FINC 6366

Project 4

Homeowners Insurance
 
 
 
The goal of this project is to explore the topic of homeowners insurance. The project requires you to work in Excel with the provided spreadsheet. Be sure to fill in the yellow boxes in the Excel file for full credit and show all work by referencing cells where necessary (do not simply type in answers). In addition, type up a report in Word (1-2 pages) with a separate section for the introduction (description of the project), findings (answer assignment questions, plots, etc.), and conclusion (conclusions, summary). Make sure to follow all directions or points will be deducted. This is an individual project so be sure to submit your own work. Upon completion, please submit both your Word report and Excel file to blackboard at the same time. Each question (A, B, C, D, E, F, G, H, and I) in the Excel file is worth 10 points (total of 90 points) and the report is worth 10 points.
 
 

Homeowners Insurance

Assume that Sandra Rice owns a HO-3 policy for his home. The limits set in his policy are provided below:

Type	Coverage A	Coverage B	Coverage C	Coverage D	Coverage E	Coverage F
Limit	$120,000	$12,000	$60,000	$24,000	$100,000	$5,000

 
A $350 deductible applies to Section 1, Coverages A, B, and/or C. The replacement cost of Sandra’s home is $132,000, the contents are valued at $75,000, and the home is 30 percent depreciated. Compute the amount that Sandra will collect in each of the following circumstances and assume that each event occurs independently. Note: a deductible will only apply if losses are less than the coverage limit.
 

1. A storm ripped through Sandra’s neighborhood, destroying her house and all of its belongings. Rebuilding the house will take six months, and Sandra will have to pay an additional $12,000 in living expenses during that time.

 

1. A neighbor’s eight-year-old youngster mistakenly releases the brakes on his family’s pickup truck, causing it to slam into Sandra’s home. There is $30,000 damage to the home. The truck has been totally demolished in the process. Before the loss, its ACV was $18,000. An injury to both the youngster ($5,000) and Sandra ($7,000) is reported.

 

1. Sandra’s unattached gazebo burns down, causing $7,000 in damage to the gazebo and $5,000 in damage to the furniture inside.

 

1. Sandra negligently starts a fire while cooking. The home, all the contents, and gazebo (value of $14,000) are a total loss. It costs Sandra an additional $31,000 to live in a rental home while the house is being rebuilt.

 

1. Sandra accidentally burns down her neighbor’s house while cooking, causing $130,000 in damage.

 

1. Sandra’s golf ball strikes another golfer, Timothy C. Green, in the head while they are playing golf at Sandra’s house. Sandra warned Timothy before he was struck. Timothy claims he didn’t hear the warning and has filed a lawsuit against Sandra for $6,000 in medical expenses, $15,000 in lost wages, and $60,000 for pain and suffering. In order to defend Sandra, it will cost an additional $10,000 to hire a lawyer. Assume Timothy wins the lawsuit.

 

1. Sandra’s son, Jack, has his PlayStation stolen from his dorm room when he is away at college. This results in $500 of damage.

 

1. Sandra drops her laptop while carrying it to the basement. A total of $1,500 has been lost.

 

1. Sandra works from home as a certified public accountant. Mack Green’s tax return was prepared by her but contains many errors. Mack is suing Sandra for negligence. Mack wins a $12,000 judgment in the suit.