Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law)Property InsuranceMedium
A client has a Dwelling Policy (DP-3) covering a rental property. The property becomes uninhabitable due to a covered fire, and the tenant must move out. The policy has a Coverage D (Fair Rental Value) limit of $10,000. It takes 4 months to repair the property, during which time the client loses $2,000 in rent per month. How much will the insurer pay under Coverage D?
- A$8,000
- B$6,000
- C$10,000
- D$2,000
Show answer & explanationAnswer & explanation
Correct answer: A. $8,000
Coverage D (Fair Rental Value) covers the lost rental income for the period the property is uninhabitable due to a covered loss. In this case, 4 months of lost rent at $2,000/month totals $8,000. This amount is within the $10,000 policy limit for Coverage D, so the full $8,000 will be paid.
Why the other options are wrong
- B. This is an incorrect calculation; it might reflect three months of lost rent.
- C. This would be the payment if the lost rent equaled or exceeded the policy limit, which is not the case here.
- D. This represents only one month of lost rent, not the total period of loss.
DP-3 Coverage D (Fair Rental Value)
Coverage in a Dwelling Policy that reimburses the insured for lost rental income when a covered loss makes the rental property uninhabitable.
- Covers lost rent due to covered perils
- Reimburses for the period of untenantability
- Subject to policy limits
Memory trick: A is Dwelling, B is Other, C is Personal, D is Rent.