State Farm Insurance License Practice Exam

Which coverage component provides compensation for loss of rental income due to property damage?

1. Coverage A

2. Coverage B

3. Coverage C

4. Coverage D

The correct answer is: Coverage D

Coverage D is the correct component that provides compensation for loss of rental income due to property damage. This type of coverage is often referred to as "Loss of Use" or "Fair Rental Value" in insurance policies. It allows policyholders to receive financial assistance for lost rental income when the insured property becomes uninhabitable due to covered risks, such as fire or severe weather. Essentially, this coverage financially bridges the gap for landlords or property owners who might be unable to collect rental payments during the period the property is being repaired or restored. Coverage A typically pertains to the dwelling itself, addressing the physical structure and its components. Coverage B usually relates to other structures on the property, like detached garages or sheds. Coverage C generally covers personal property belonging to the insured, including items inside the dwelling. Therefore, none of these options provide the specific protection for lost rental income, which is uniquely covered under Coverage D.