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20 February, 23:59

Amanda owns a home with a $400,000 replacement value. This January, a snowstorm causes $75,000 in damages to the home. Amanda has an insurance policy with 80% coinsurance and a $1,000 deductible. How much will the insurer pay if Amanda carries $300,000 of coverage?

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  1. 21 February, 02:12
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    Insurer will pay to Amanda $69312.50

    Explanation:

    As we know that Amanda home replacement value which means the (Property value) is $400,000 and Amanda carries a coverage of amount $300,000 which is her policy limit. Her policy has 80% of coinsurance and snow storm causes a damage of amount $75,000. She has the $1,000 deductible in her policy.

    80% of the 400,000 = 320,000

    Amanda should have $320,000 but carries the insurance coverage $300,000

    So she will get 300,000/320,000 = 0.9375

    In this scenario as the damage amount is $75,000 she will get $75,000 x 0.9375 which is equal to $70,312.50

    Since the deductible amount of her policy is $ 1000 Which will therefore be deducted

    Hence $70312.50 - $1000 = $69312.50

    Amanda will get $69312.50
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