Smith Family

Assume the Smith family of Philadelphia, Pennslyvania purchased their home in 2002 for $80,000. Since then, comparable homes in their neighborhood have most recently sold for $200,000. The cost to replace the home would be $180,000. It is estimated that the house is one-third depreciated. The Smiths have a $175,000 (face amount coverage A) Homeowners policy in force, similar to the policy shown in the Appendix. Answer the following questions as if each question were a separate event.

1) How much will the Smiths collect for a total covered fire loss under coverage A?

2) How much will be collected for a $20,000 partial loss under coverage A

3) What would be your answers to questions 1 and 2 above if the Smiths had only $80,000 of insurance of Coverage A?

a. question 1