State Farm Insurance License Practice Exam

Which coverage in a homeowners policy addresses additional living expenses?

1. Coverage C

2. Coverage D

3. Coverage E

4. Coverage A

The correct answer is: Coverage D

The coverage in a homeowners policy that addresses additional living expenses is specifically designed to pay for the costs incurred when the insured's residence is uninhabitable due to a covered loss. This is typically referred to as "Loss of Use" coverage. When a home is damaged, for example, through a fire or severe storm, the homeowner may need to temporarily relocate while repairs are being made. Coverage D provides reimbursement for expenses such as hotel stays, dining out, and other necessary costs incurred above normal living expenses during this period. It's critical for homeowners to understand this aspect because it helps mitigate the financial burden of displacement caused by a covered event. The other coverage areas in a homeowners policy serve different purposes: Coverage A relates to the dwelling itself, Coverage B typically pertains to other structures on the property, and Coverage C covers personal property. Understanding these distinctions helps ensure that homeowners procure the right type of coverage for their specific needs.