A Dwelling Policy has Coverage A limit of 40,000. A covered loss totals the dwelling and a detached garage; the garage sustains 6,000 in damage. How much will be paid for the loss?

A Dwelling Policy has Coverage A limit of 40,000. A covered loss totals the dwelling and a detached garage; the garage sustains 6,000 in damage. How much will be paid for the loss?

• A. 44,000
• B. 40,000
• C. 46,000
• D. There is no coverage

Answer: (A)

In a dwelling policy, each type of property has its own limit. Coverage A pays for the dwelling itself, here up to 40,000. Detached structures like a garage fall under Coverage B, which is typically 10% of the Coverage A limit unless you’ve increased it. That means the garage has a 4,000 limit. If both the dwelling and the detached garage are damaged in the same loss, you’re paid up to 40,000 for the dwelling and up to 4,000 for the garage. The garage's damage is 6,000, but only 4,000 is payable under Coverage B, so the total payout would be 40,000 plus 4,000, or 44,000.

In a dwelling policy, each type of property has its own limit. Coverage A pays for the dwelling itself, here up to 40,000. Detached structures like a garage fall under Coverage B, which is typically 10% of the Coverage A limit unless you’ve increased it. That means the garage has a 4,000 limit. If both the dwelling and the detached garage are damaged in the same loss, you’re paid up to 40,000 for the dwelling and up to 4,000 for the garage. The garage's damage is 6,000, but only 4,000 is payable under Coverage B, so the total payout would be 40,000 plus 4,000, or 44,000.