Amy is a business owner who purchased a policy of business insurance providing 1,000,000 limits for 1 party coverages. Covid and inflation has cut into her profits so she chose to purchase an actual cash value 1" party coverage limit as opposed to replacement cost. Unfortunately she had a fire and all of the contents of her office building were destroyed (computers, copying machine, phones etc.) Amy's office contents were quite old and had a value at the time of the fire of $550,000. The cost to replace these items, however, was $975,000. Amy is glad she purchased 1,000,000 limits thinking she will be able to buy new contents to replace the destroyed ones without having to spend any $. After all her limits are less than the cost to replace. Is she correct? Explain.
Amy is a business owner who purchased a policy of business insurance providing 1,000,000 limits for 1 party coverages. Covid and inflation has cut into her profits so she chose to purchase an actual cash value 1" party coverage limit as opposed to replacement cost. Unfortunately she had a fire and all of the contents of her office building were destroyed (computers, copying machine, phones etc.) Amy's office contents were quite old and had a value at the time of the fire of $550,000. The cost to replace these items, however, was $975,000. Amy is glad she purchased 1,000,000 limits thinking she will be able to buy new contents to replace the destroyed ones without having to spend any $. After all her limits are less than the cost to replace. Is she correct? Explain.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Amy is a business owner who purchased a policy of business insurance providing
1,000,000 limits for 1st party coverages. Covid and inflation has cut into her profits so
she chose to purchase an actual cash value 1 party coverage limit as opposed to
replacement cost. Unfortunately she had a fire and all of the contents of her office
building were destroyed (computers, copying machine, phones etc.) Amy's office
contents were quite old and had a value at the time of the fire of $550,000. The cost to
replace these items, however, was $975,000. Amy is glad she purchased 1,000,000
limits thinking she will be able to buy new contents to replace the destroyed ones
without having to spend any $. After all her limits are less than the cost to replace. Is
she correct? Explain.
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