How Much of Fire Loss Will Be Covered? Toula and Ian Miller of Gainesville, Florida, recently suffered a fire at their home. The fire, which began in a crawl space at the back of the house, caused $50,000 of damage to the dwelling itself. Their garage, valued at $20,000, was totally destroyed but did not contain a car at the time of the fire. Replacement of the Millers personal property damaged in the home and garage amounted to $23,000. In addition, $350 in cash and a stamp collection valued at $3,215 were destroyed. While the damage was being repaired, the Millers stayed in a motel for one week and spent $1,350 on food and lodging. The house had a value of $ 195,000 and was insured for $150,000 under an HO-3 policy with a $250 deductible. Use Table 10-1 to answer the following questions. (Hint: You must first determine whether the Millers have adequate dwelling replacement coverage and, if not, what percentage of the necessary 80 percent coverage they do have. The resulting answer will determine the percentage of the loss to the dwelling covered, and consequently the amount to be reimbursed by the insurance company.)
Assuming that the deductible was applied to the damage to the dwelling, calculate the amount covered by insurance and the amount that the Millers must pay for each loss listed: the dwelling, the garage, the cash and stamp collection, and the extra living expenses.
How much of the amount of the personal property loss would be covered by the insurance policy? Paid for by the Millers?
\begin{tabular}{|c|c|c|c|} \hline & \begin{tabular}{l} maximum per \\ item \end{tabular} & \begin{tabular}{l} maximum per \\ item \end{tabular} & \begin{tabular}{l} maximum per \\ item \end{tabular} \\ \hline \begin{tabular}{l} Personal \\ property \end{tabular} & \begin{tabular}{l} 5070 percent \\ of insurance \\ on the home \\ (minimum) \end{tabular} & \begin{tabular}{l} 5070 percent \\ of insurance \\ on the home \\ (minimum) \end{tabular} & \begin{tabular}{l} 5070 percent \\ of insurance \\ on the home \\ (minimum) \end{tabular} \\ \hline \begin{tabular}{l} Loss of use \\ and/or \\ additional \\ living expense \end{tabular} & \begin{tabular}{l} 10 percent of \\ insurance on \\ the home \end{tabular} & \begin{tabular}{l} 20 percent of \\ insurance on \\ the home \end{tabular} & \begin{tabular}{l} 20 percent of \\ insurance on \\ the home \end{tabular} \\ \hline \begin{tabular}{l} Credit card, \\ forgery, \\ counterfeit \\ money \end{tabular} & $1,000 & $1,000 & $1,000 \\ \hline \begin{tabular}{l} Liability \\ coverage/limits \\ (for all policies) \end{tabular} & & \multicolumn{2}{|c|}{ Special limits of liability } \\ \hline \begin{tabular}{l} Comprehensive \\ personal \\ liability \\ No-fault \\ medical \\ payments \\ No-fault \\ property \\ damage \end{tabular} & \begin{tabular}{l} $300,000 \\ $1,000 \\ $500 \end{tabular} & \multicolumn{2}{|c|}{\begin{tabular}{l} For the following classes of \\ personal property, special limits \\ apply on a per-occurrence basis \\ (e.g., per fire or theft): money, \\ coins, bank notes, precious \\ metals (gold, silver, etc.), $200; \\ computers, $5,000; securities, \\ deeds, stocks, bonds, tickets, \\ stamps, $1,000; watercraft and \\ trailers, including furnishings, \\ equipment, and outboard \\ motors, $1,000; trailers other \\ than for watercraft, $1,000; \\ jewelry, watches, furs, $1,000; \\ silverware, goldware, etc., \\ $2,500; guns, $2,000. \end{tabular}} \\ \hline \end{tabular} List of perils covered 1. Theft 2. Fire or Lightning 3. Explosion 4. Smoke 5. Freezing 6. Vehicles 7. Falling Objects 8. Volcanic Eruption 9. Windstorm or Hail 10. Riot or Civil Commotion 11. Damage caused by Aircraft 12. Vandalism or Malicious Mischief 13. Damage due to weight of Ice, Snow, or Sleet 14. Sudden \& Accidental Tearing Apart, Cracking, Burning, or Bulging 15. Sudden \& Accidental Damage from Artificially Generated Electric Current 16. Accidental Discharge or Overflow of Water from Plumbing, Air conditioning etc. These perils that are typically excluded in all standard homeowners insurance policies and must be purchased as a rider to the policy or separately, if available at all: 1. Earth Movement (earthquake coverage can be endorsed) 2. Ordinance or Law (some coverage may be provided in your policy) 3. Water Damage (Sudden \& Accidental Water Damage is automatically included; others can be endorsed onto the policy) 4. Power Failure 5. Neglect 6. War 7. Nuclear Hazard 8. Intentional Loss 9. Government Action 10. Collapse (some coverage may be provided in your policy) 11. Theft to a Dwelling Under Construction 