Underinsured Dwelling Penalty

Sam carries an H0-3 policy with $500,000 of coverage and a $2,000 deductible. It would cost $700,000 to rebuild Sam’s house. How much will his insurance company pay on a $200,000 claim related to a fire that started in Sam’s kitchen?

1. $176,571
2. $178,571
3. $231,235
4. $198,000