Property & Casualty Insurance Exam (National Portion)Property InsuranceEasy
A homeowner's HO-3 policy has a Coverage A (Dwelling) limit of $400,000. Coverage B (Other Structures) is typically set as a percentage of Coverage A. What is the standard percentage used for Coverage B, and what would be the corresponding limit in this scenario?
- A25%, $100,000
- B5%, $20,000
- C10%, $40,000
- D20%, $80,000
Show answer & explanationAnswer & explanation
Correct answer: C. 10%, $40,000
In a standard HO-3 homeowners policy, Coverage B (Other Structures) is typically set at 10% of the Coverage A (Dwelling) limit. Therefore, for a $400,000 Coverage A limit, Coverage B would be $400,000 x 0.10 = $40,000.
Why the other options are wrong
- A. This is incorrect; 25% is not the standard for Coverage B.
- B. This is incorrect; 5% is not the standard for Coverage B.
- D. This is incorrect; 20% is not the standard for Coverage B.
Homeowners Coverage B (Other Structures)
A section of a homeowners policy that covers structures on the insured's property that are separated from the dwelling by a clear space, such as detached garages, sheds, or fences.
- Standard amount is typically 10% of Coverage A (Dwelling).
- Can be increased by endorsement for an additional premium.
- Excludes structures used for business purposes or rented to non-tenants.
Memory trick: Your main home 'A' is big, but 'B' for buildings is just a 'bit' of it!