Rhode Island Insurance Adjuster Exam

What is the maximum an insurance company would pay for property damage to a borrowed lawn mower?

1. $250

2. $400

3. $500

4. $750

The correct answer is: $500

When determining the maximum amount an insurance company would pay for property damage to a borrowed lawn mower, the relevant factor is typically the specific coverage limits set in the insurance policy regarding borrowed property. In many standard homeowners or renters insurance policies, there is a limit on coverage for personal property that is not owned by the insured party. This can include items such as borrowed equipment. In this case, the choice of $500 as the maximum payout is consistent with common limit structures seen in insurance policies. It reflects a reasonable amount that an insurer might allocate for the damage caused to a borrowed lawn mower, which is often considered personal property under these provisions. The limit is set to provide coverage while also managing the insurer's risk exposure. The other options indicate lower coverage amounts which may not sufficiently compensate for repair or replacement costs associated with more valuable equipment like a lawn mower. Therefore, defining this maximum at $500 aligns with industry standards for insuring borrowed property, taking into account both the inherent value of such items and the typical limits of liability insurance policies.