What is the coverage limit for Fair Rental Value caused by a covered peril?

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The coverage limit for Fair Rental Value, which is intended to compensate the policyholder for lost rental income due to a covered peril, is typically set at 20% of Coverage A (the dwelling coverage). This means if a rental property suffers damage from a peril that is covered by the insurance policy, the policyholder can receive reimbursement for up to 20% of the amount allocated under Coverage A for the income lost during the repair period.

This structure aligns with industry standards aimed at providing a balance between offering adequate financial support for lost rental income while also limiting the insurance company's exposure. Other options, such as 10%, 30%, or the entire Coverage A amount, do not reflect the standard policy limits established for Fair Rental Value and would not be applicable to most homeowners' or rental property insurance policies. These limits are designed to protect both the insurer and the insured, ensuring that the benefits are sufficient yet not excessive relative to the loss incurred.

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