Property Insurance FundamentalsQuestion 223 of 474
A homeowners policy shows a dwelling limit of $280,000 and a 2% deductible; the home's full replacement cost is $350,000. A covered $34,000 loss occurs. The insurer pays:
a.$33,320
b.$28,400
c.$34,000
d.$27,000
Explanation
The percentage deductible runs on the amount of insurance, so it is 2% of $280,000, or $5,600, leaving $28,400 of the $34,000 loss. The $27,000 answer takes 2% of the home's $350,000 replacement cost instead of the limit shown on the declarations. Applying the 2% to the loss itself gives only a $680 deductible, and $34,000 ignores the deductible.
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