Property Insurance FundamentalsQuestion 215 of 474
A house sold recently for $460,000. A builder puts the cost to rebuild the structure at $310,000, the lot alone is worth $150,000, and the mortgage balance is $370,000. The dwelling limit should be set near:
a.$310,000
b.$150,000
c.$370,000
d.$460,000
Explanation
The dwelling limit insures the cost to rebuild the structure, which is the builder's $310,000 estimate; land is not insured because it cannot be destroyed. The $460,000 sale price is market value and includes the lot. Setting the limit at the $370,000 mortgage balance insures the lender's debt rather than the building, and $150,000 is the land by itself.
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