There was water damage to personal property in a home. The items damaged were originally priced at $4000. The items lose value by 11% per year. The items were four years old when they were damaged. The owner had actual cash value coverage with a deductible of $250.
How much will the insurance company pay the policy holder?
$4000
$1990
$250
$3600
?
4000 * 0.89^4 - 250
Amt. Paid = 4000-4000*0.11*4-250 = $1990.
Go with henry2 - I forgot to use linear depreciation.
To calculate how much the insurance company will pay the policyholder, we need to consider the depreciation of the items based on their age.
Given that the items were four years old and lose value by 11% per year, we can calculate the depreciated value using the formula:
Depreciated value = Original value * (1 - depreciation rate)^number of years
In this case, the original value is $4000, the depreciation rate is 11%, and the number of years is 4.
Depreciated value = $4000 * (1 - 0.11)^4
Depreciated value = $4000 * 0.89^4
Depreciated value = $4000 * 0.5808
Depreciated value ≈ $2323
The depreciation calculation gives us an approximate value of $2323 for the damaged items.
Next, we need to consider the deductible amount, which is $250. The deductible is the amount the policyholder must pay out of pocket before the insurance company covers any expenses.
Finally, to find out how much the insurance company will pay the policyholder, we subtract the deductible from the depreciated value:
Insurance payout = Depreciated value - Deductible
Insurance payout = $2323 - $250
Insurance payout = $2073
So, the insurance company will pay the policyholder approximately $2073.