Could anyone assist me with understanding how the answer was reached for the question below?
The insured's covered building, with a value of $125,000, insured for $100,000, was a total loss from a covered cause of loss. Cost of removing debris, after loss, was $7,000. The policy deductible is $5,000. With no other coverage issues, how much is payable to the insured?
Ans: $107,000. The deductible applies to the loss ($125,000), not to the amount of insurance.
Thanks!
Sarah,
The property in this question was a total loss which means the insured lost $125,000. So $125,000 is payable minus the $5000 deductible. However, the insured only has $100,000 in coverage. Instead of collecting $120,000 the insured will collect $100,000 plus they can recover the $7000 for debris removal because debris removal is paid "in addition to" the policy limit.
I hope this helps. Let me know if you have other questions.
Jan