OLT-Breakroom: Unit 4 Lesson 2 calculation

QUESTION: insured has partial damage to roof. There is a $500 deductible. Replacement cost is $5,000. $5,000 less $500 deductible but insured needed to have at least 80% of coverage A for full replacement loss to take effect. Taking depreciation into account the ACV is $3,000. What is payable? ANSWER: $3,500 They don't say what insured has dwelling covered for and it is assumed that its not at least 80%. Why is that relevant to the answer? Where does the $3,500 come from? Is it $3,000 ACV plus $500 deductible? If so, why?

Grisel

I will check on this question and get back to you.

Jan

Without knowing the dwelling coverage amount I don't see how someone would figure out the correct number .

The dwelling cost is $125,000. Some one else has posted the same question. I'm getting ready to take the final exam and still don't have an answer and don't understand the convoluted reading which is why I don't like online courses. Regardless, I think that since deductible is taken from the loss/value $125,000 which is much higher than the coverage then what's payable is the damage at ACV $3,000plus the $500 deductible or perhaps replacement cost does not come into play because the coverage is $70,000 and for replacement cost to be effective, that amount should have been $100,000 ($125,000x 80%). Not sure. Need an answer from an instructor.

Thanks for providing the entire question. It now makes sense and I can provide an answer.

This is a coinsurance question which means you have to apply the coinsurance formula. Coinsurance does not apply the deductible. You follow the equation which calculates the percent of loss the policy will cover. Also, ACV or replacement cost does not figure into this question - only coinsurance.

Apply the formula and let me know if you are able to get the correct answer.

Jan

I have the same question. I took the coinsurance into account and came up with 3500. I am puzzled since there is a deductible of 500 for wind, consequently shouldn t the answer be 3000. thank you for your clarification.

Sandro,

You do not use the deductible when you are calculating coinsurance. The deductible is part of the coinsurance formula.

Jan

So the formula should go $70k(insured amount) divided by $100k(amount needed) =.7 or 70%

70% of $5000(damage) = $3500 minus your deductible($500) = $3000.

Am I missing something here?

Q: joe has a personal auto policy with two cars & um limits is 25/50 stacked he also has basic pip & 1k in med pay . He is involved in a accident where a hit & run driver runs into his car . He has 42k in medical bills. How much dues his um pay ? A 25k B 31k C 42k D 50 k The correct answer is B . I don't understand how they came up with that answer . Math was never my subject

Stephanie, my understanding is that Joe's PIP will pick up the first $10,000 and his Medial Payment will pick up $1,000. The remaining $31,000 is picked up by UM. UM covers hit & run accidents, not just underinsured or un-insured. I'm kinda sure but not positive and hopefully an instructor can explain better.

Good explanation Grisel! You're exactly right. It's a sure sign you understand the concept when you can explain it to another student.

To add to your explanation - UM covers a hit and run because there is no insurance available from the at-fault party. Even if they had coverage, there is no way of knowing since they left the scene of the accident.

Jan

Thank you, Jan. Your additional knowledge further explains the reasons for the calculation.

2-20 Conversion Course

Unit 4 Lesson 2 calculation