South Carolina Personal Lines Practice Exam

What type of loss does Coverage D Fair Rental Value compensate for?

1. Loss of personal property

2. Income loss while the property is uninhabitable

3. Replacement costs for damaged property

4. Liability claims

The correct answer is: Income loss while the property is uninhabitable

Coverage D, known as Fair Rental Value, is designed to compensate for income loss that occurs when a rental property becomes uninhabitable due to a covered loss. For landlords or property owners who rely on rental income, this form of coverage ensures that they can recover the income they would have otherwise earned if the property were not damaged. When a covered event, such as a fire or severe storm, makes a rental unit uninhabitable, this coverage helps the property owner offset the financial impact of not being able to collect rent during the period of repair or restoration. Therefore, the focus of Coverage D is specifically on the loss of rental income, rather than physical property loss, replacement costs, or liability claims, which are covered under different sections of an insurance policy.