homeowners insurance premium pp. 359-360 10-7 section
TRANSCRIPT
Homeowners Insurance Premium
pp. 359-36010-7SECTIONSECTION
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Section ObjectiveSection ObjectiveCalculate:
• annual homeowners insurance premium
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premium (p. 359)
The amount paid to an insurance company for insurance.
fire protection class (p. 359)
A number assigned to property based on how safe it is from fire, used to determine the cost of insuring it.
Key Words to KnowKey Words to Know
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How does an insurance company compute the amount of your premium?
The Hunt to Find a Home p. 359The Hunt to Find a Home p. 359
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The replacement value of Marcia Syke’s home is $150,000. She has insured her home for 80 percent of its replacement value. The home is of wood-frame construction and has been rated in fire protection class 4.
What is the annual premium?
Example 1Example 1
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Find the amount of coverage.
Replacement × Insured Percent of Value of Home Replacement Value
$150,000 × 80% = $120,000
Example 1 Answer: Example 1 Answer: Step 1Step 1
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Find the annual premium. (See Figure 10.5 on page 359 of your textbook.)
• Find the column, Wood Frame.
• Find the Fire Protection Class 1-6 column
• Find the Amount of Insurance Coverage column with 120,000.
Example 1 Answer: Example 1 Answer: Step 2Step 2
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• Follow across the column and down the row to where 120,000 and 1-6 meet.
$381
Example 1 Answer: Example 1 Answer: Step 2 (cont.)Step 2 (cont.)
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A brick home’s replacement cost is $250,000.
It is insured for 100 percent.
It is in an area rated fire protection class 3.
What is the annual premium?
Practice 1Practice 1
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$737
Practice 1 AnswerPractice 1 Answer
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Robert Huynh has insured his $70,000 wood-frame home for 100 percent of its replacement cost. The home is located in an area rated fire protection class 6.
What is the annual policy premium?
What would the premium be if he owned a brick home?
Practice 2Practice 2
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Annual policy premium: $225
Premium for a brick home: $213
Practice 2 AnswerPractice 2 Answer
Homeowners Insurance Premium
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