Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law)Property InsuranceMedium
A client has a Homeowners (HO-3) policy with a Coverage A (Dwelling) limit of $400,000. They also have an unattached garage on their property. A severe windstorm damages the garage, requiring $50,000 in repairs. What is the maximum amount their HO-3 policy would typically pay for the garage damage?
- A$50,000
- B$40,000
- C$80,000
- D$400,000
Show answer & explanationAnswer & explanation
Correct answer: B. $40,000
Under an HO-3 policy, Coverage B (Other Structures) is typically 10% of Coverage A (Dwelling). With a Coverage A limit of $400,000, Coverage B would be $40,000. Therefore, the maximum payout for the $50,000 damage to the unattached garage would be $40,000.
Why the other options are wrong
- A. This is the cost of the damage, but the policy will only pay up to its limit for Coverage B.
- C. This would be 20% of Coverage A, which is not the standard limit for Coverage B.
- D. This is the Coverage A limit, not the Coverage B limit for other structures.
HO-3 Coverage B (Other Structures)
Part of an HO-3 Homeowners policy that provides coverage for structures on the insured premises that are separated from the dwelling by a clear space, such as detached garages or sheds.
- Standard limit is typically 10% of Coverage A (Dwelling).
- Covers structures like detached garages, sheds, fences.
- Coverage is usually on an open perils basis, similar to Coverage A.
Memory trick: A is for home, B for the shed, C for your stuff, D for your bed.