Question

Rudy has been paying an annual homeowners insurance premium of $1,106.30 ($0.37 per $100 of value) since he first purchased his house. For the past six months, Rudy has completed some major improvements to his house to improve its overall value. If Rudy successfully adds $50,000 to the value of his house, what will his new annual homeowners insurance premium be?
a.
$185.00
b.
$315.00
c.
$1,291.30
d.
$1,351.14

Answer 1

Rate is $0.37 per $100 = $0.0037 per $1.
Original value = 1106.30 / 0.0037 = $299,000.
New value = 299,000 + 50,000 = $349,000.
New premium = 349,000 × 0.0037 = $1,291.30.

Answer: c.