4.2 Section I Coverages A-D and Additional Coverages

The Four Section I Coverages

Section I of every homeowners form provides property protection through four lettered coverages. The exam expects you to know what each insures, how the limits relate to one another, and which are stated as a percentage of Coverage A.

• Coverage A - Dwelling: the residence and structures attached to it (an attached garage, built-in appliances). This is the anchor limit chosen by the insured based on replacement cost.
• Coverage B - Other Structures: detached structures (detached garage, fence, shed, gazebo). Default limit = 10% of Coverage A, and it is additive (it does not reduce Coverage A).
• Coverage C - Personal Property: contents owned or used by the insured, worldwide. Default = 50% of Coverage A (some forms 70%).
• Coverage D - Loss of Use: additional living expenses (ALE) and fair rental value while the home is uninhabitable.

Default = 30% of Coverage A in HO-3/HO-5 (20% in HO-2/HO-4/HO-6/HO-8).

Coverage Relationship Table

The percentages are 'minimums supplied by the form' and can be raised by endorsement. They are calculated off Coverage A even in HO-4 and HO-6, where Coverage A is small or absent (for HO-4, Coverage C is the anchor).

Worked example: Coverage A = $300,000. Then Coverage B = $30,000, Coverage C = $150,000, and Coverage D = $90,000. Total Section I limits = $570,000, because B, C, and D are additive, not carved out of A.

Coverage C Special Sublimits

Coverage C insures contents on a named-perils basis (HO-3) but imposes special category sublimits that apply even when the overall Coverage C limit is far higher. These sublimits are a heavily tested trap because a $150,000 Coverage C limit does NOT mean $150,000 of jewelry coverage.

To cover high-value items above the sublimit, the insured schedules them on a Scheduled Personal Property endorsement (a personal articles floater), which insures on an open-perils, agreed-value basis with no theft sublimit.

Additional Coverages

Beyond A-D, Section I provides numerous Additional Coverages, some of which add limit (additive) and some of which are within existing limits. High-yield ones:

• Debris removal - typically within the applicable limit, with an extra 5% if the limit is exhausted.
• Reasonable repairs / property removed - costs to protect property from further damage; removed property covered 30 days against any peril.
• Trees, shrubs, plants - up to 5% of Coverage A, with a $500-per-item cap; covered only for specified perils (fire, lightning, vandalism, theft, etc., NOT wind or disease).
• Fire department service charge - $500 additional.
• Credit card / forgery / counterfeit money - $500 additional.
• Collapse, glass breakage, landlord's furnishings, ordinance or law (10% of A) - each tested as a named additional coverage.

Know which additional coverages are additive (fire department charge, credit card) versus those that share an existing limit (debris removal).

Loss Assessment, Ordinance or Law, and Other Additional Coverages

The homeowners Additional Coverages extend the policy in ways the exam isolates. Loss assessment pays the insured's share of a charge an HOA or condo association levies after a covered loss to common property, up to a modest limit (often $1,000, raisable by endorsement). Ordinance or law provides a small percentage (commonly 10% of Coverage A) toward the extra cost of rebuilding to current building codes, which the base exclusion otherwise bars.

Debris removal pays the cost to clear covered debris, generally within the Coverage A limit but with an additional amount if the limit is exhausted. Collapse covers sudden, entire collapse from specified causes such as hidden decay or the weight of contents, but not mere cracking or settling. Trees, shrubs, and plants are covered for limited perils (fire, lightning, vandalism, vehicles not owned by an insured) up to 5% of Coverage A with a per-item cap, and fire-department service charge reimburses a stated amount with no deductible.

Coverage A, B, C, D Percentage Relationships

The exam expects candidates to recall the default homeowners limit relationships, which flow from Coverage A. Coverage B (Other Structures) is 10% of Coverage A as additional insurance. Coverage C (Personal Property) defaults to 50% of Coverage A (raisable, and reducible to 40% in some forms). Coverage D (Loss of Use) is commonly 30% of Coverage A in the current ISO edition. These are additional amounts, not erosions of the dwelling limit.

Special Limits of Liability Within Coverage C

Coverage C carries internal special limits that cap recovery for theft-prone or high-value categories regardless of the overall contents limit: money and bank notes (a few hundred dollars), securities, jewelry and watches stolen (commonly $1,500), firearms by theft, silverware by theft, and business property on premises. A scheduled personal property (inland-marine) endorsement removes these caps for listed items and adds open-peril, no-deductible coverage — the fix the exam wants candidates to recommend when a client owns a valuable ring or coin collection.