South Carolina Personal Lines Practice Exam

What does Coverage D in a dwelling policy provide?

1. Fair rental value if loss prevents property income

2. Legal defense costs

3. Coverage for personal liability claims

4. Replacement cost for personal property

The correct answer is: Fair rental value if loss prevents property income

Coverage D in a dwelling policy is designed to provide compensation for the fair rental value of the property if a covered loss makes the dwelling uninhabitable. This means that if a policyholder suffers an insured loss, such as a fire or severe water damage, and they are unable to rent out their property during the repair process, this coverage will help replace the rental income they would have otherwise received. This is particularly important for landlords who rely on rental income for their economic stability. It ensures financial continuity by compensating for the potential loss of income resulting from property damage while repairs are being made. The other options pertain to different aspects of insurance coverage. For instance, legal defense costs relate to liability coverage, which is not included in Coverage D. Similarly, personal liability claims and replacement costs for personal property fall under different coverage sections and do not align with the purpose of Coverage D in the dwelling policy.