Question

A flood inundates Howard's property, causing $100,000 of damage to the dwelling and $25,000 of damage to the detached garage. If Howard has a Dwelling Form flood policy with a $150,000 limit, how much will the policy pay for the damage to Howard's home and detached garage combined? (Ignore deductible amounts.)

Option 1: $150,000
Option 2: $125,000
Option 3: $100,000
Option 4: $75,000

Answer 1

Howard's policy limit for flood damage is $150,000, and the total damage to the dwelling and detached garage is $125,000. Therefore, the insurance policy will cover the entire amount of the damages, which is $125,000 (option 2).

Step-by-step explanation:

The question presented is regarding how a flood insurance policy would cover damages to Howard's property, which includes his dwelling and a detached garage. Howard's Dwelling Form flood policy has a coverage limit of $150,000, and the damages reported are $100,000 for the dwelling and $25,000 for the detached garage, totaling $125,000. Since the policy limit is $150,000, which is more than the total damages, the policy will pay out the full amount of the damages, $125,000.


This is because the combined damage does not exceed the policy's coverage limit. Insurance policies like this are designed to cover losses up to the limit stated in the policy. It is important to know that one must always consider the specific terms and conditions of their insurance policy to understand the coverage.