Mr Xavier Has an HO-3 Contract with $100,000 Dwelling Coverage

question 24

Multiple Choice

Mr. Xavier has an HO-3 contract with $100,000 dwelling coverage, $50,000 personal property coverage, and a $500 deductible. The dwelling is 50% depreciated. Sewage backs up into the basement and destroys the furnace, which will cost $8,000 to replace. The policy will pay:

• A) nothing because of the water damage exclusion
• B) nothing because the property is not covered
• C) $7,500 because of replacement cost coverage
• D) $3,500 because of actual cash value and the deductible

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Definitions:

Financial Statement

A formal record of the financial activities and position of a business, individual, or other entity, typically including the balance sheet, income statement, and cash flow statement.

Taxable Income

The amount of income used to calculate how much the government can tax an individual or a company, after all deductions and exemptions have been factored in.

Tax Considerations

Factors related to taxation that must be taken into account when making investment or business decisions.

Vendor

A person or company offering something for sale, especially a trader in the goods market.