Question

Both Steve and his wife, Arlene, carry DP-2 policies on their $135,000 home. Steve's policy has a limit of $108,000 and Arlene's has a $27,000 limit, and both policies pay on a pro rata basis. After a hailstorm causes $13,000 in damage to their roof, how much of the damage will be covered by Steve's policy (ignoring any deductible)?

Answer 1

Steve's policy will cover $10,400 of the $13,000 damage caused by the hailstorm.

Step-by-step explanation:

1. To find out how much of the damage will be covered by Steve's policy, we first need to calculate the proportion of the damage that each policy covers.
2. Steve's policy has a limit of $108,000, which is 80% of the total value of the home ($135,000).
3. Therefore, Steve's policy will cover 80% of the damage. Since the total damage is $13,000, Steve's policy will cover $10,400 of the damage.