How much will an HO3 policy pay for additional living expenses if the insured's home was severely damaged by fire?

An HO3 policy, which is a type of homeowners insurance, provides coverage for additional living expenses under Coverage D, also known as Loss of Use coverage. This coverage is activated when the insured's home becomes uninhabitable due to a covered peril, such as a fire.

When a home is severely damaged and the insured is displaced, Coverage D will typically cover the necessary increase in living expenses incurred while the home is being repaired or rebuilt. This includes costs such as temporary housing (like rent for an apartment), increased food expenses, and other costs that are above the normal living expenses due to the need to find alternative living circumstances.

The wording of the correct answer reflects the policy's provisions accurately. It specifies that the policy will pay for all additional expenses up to the limit established for Coverage D. This limit is predefined in the policy and determines the maximum amount the insurer will pay for additional living expenses. Therefore, as long as the expenses remain within the limit of Coverage D, the insured's additional living expenses related to the fire damage will be fully covered.

This understanding of Risk and Insurance reflects the design of the HO3 policy to provide financial support to policyholders during unexpected incidents that displace them from their homes.