Question

Sam knows that his annual homeowners insurance premium is $0. 27 per $100 of value, which usually works out to be $683. 10 annually. But Sam is confused by a letter from his insurance company telling him that an increase in the value of his home has led to an increase in his annual homeowners insurance premium. He is now being charged an annual premium of $720. 90. Based on the increase in his annual homeowners insurance premium, what was the increase in his home's value? (Note: The cost is still $0. 27 per $100, even though the annual premium went up. ) a. $140 b. $1,400 c. $14,000 d. $140,000 Please select the best answer from the choices provided A B C D.

Answer 1

The increase in in Sam's home value is c. $14,000.

Data and Calculations:

Sam's homeowners insurance premium rate = $0.27 per $100

Total annual premium = $683.10

Home value = $253,000 ($683.10/0.0027)

New total annual premium = $720.90

New Home value = $267,000 ($720.90/0.0027)

Increase in Sam's home value = $14,000 ($2,670 - $2,530)

Thus, the increase in in Sam's home value is c. $14,000.

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