Question about homeowners insurance

I have homeowners insurance and a mortgage. I live in San Francisco, with a small lot and no room for anything but the house and a smallish (25x40) back yard, in which I am not allowed to build due to fire ordinances.

Part of my policy is for “Coverage B - Separate Structures.” The insurance company says this is for outbuildings, such as a garage or shop or “she shed” and fencing. When I expressed the fact that I don’t have any of those things due to lack of space, he said it is a package thing and is always included regardless of the actual conditions of the home. So I am apparently paying for coverage for which I will never be able to make a claim.

Questions: is this standard in the industry? Are there any reputable insurance companies that don’t do this (i.e. where separate structure coverage is optional and is based on actual existence of separate structures)?

Yes, it’s usual. If you could get an insurer to write you a policy excluding them, you wouldn’t save money on your premium, you’d probably have to pay more.

OK, sorry, I don’t understand this. If you like, can you elaborate on why this would be the case?

For it not to drop, because the cost of losses of garden sheds, etc, is not a large proportion of the potential claims. It’s as if you wanted to insure a box of jewellery, diamonds and emeralds and all sorts. If you wanted to exclude costume jewellery from K Mart, you wouldn’t be excluding anything that would make you have to pay less. For it to potentially cost more, insurers pool the premiums from classes of insurance and invest them - the bigger the pool, the higher potential return on investment. You could pretty much be in a class on your own so you’d have to fork out more so that they’d have enough money in the pool to cover potential claims.

You’re getting a discount on your current policy because it is a standardized policy that was written to be broad enough to fit most single family dwellings into it’s coverages. If you request a special written policy to cover just your specific coverages, it will the cost the insurance company time and money to tailor to the documentation your specific needs. They aren’t going to eat that cost, they are going to pass it along to you.

Here is a bit more in depth description, but the first 2 replies pretty much nailed it. Kind of like paying for cable channels you never watch - it’s part of the basic package.