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David has a Homeowners 3 policy that provides $280,000 of insurance on his dwelling, which has a current replacement value of $400,000. Ignoring any deductible, how much will David collect if a roof with a replacement value of $16,000 but an actual cash value of $10,000 is destroyed in a fire?

Respuesta :

Answer:

$14,000

Explanation:

Insurance policy = $280,000

Current dwelling replacement value = $400000

Therefore = $400000 - $280,000

= $120,000

Roof replacement value = $16,000

Actual cash value of the roof = $10,000

Therefore = $16,000 - $10,000

= $6,000

The next step,

= $120,000÷ $6,000

= $20,000

Hence, the amount David will collect for his roof = $20,000 -$6,000

= $14,000.

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