Lori lives in an area in Montreal that seems to flood around this time every year. It is getting frustrating, as she does the cleanup herself so as not to deal with the insurance company. She is concerned that if she declares the small amount of water damage each year, her insurance company will no longer insure her, just as they have done with her neighbours after they made their claims. This year, however, the water damage was excessive, and she had no choice but to file an insurance claim. She is however confused about two home value concepts regarding home insurance, one being market value and the other replacement cost. You explain that market value is the price she would get for her home on the real estate market, which includes the land. The replacement cost covers the cost of rebuilding and does not include land. Lori knows that she could sell her home for $$750,000$ as she just received an offer to buy her place, even though it was not listed for sale. The cost, however, to rebuild would be $$500,000.$ Lori has a replacement cost policy and is not fully covered as she has not maintained the $80\%$ coverage amount on the insurance policy. Her home has a replacement cost of $$500,000,$ but her insurance coverage totals $$375,000.$ The water damages total $$125,000$ to her home.

a$)$ How much will the insurance company pay for the damage?

Calculation: $(1$ mark$)$

b$)$ Lori has a home office as she works from home. As her office is upstairs, it did not suffer from water damage, so she could continue working from home during the repairs. With all the workers coming and going to clean and renovate the area impacted by the water damage, she noticed her work laptop missing from her office! She does not have a home office provision on her insurance policy. Explain whether the insurance company will cover her laptop?

$(1$ mark$)$

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