
Concept explainers
To determine:
The maximum dollar coverage amounts for parts B, C, and D of J homeowner’s policy.
Introduction:
Homeowner’s insurance refers to the property insurance that not only covers the loss on damage of a property but also the assets related with that property. It also covers the loss due to the accidents in property through liability coverage.

Explanation of Solution
HO-3 is a homeowner’s insurance in which the coverage included are,
- Part A is related with dwelling and based on structure replacement value. It is minimum $20,000.
- Part B is related with other structures and provides coverage up to 10% of insurance on house.
- Part C is related with personal property and provides coverage up to 50% of insurance on house.
- Part D is related with loss of use and provides coverage up to 20% of insurance on house.
- Part E is related with personal liability and provides coverage up to $100,000.
- Part F is related with medical payments to others and provides coverage up to $1000 per person.
As J insures her home with HO-3 policy for 100% of its replacement value of $140,000, the calculation of maximum dollar coverage for part B is,
Substitute $140,000 for insured amount of home in the above formula.
The maximum coverage under part B is $14,000.
Calculation of maximum dollar coverage for part C is,
Substitute $140,000 for insured amount of home in the above formula.
The maximum coverage under part C is $70,000.
Calculation of maximum dollar coverage for part D is,
Substitute $140,000 for insured amount of home in the above formula.
The maximum coverage under part D is $28,000.
Thus, the maximum dollar coverage amounts for parts B, C, and D of J homeowner’s policy are $14,000, $70,000 and $28,000 respectively.
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