unendorsed HO-3 Policy with Farm Bureau Ins. Co. The home has a current replacement cost of $300,000. The policy contains the following limits:

Coverage A: $240,000

Coverage B: $24,000

Coverage C: $120,000

Coverage D: $72,000

The home was badly damaged in a fire and Fred and Ethel were forced to live in a motel for 60 days while their home was being rebuilt. Undamaged personal property was stored in a rental unit during the period of reconstruction.

What dollar amount, if any, will Farm Bureau pay under the HO-3 policy for the following items (ignore any applicable deductibles):

1. Three bedrooms were totally destroyed in the fire. The replacement cost of restoring the bedrooms is $80,000. The Actual Cash Value (ACV) of the loss is $50,000.
2. Monthly mortgage payments of $1,500 on the home.
3. Rental of a motel room at $100/day for 60 days.
4. Meals eaten in the motel restaurant for 60 days at an average cost of $60/day (food costs at home average $20/day).
5. Rent for storing undamaged furniture in a rental unit while the home is being rebuilt, $200/monthly.

Policy: HO-3 (special form)

Coverage A: dwelling

coverage b: other structures

coverage c: personal property

coverage d: loss of use