Question

If Farmer Brown sustains a 10% loss to his crop, and he has crop-hail insurance with a $10,000 limit and a 5% minimum loss percentage, how much will his policy pay him?

A. $500
B. $10,000
C. $1,500
D. $1,000

Answer 1

To calculate how much Farmer Brown's crop insurance policy will pay him, we first need to determine the minimum loss that qualifies for coverage. The policy has a minimum loss percentage of 5%, and since Farmer Brown sustained a 10% loss, it exceeds the minimum threshold. The amount of coverage is calculated by multiplying the loss percentage by the policy limit. In this case, 10% of $10,000 is $1,000.

Step-by-step explanation:

To calculate how much Farmer Brown's crop insurance policy will pay him, we first need to determine the minimum loss that qualifies for coverage. The policy has a minimum loss percentage of 5%, and since Farmer Brown sustained a 10% loss, it exceeds the minimum threshold.

Next, we calculate the amount of coverage by multiplying the loss percentage by the policy limit. In this case, 10% of $10,000 is $1,000. Therefore, Farmer Brown's policy will pay him $1,000.

So the correct answer is D. $1,000.