California Property & Casualty Broker-AgentProperty InsuranceMedium
A homeowner's HO-3 policy has a Coverage A (Dwelling) limit of $300,000. Their detached garage, covered under Coverage B (Other Structures), is damaged by a windstorm. The repair cost for the garage is $35,000. How much will the policy pay for the garage damage, assuming no deductible applies?
- A$35,000
- B$45,000
- C$15,000
- D$30,000
Show answer & explanationAnswer & explanation
Correct answer: D. $30,000
Under an HO-3 policy, Coverage B (Other Structures) is typically 10% of Coverage A (Dwelling). With a Coverage A limit of $300,000, Coverage B would be $30,000. Since the repair cost of $35,000 exceeds this limit, the policy will pay the maximum Coverage B limit of $30,000.
Why the other options are wrong
- A. The policy will not pay more than the Coverage B limit, even if the damage is higher.
- B. This would be 15% of Coverage A, which is incorrect.
- C. This would be 5% of Coverage A, which is incorrect.
HO-3 Coverage B Limit
Under a standard HO-3 Homeowners Policy, Coverage B for Other Structures is typically set at 10% of the Coverage A (Dwelling) limit.
- 10% of Coverage A
- Applies to detached structures
- Can be increased by endorsement
Memory trick: Homeowner's 3: Dwelling is the main, Other Structures are 1/10th