South Carolina Personal Lines Practice Exam

Which type of insurance coverage typically applies to loss of use of property?

1. Liability coverage

2. Property damage coverage

3. Loss of income coverage

4. Consequential loss coverage

The correct answer is: Consequential loss coverage

Consequential loss coverage is specifically designed to address the financial impacts that arise when property cannot be used as intended due to a loss. This type of coverage steps in to cover the extra costs incurred or the loss of revenue while the property is being repaired or replaced. It is particularly relevant in scenarios where business operations are interrupted, and the insured experiences a decrease in earnings due to the inability to utilize their property. This coverage goes beyond mere property damage and directly addresses the consequences of that damage, providing essential financial relief during the recovery period. In contrast, liability coverage focuses on protection against claims arising from injuries or damage caused to others due to the insured's actions. Property damage coverage pertains to the actual physical damage to a property, rather than the loss of use or income from that property. Loss of income coverage is more closely associated with income directly lost due to disruptions in business operations but is not as comprehensive in addressing the overall consequences of losing access to property as consequential loss coverage.