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The homeowner had an explosion accident of X amount of loss on a replacement cost basis. You are given the following: 1. the value
The homeowner had an explosion accident of X amount of loss on a replacement cost basis. You are given the following: 1. the value of the insured house is $15,000 at the time of the accident. ii. the loss random variable X is uniform distributed in the range of 80 thousands and 110 thousands. iii. the loss X is reimbursed in full if the insured amount exceeds 70% of the house value at the time of the accident. Otherwise, X is reimbursed on a pro-rata basis of what would have been paid had the 70% requirement been met. iv. the owner has insured the house for $100,000, which is also the policy limit. Determine the expected amount the insurer pay toward reimbursing the homeowner?
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To determine the expected amount the insurer will pay toward reimbursing the homeowner we need to consider the different scenarios based on the policy ...Get Instant Access to Expert-Tailored Solutions
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