An insured has $200,000 Coverage A dwelling coverage, under his HO-3 Policy. He incurs the following damage from a covered peril: fence 5,000; gazebo 7,500; tool shed 15,000. What will his HO Policy pay?

• A. $10,000
• B. No coverage
• C. $25,000
• D. $20,000

Answer: (D)

Coverage A pays for the dwelling itself. Fences, gazebos, and a detached tool shed are considered Other Structures, which are covered under Coverage B and are limited to 10% of Coverage A. With Coverage A at $200,000, the limit for Other Structures is $20,000. Although the total damage to these structures adds up to $27,500, the policy will pay only up to the $20,000 limit of Coverage B. Therefore, the payout is $20,000.