Property & Casualty Insurance Exam (National Portion)Property InsuranceEasy
A homeowner's HO-3 policy has a Coverage A (Dwelling) limit of $300,000. If the detached garage, which is covered under Coverage B, is completely destroyed by a covered peril, what is the maximum amount the policy will pay for the garage?
- A$15,000
- B$60,000
- C$30,000
- D$150,000
Show answer & explanationAnswer & explanation
Correct answer: C. $30,000
Coverage B (Other Structures) in an HO-3 policy is typically 10% of the Coverage A (Dwelling) limit. Therefore, if the Coverage A limit is $300,000, Coverage B will be $30,000.
Why the other options are wrong
- A. This is half of the typical Coverage B limit and is incorrect.
- B. This represents 20% of the Coverage A limit, which is not the standard for Coverage B.
- D. This is 50% of the Coverage A limit, which is incorrect for Coverage B.
Homeowners Coverage B (Other Structures)
Coverage B in a homeowners policy provides insurance for structures on the property that are separated from the dwelling by a clear space, such as a detached garage or shed.
- Typically 10% of Coverage A limit.
- Covers structures not attached to the main dwelling.
- Subject to perils covered under Coverage A.
Memory trick: Always remember the 'B' for 'Buildings' not attached to the main 'A' dwelling.