What limitation does the Increased Cost of Construction coverage have under the BPP?

The Increased Cost of Construction coverage under the Building and Personal Property (BPP) policy is designed to help policyholders cover the extra expenses incurred when rebuilding or repairing a property due to changes in building ordinances or other legal requirements after a covered loss. This coverage is particularly important in scenarios where the costs of complying with updated building codes may exceed the normal expenses associated with the rebuilding process.

The correct choice accurately reflects the limitation imposed by this type of coverage, as it indicates that the coverage is limited to a percentage of the overall coverage limit or a specific dollar amount, whichever is less. This means that while the policyholder may receive some assistance in managing the increased costs, there is a cap on the amount payable that may not fully cover all expenses incurred due to construction requirements.

The context of other options reinforces this understanding. For instance, suggesting unlimited coverage falsely implies there would be no financial limits, which is not true for this policy. Likewise, the specified dollar amounts or percentages in the other options either exceed or underestimate the actual terms of the coverage, which is specifically capped to ensure that policyholders have a controlled amount of money available to address the increased costs of complying with legal or regulatory changes while still maintaining a balance in insurance resources for other claims.