1. SECTION 10-7
Homeowners Insurance
Premium pp

2. Section Objective
Calculate:
annual homeowners insurance premium

3. Key Words to Know 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.

4. The Hunt to Find a Home p. 359
How does an insurance company compute the amount of your premium?

5. Example 1
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?

6. Example 1 Answer: Step 1 Find the amount of coverage.
Replacement × Insured Percent of
Value of Home Replacement Value
$150,000 × 80% = $120,000

7. Example 1 Answer: Step 2
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.

8. Example 1 Answer: Step 2 (cont.)
Follow across the column and down the row to where 120,000 and 1-6 meet.
$381

9. Practice 1 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?

10. Practice 1 Answer
$737

11. Practice 2
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?

12. Practice 2 Answer Annual policy premium: $225
Premium for a brick home: $213

13. END OF SECTION 10-7
Homeowners Insurance
Premium