Dwelling PolicyQuestion 85 of 158
A DP-3 dwelling insured for $300,000 (which equals 100% of its replacement cost) burns to the ground. The loss is total. Ignoring deductibles, what does the insurer pay?
a.$240,000 because of the 80% coinsurance condition
b.Replacement cost minus depreciation
c.$300,000 minus the percentage of the dwelling's age
d.Up to $300,000 — the full policy limit on a total loss
Explanation
Coinsurance penalties apply to partial losses, not total losses. On a total loss the policy limit is the maximum the insurer will pay; here the limit is $300,000 and the insured was carrying insurance equal to 100% of replacement cost. The insurer pays up to the $300,000 policy limit (subject to deductible, which the question said to ignore). California's Insurance Code §2051 governs how total losses are valued.
Law Reference: ISO Dwelling forms — Loss Settlement; policy limit capPractice all 158 questions free — no signup required.
Related questions on this topic
- Under a standard DP-3 without additional endorsements, how is a covered loss to the named insured's Coverage C personal property settled?
- A landlord who rents out a single-family house on a DP-3 asks whether theft losses to the dwelling are covered. Which statement is MOST accurate?
- A homeowner uses a DP-3 to cover a vacation cabin she personally occupies four months each year. When a covered fire makes the cabin uninhabitable during her stay, which DP coverage reimburses her extra hotel and meal costs?
- A California landlord on a DP-3 asks whether a future earthquake that damages the rental house will be covered. Which response is correct?
- Which of the following correctly distinguishes the Dwelling Policy from the Homeowners Policy?
- A broker writes a DP-3 on a client's three-unit rental building. The client also wants protection if a tenant sues for an injury on the premises. What is the proper way to add that protection?
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against California Personal Lines Insurance License Exam · How we review