Reference no: EM134045626

Assignment:

1. Guanlin lives near a river. He's very concerned about the effects of climate change and severe storms and his friend has told him that his insurance will not cover flooding. He's concerned about that, because he knows that water damage is one of the most frequent causes of damage. He's also worried about the sewer backing up or a plumbing malfunction causing a flood, as his co-worker had a terrible flood last year in her basement caused by sewer backup. So, Guanlin wants to ensure he's protected from such problems by purchasing a sewer back up endorsement. His broker suggests purchasing an extended water endorsement to cover his concerns.

a. Explain the term "flood" to Guanlin, by providing examples of how people use the term incorrectly and how such examples might be covered.

b. Explain to Guanlin how his standard insurance policy will respond if his property is damaged by a severe storm.

c. Explain to Guanlin what constitutes flooding why he might be better protected by the IBC 1148 Extended Water Endorsement than by a sewer back up endorsement.

2. Guanlin decides to purchase a comprehensive homeowners form, but does not purchase any endorsements. In July, he goes away on a three-week vacation. When he returns, he discovers a pipe on the hot water heater has burst, flooding his basement, which contained a recreation area with television, computer and audio equipment. Because it has been quite warm and humid, there was some mould on several of the walls and surfaces, around the water damage. Guanlin shuts off the water and calls his broker.

a. Will Guanlin have coverage under the Homeowners comprehensive form? Is all of the loss or damage covered or only some of the loss or damage?

b. How would your answer to part a change if, instead of the Homeowners comprehensive form, Guanlin had selected the homeowners basic form?

c. List five types of water damage that are excluded from all three Homeowners forms

d. As a result of the water damage, much of the property (contents, carpeting, drywall) was damaged and needed to be removed and disposed of. Who will pay to remove and dispose of the damaged and destroyed property? How much will they pay?

3. As a result of the burst pipe, Guanlin must spend one week at a hotel. Explain what coverage, if any, Guanlin will have for this under his Homeowners policy.

4. While the water damage is being repaired, the contractor doing the repairs accidentally starts a fire and causes additional damage to the home. How will Guanlin's insurer handle the claim for this additional damage?