Kuen Yee owns a $400,000 brick home in fire protection class 11 that is insured for 75% of its replacement
value.
Find the
a) amount of coverage,
and
b) annual insurance premium.



Answer :

To find the amount of coverage and the annual insurance premium, we can follow these steps:

a) **Amount of Coverage**:

- The home is insured for 75% of its replacement value.

- Let's calculate 75% of the replacement value.

- 75% of $400,000 = 0.75 * $400,000 = $300,000

- Therefore, the amount of coverage is $300,000.

b) **Annual Insurance Premium**:

- The premium is usually calculated as a percentage of the insured amount.

- Let's assume the premium rate is 0.5% of the insured amount.

- Annual premium = Premium rate * Insured amount

- Annual premium = 0.005 * $300,000

- Annual premium = $1,500

So,

a) The amount of coverage is $300,000.

b) The annual insurance premium is $1,500.