Zach Is Applying for Insurance for His New Home

question 47

Multiple Choice

Zach is applying for insurance for his new home. Which of the following is correct?

• A) He should base the amount of insurance on the price he paid for the new home.
• B) He should insure the building under the replacement value method to receive the full cost of repairing or replacing it.
• C) He should use the actual cash value method for settling claims to receive the full cost of repairing or replacing his personal belongings.
• D) His personal belongings should automatically be covered with his home at 125% of his home's insured amount.
• E) His insured amount should remain the same as long as he lives in his house.

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Definitions:

Net Operating Income

A company's income after subtracting operating expenses but before deducting taxes and interest charges.

Variable Selling Expense

Costs that vary directly with the level of sales, such as commissions for sales personnel, shipping charges, and promotional expenses.

Manufacturing Overhead

All indirect costs associated with the production process, including but not limited to utilities, rent, and salaries of non-direct labor.

Cash Collections

The process of gathering and managing payments received from customers or clients.