Problem 4

Ken and Mary Claire Powell, both age 40, own their own home, with the land valued at $80,000 and the dwelling with a replacement value of $150,000. They have a total net worth of $550,000. They have the following property/liability insurance coverages:

Homeowners Insurance

The Powells currently have an HO-3 policy with a replacement value endorsement on contents. The policy provides open-perils coverage. The deductible is $250, and the premium is $533.60 per year.

The dwelling coverage is $100,000, contents $50,000, and liability $100,000.

Automobile Insurance

The Powells have full coverage on both cars, including:

$100,000 bodily injury for one person

$300,000 bodily injury for all persons

$50,000 property damage

$100,000 uninsured motorist

Deductibles

$500 comprehensive

$1,000 collision

This insurance includes medical payments, car rentals, and towing.

The cost of the auto insurance is $2,123.50 per year because of the number of speeding tickets Mary Claire has received.

The Powells suffer a burglary and lose personal property items purchased for $20,000 and having a replacement value of $27,000. How much will the insurance company pay?

If a fire destroys two-thirds of their house and the loss is $100,000, how much will the insurance company pay?

Do the Powells have adequate liability coverage?

What would you recommend regarding their liability coverage?

While Mary Claires car was parked in a parking lot next to a school playground, a young student missed a ball being thrown and it dented the hood of Mary Claires car. The damage was estimated to cost $1,840 to repair. How much will the insurer pay?