Section I Coverages A-D and Additional Coverages

The Four Section I Coverages

Section I of every homeowners form is built on four lettered coverages. The exam expects you to know what each insures, the automatic relationships among their limits, and the default percentages ISO uses.

These percentages are additional amounts of insurance stacked on top of Coverage A, not slices carved out of it. A $400,000 Coverage A automatically brings $40,000 Coverage B, $200,000 Coverage C, and $120,000 Coverage D.

The relationships are defaults, not ceilings. An insured can raise Coverage C (for example to 70% of A for a heavily furnished home) or buy a higher Coverage B for a detached workshop. The exam usually tests the unedited defaults, so memorize 10/50/30 and apply them unless the question states a changed limit. Note also that Coverage D on the HO-4 and HO-6 defaults differently (commonly 30% of Coverage C), reflecting that renters and condo owners insure contents rather than a dwelling.

Coverage C Special Limits and Off-Premises Coverage

Coverage C follows the insured worldwide, but property usually situated at a secondary residence is limited to 10% of Coverage C. The form also imposes special internal sub-limits on theft-prone or easily concealed categories, regardless of the overall Coverage C limit:

• Money, bank notes, coins: $200
• Securities, deeds, manuscripts: $1,500
• Watercraft (including trailers/motors): $1,500
• Jewelry, watches, furs (theft only): $1,500
• Silverware/goldware (theft only): $2,500
• Firearms (theft only): $2,500
• Business property on premises: $2,500

These caps are why a scheduled personal property endorsement (HO 04 61) is recommended for valuable jewelry or fine art — it removes the sub-limit and adds open-peril coverage.

Read the sub-limits carefully on the exam: several apply to the theft peril only. Jewelry, furs, silverware, goldware, and firearms are capped for theft but are paid up to the full Coverage C limit if destroyed by a covered non-theft peril such as fire. So a $10,000 ring melted in a house fire could be paid up to the Coverage C limit, while the same ring stolen is capped at $1,500. Candidates who apply the theft cap to a fire loss will answer incorrectly.

A Worked Coverage Example

An insured carries Coverage A of $300,000 on an HO-3. A burglar steals a $4,000 diamond ring and $600 in cash. How much does the policy pay before the deductible?

• Jewelry theft sub-limit: $1,500 (not the full $4,000)
• Money sub-limit: $200 (not the full $600)
• Total recoverable: $1,700, minus the deductible

The overall Coverage C limit here is $150,000 (50% of $300,000), but the special limits override it for these categories. Candidates who answer $4,600 have missed the sub-limits.

Contrast that with a fire that destroys the same ring and a stack of $600 cash. The jewelry would be valued without the theft cap (paid at ACV up to the Coverage C limit), but the money sub-limit of $200 still applies because that cap is not restricted to theft. Working each item against its own rule, rather than summing the face values, is the discipline the exam rewards.

Additional Coverages

Homeowners forms add a list of Additional Coverages that pay over and above the A-D limits or carry their own caps:

• Debris removal - included; an extra 5% of the applicable limit is available if the loss plus removal exhausts that limit.
• Reasonable repairs - emergency measures to protect property from further damage.
• Trees, shrubs, plants, lawns - up to 5% of Coverage A, with a $500 per-item cap, for named perils (not wind or hail to plants).
• Fire department service charge - $500 with no deductible.
• Property removed - covered against direct loss for 30 days while removed to protect it.
• Credit card / EFT / forgery / counterfeit money - $500 (raisable by endorsement).
• Loss assessment - $1,000 for assessments charged by a homeowners/condo association.
• Collapse, glass breakage, landlord's furnishings - included subject to form terms.

Section I Coverages A–D and Their Percentages

Homeowners Section I uses four coverage letters, with B, C, and D commonly expressed as a percentage of Coverage A (HO-3 defaults):

Coverage C follows the insured's property anywhere in the world, and property usually at a secondary residence is limited (often 10% of C). Trap: Coverage B and C limits are automatically set as a percentage of A unless changed — raising A raises them proportionally.

Personal Property Special Limits and Additional Coverages

Coverage C imposes special dollar sublimits on theft-prone or high-value categories regardless of the overall C limit. Memorize the common ones:

To cover valuables above these caps, the insured adds a Scheduled Personal Property Endorsement (HO 04 61) — open-peril, often no deductible, frequently agreed value. Worked example: a $9,000 diamond ring stolen pays only $1,500 under the base policy; scheduling it pays the full agreed value. Trap: the special limits apply to theft; the loss-type matters.