Property Insurance FundamentalsQuestion 246 of 474
A homeowners policy shows a dwelling limit of $260,000, with other structures at the standard 10% of that limit. A detached garage suffers $31,000 of covered damage and the deductible is $1,000. The insurer pays:
a.$30,000
b.$25,000
c.$26,000
d.$31,000
Explanation
Other structures is a percentage sublimit, 10% of the $260,000 dwelling limit, so $26,000 is the most available for the garage even though the loss less the deductible comes to $30,000. Paying $30,000 ignores the sublimit. Subtracting the deductible from the limit to reach $25,000 reverses the order: the deductible comes off the loss, and the sublimit then caps the result.
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