John and Jenifer are a married couple, and they jointly own a home insured for $200,000 under an unendorsed HO-3 policy. The replacement cost of the home is $275,000. Personal property is insured for $90,000. Jenifer has jewelry valued at $20,000. John has a coin collection valued at $15,000 and a motorboat valued at $20,000. Assume you are a financial planner who is asked to evaluate the couples HO-3 policy.

a)

A burglar broke into the home and stole a new television, jewelry, and several paintings. The actual cash value of the stolen property is $4,000. The cost of replacing the property is $9,000. In addition, the coin collection was taken. Indicate the extent, if any, to which an unendorsed HO-3 policy will cover these losses.

b)

Assume that the couple have a disagreement with their insurer concerning the value of the above losses. How would the dispute be resolved under their HO-3 policy?

(c)

Assume that Jenifer operates an accounting business from the home. Her home business office contains a computer used solely for business, office furniture, file cabinets, and other business personal property. Explain whether her HO-3 policy would cover business personal property used in a home business.