Question

Stewart owns a home with a replacement cost of $300,000. He purchased $200,000 of property insurance on the house with a $1,000 deductible for all losses. The house caught on fire and sustained $100,000 worth of damage. The actual cash value (ACV) of the damaged portion of the property was $80,000. How much will Stewart receive as reimbursement for the loss

Answer 1

$82,333

Step-by-step explanation:

The computation of the amount received as reimbursement for the loss is given below:

Given that

House Replacement= $300,000

80% of replacement cost = 80% of $300,000 = $240,000

Value of insurance = $200,000

Now

Amount of claim = [($200,000 ÷ $240,000) × $100,000] - $1,000 (deductible for all losses)

= $83,333 - $1,000

= $82,333