Jerry Carter's home is currently valued, on a replacement cost basis, at
$515 comma 000515,000.
When he last checked his policy, his home was insured for
$375 comma 233375,233
and he did not have an inflation guard endorsement. If he has a
$35 comma 56935,569
claim due to a kitchen fire, how much will his homeowner's insurance policy pay? How much would be paid if his home were totally destroyed? In order to obtain full replacement coverage, how much insurance should Jerry carry on his house?
Question content area bottom
Part 1
If he has a
$35 comma 56935,569
claim due to a kitchen fire, his homeowner's policy would pay
$enter your response here.
(Round to the nearest dollar.)
Part 2
How much would be paid if his home were totally destroyed? In order to obtain full replacement coverage, how much insurance should Jerry carry on his house?  (Select the best answer below.)
A.
If Jerry's home was totally destroyed, the maximum he could collect is
$412,000,
or 80% of the
$515,000
current value of the home. He should probably have 100% coverage to protect against a total loss of $515,000,
and perhaps consider an inflation guard endorsement to protect against future changes in the market value of his home.
B.
If Jerry's home was totally destroyed, the maximum he could collect is
$515,000,
or 100% of the $515,000
current value of the home. He should probably consider an inflation guard endorsement to protect against future changes in the market value of his home.
C.
If Jerry's home was totally destroyed, the maximum he could collect is
$375,233,
or the face value of his policy. He should maintain at least 80% coverage and probably 100% coverage to protect against a total loss of
$515,000,
and perhaps consider an inflation guard endorsement to protect against future changes in the market value of his home.