4.2 Section I Coverages A-D and Additional Coverages

4.2 Section I Coverages A-D and Additional Coverages

Every homeowners policy is split into Section I (property) and Section II (liability). Section I contains four lettered property coverages plus a list of Additional Coverages. The exam tests the limits as a percentage of Coverage A, because most HO limits are derived from the dwelling amount the insured selects.

Section I Coverages A through D

Worked example: a home insured for Coverage A = $300,000 automatically carries Coverage B = $30,000, Coverage C = $150,000, and Coverage D = $90,000 unless the insured buys higher amounts.

Coverage A and B details

• Coverage A includes the dwelling and structures attached to it (an attached garage or breezeway), plus materials and supplies on the residence premises used to build/repair the dwelling.
• Coverage B covers structures separated by clear space (a detached garage, gazebo, or yard fence). Structures rented to others for any use other than as a private garage are EXCLUDED, and structures used for business are excluded under Coverage B.

Coverage C special sublimits (a heavy exam target)

Coverage C is named perils under HO-2/3/4/6 and is subject to internal sublimits for theft-prone or hard-to-value property. These caps apply per occurrence even though the overall Coverage C limit is much higher:

Trap: the jewelry $1,500 cap applies only to theft, not to a fire or other covered peril — jewelry destroyed by fire is paid up to the full Coverage C limit. To insure jewelry above the theft cap, use a scheduled personal property endorsement (HO 04 61).

Coverage D — Loss of Use

Coverage D pays the necessary increase in living expenses (ALE) so the household can maintain its normal standard of living while the home is uninhabitable, plus fair rental value if part of the home was rented. It also pays civil authority loss of use (up to two weeks) when a neighboring covered peril forces an evacuation. Coverage D is NOT subject to a deductible. The key word is increase: if the family normally spends a certain amount on housing and food, the policy reimburses only the difference between normal spending and the higher displaced cost, not the entire hotel and restaurant bill.

Optional changes to the percentages

The default percentages are starting points, not ceilings. An insured can buy higher Coverage B (for an expensive detached barn or pool house), increased Coverage C up to 70% of Coverage A, or even reduced Coverage C in some states for clients with few possessions. Condo owners frequently raise the HO-6 Coverage A limit far above the $1,000 minimum to cover extensive built-in upgrades. The exam expects you to start from the standard percentage, then apply any optional limit stated in the declarations, and never to assume a higher limit exists without a stated endorsement.

Additional Coverages (paid in addition to the limits above)

• Debris removal: included; if debris + loss exceed the limit, an extra 5% is available.
• Reasonable repairs, trees/shrubs/plants (5% of Cov A, max $500 per item, named perils only — NOT wind/hail to plants), fire department service charge ($500), property removed (30 days at another location), credit card/forgery ($500), loss assessment ($1,000), collapse, landlord's furnishings, and ordinance or law (10% of Cov A).

Coverage C is worldwide and follows the insured

A tested feature of Coverage C is its worldwide scope: a laptop stolen from a hotel room in another country is covered, subject to the same sublimits. Property usually situated at a second residence is limited to 10% of Coverage C or $1,000, whichever is greater. Personal property of guests and residence employees is covered while in any residence the insured occupies. The exam contrasts this portability with Coverage A and B, which are fixed to the residence premises described on the declarations and do not travel.

Distinguishing Additional Coverages from the four lettered limits

A recurring trap pairs an Additional Coverage with a lettered coverage to see whether the candidate double-counts limits. Debris removal, ordinance or law (10%), trees and shrubs (5%), and the fire-department service charge ($500) are paid on top of Coverages A through D, not subtracted from them. The credit-card/forgery and loss-assessment coverages each carry low default limits ($500 and $1,000) that the insured can increase by endorsement. When a question asks for a 'total recovery,' add the relevant Additional Coverage amounts to the base coverage payment.