12. Vandalism or Malicious Mischief (only if vacant more than 60 days) 13. Mold, Fungus, or Wet Rot (some coverage may be provided in your policy) 14. Wear \& Tear, Deterioration 15. Mechanical Breakdown 16. Smog, Rust \& Corrosion 17. Smoke from Agricultural Smudging \& Industrial 19. Settling, Shrinking, Bulging, or Expanding 20. Birds, Vermin, Rodents, Insects 21. Animals Owned by Insured This table describes the standard policies. Specific items differ from company to company and from state to state. When you want a limit that exceeds the standard limit for your company, you usually can increase the limit by paying an additional premium. \begin{tabular}{|c|c|c|} \hline \begin{tabular}{l} HO-4 (Renter's \\ Contents Broad \\ Form) \end{tabular} & \begin{tabular}{l} HO-6 (For \\ Condominium \\ owners) \end{tabular} & HO-8 (For Older Homes) \\ \hline Perils 1-16 & Perils 1-16 & Perils 1-4, 6, 8-12 \\ \hline \begin{tabular}{l} 10 percent of \\ personal property \\ insurance on \\ additions and \\ alterations to the \\ apartment \end{tabular} & \begin{tabular}{l} $1,000 on owner's \\ additions and \\ alterations to the \\ unit \end{tabular} & \begin{tabular}{l} Amount based on actual \\ cash value of the home \end{tabular} \\ \hline Not covered & \begin{tabular}{l} Not covered \\ (unless owned \\ solely by the \\ insured) \end{tabular} & \begin{tabular}{l} 10 percent of insurance \\ on the home (minimum) \end{tabular} \\ \hline \begin{tabular}{l} 10 percent of \\ personal property \\ insurance, $500 \\ maximum per \\ item \end{tabular} & \begin{tabular}{l} 10 percent of \\ personal property \\ insurance, $500 \\ maximum per \\ item \end{tabular} & \begin{tabular}{l} 5 percent of insurance on \\ the home, $500 maximum \\ per item \end{tabular} \\ \hline \begin{tabular}{l} Chosen by the \\ tenant to reflect \\ the value of the \\ items, minimum \\ $6,000 \end{tabular} & \begin{tabular}{l} Chosen by the \\ homeowner to \\ reflect the value \\ of the items, \\ minimum $6,000 \end{tabular} & \begin{tabular}{l} 5070 percent of \\ insurance on the home \\ (minimum) \end{tabular} \\ \hline \begin{tabular}{l} 20 percent of \\ personal property \\ insurance \end{tabular} & \begin{tabular}{l} 40 percent of \\ personal property \\ insurance \end{tabular} & \begin{tabular}{l} 20 percent of insurance \\ on the home \end{tabular} \\ \hline$1,000 & $1,000 & $1,000 \\ \hline \multicolumn{2}{|c|}{\begin{tabular}{l} These perils that are typically excluded in \\ all standard homeowners insurance \end{tabular}} & 11. Theft to a \\ \hline \end{tabular} Table 10-1 Summary of Homeowner's Insurance Policies \begin{tabular}{|c|c|c|c|} \hline & \begin{tabular}{l} HO-1 (Basic \\ Form) \end{tabular} & \begin{tabular}{l} HO-2 (Broad \\ Form) \end{tabular} & \begin{tabular}{l} HO-3 (Special \\ Form) \end{tabular} \\ \hline \begin{tabular}{l} Perils covered \\ (descriptions \\ are given \\ below) \end{tabular} & \begin{tabular}{l} Perils 1-4, 6, \\ 812 \end{tabular} & Perils 1-16 & \begin{tabular}{l} All perils \\ except those \\ specifically \\ excluded for \\ buildings; \\ perils 1-16 on \\ personal \\ property \\ (does not \\ include glass \\ breakage) \end{tabular} \\ \hline \begin{tabular}{l} House and any \\ other attached \\ buildings \end{tabular} & \begin{tabular}{l} Amount \\ based on \\ replacement \\ cost, \\ minimum \\ $15,000 \end{tabular} & \begin{tabular}{l} Amount \\ based on \\ replacement \\ cost, \\ minimum \\ $15,000 \end{tabular} & \begin{tabular}{l} Amount \\ based on \\ replacement \\ cost, \\ minimum \\ $20,000 \end{tabular} \\ \hline \begin{tabular}{l} Detached \\ buildings \\ (appurtenant \\ structures) \end{tabular} & \begin{tabular}{l} 10 percent of \\ insurance on \\ the home \\ (minimum) \end{tabular} & \begin{tabular}{l} 10 percent of \\ insurance on \\ the home \\ (minimum) \end{tabular} & \begin{tabular}{l} 10 percent of \\ insurance on \\ the home \\ (minimum) \end{tabular} \\ \hline \begin{tabular}{l} Trees, shrubs, \\ plants, etc. \end{tabular} & \begin{tabular}{l} 5 percent of \\ insurance on \\ the home, \\ $500 \\ maximum per \\ item \end{tabular} & \begin{tabular}{l} 5 percent of \\ insurance on \\ the home, \\ $500 \\ maximum per \\ item \end{tabular} & \begin{tabular}{l} 5 percent of \\ insurance on \\ the home, \\ $500 \\ maximum per \\ item \end{tabular} \\ \hline \begin{tabular}{l} Personal \\ property \end{tabular} & \begin{tabular}{l} 5070 percent \\ of insurance \end{tabular} & \begin{tabular}{l} 5070 percent \\ of insurance \end{tabular} & \begin{tabular}{l} 5070 percent \\ of insurance \end{tabular} \\ \hline \end{tabular}
