4.2 Section I Coverages A-D and Additional Coverages

The Four Section I Coverages

Section I of every homeowners form is organized into four lettered property coverages. The Declarations page lists the Coverage A limit the insured selects; Coverages B, C, and D are then expressed as percentages of Coverage A by default.

Worked example: An HO-3 with Coverage A = $300,000 automatically provides Coverage B = $30,000 (10%), Coverage C = $150,000 (50%), and Coverage D = $90,000 (30%). These percentages are minimums on the standard form and can be increased by endorsement. On the HO-4 and HO-6, Coverage C is the primary limit and Coverage D defaults to a higher percentage (often 30% of Cov C on HO-4).

Because B, C, and D float with Coverage A, raising the dwelling limit automatically raises the others unless the insured schedules higher specific limits. A producer correcting an underinsured home therefore fixes Coverage A first; the dependent coverages follow. Watch for a question that quietly raises Coverage A and asks for the new Coverage C — multiply the new Cov A by 50%.

Coverage A, B, and C Details

Coverage A — Dwelling insures the residence on the described location plus structures attached to it and materials/supplies on or next to the premises used to build. It excludes land.

Coverage B — Other Structures covers structures separated by clear space (or connected only by a fence/utility line) — a detached garage, gazebo, or barn. It excludes structures rented to others (except as a private garage) or used for business.

Coverage C — Personal Property covers contents owned or used by an insured, anywhere in the world. Property usually at another residence (a vacation home) is limited to 10% of Cov C or $1,000, whichever is greater. Coverage C also carries special-limit sublimits that cap recovery on theft-prone or high-value categories regardless of the overall Cov C limit:

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

Coverage D — Loss of Use

Coverage D pays when a covered Section I loss makes the residence uninhabitable. It has two parts:

1. Additional Living Expense (ALE): The increase in living costs to maintain the household's normal standard of living (hotel, restaurant meals above normal grocery cost).
2. Fair Rental Value: Lost rent (less non-continuing expenses) if part of the home was rented or held for rental.

Additional Coverages

Beyond A-D, Section I grants Additional Coverages that may have their own limits and do not always reduce the Coverage limits. Heavily tested ones:

• Debris Removal — included; if debris + loss exceeds the limit, an extra 5% is available.
• Trees, Shrubs, Plants — up to 5% of Cov A, max $500 per item, for named perils only (fire, theft, vandalism, vehicles not owned by an insured — NOT wind/ice).
• Credit Card / Forgery / Counterfeit Money — $500.
• Loss Assessment — $1,000 for charges levied by a condo/HOA association.
• Fire Department Service Charge — $500, no deductible.
• Reasonable Repairs, Property Removed (30 days), Collapse, Ordinance or Law (10% of Cov A).

How the Sublimits Trip Candidates

The special limits are per-loss caps, not deductibles — the insurer pays up to the sublimit and the insured eats the rest. They apply mostly to theft (jewelry, firearms, silverware) but the money and securities caps apply to any peril, not just theft. Watch for a question that totals several categories: you must apply each cap separately and add the capped amounts, never the full values.

Loss of Use Is Often Overlooked

Coverage D does not require physical damage to the insured's own home in one situation: if a civil authority prohibits use of the residence because a neighboring premises suffered a covered peril, ALE is payable for up to two weeks. Also note that fair rental value and ALE share the single Coverage D limit, and that Coverage D losses are not subject to the deductible on most editions — a frequently tested nuance that separates property-damage payments from loss-of-use payments.

Worldwide Coverage and the Off-Premises Cap

Coverage C follows the insured's belongings worldwide, but property usually kept at a second residence is capped at the greater of 10% of Coverage C or $1,000. A student living away at school is typically still an insured, so dorm-room contents remain covered, though some editions reduce the off-premises percentage. When a question places property at a vacation home or storage unit, apply the off-premises cap rather than the full Coverage C limit.

Additional Coverages Do Not Always Reduce the Limit

A recurring trap is assuming every payment erodes Coverage A or C. Several Additional Coverages - debris removal's extra 5%, the $500 fire-department service charge, and reasonable repairs to protect property - are paid in addition to the applicable limit, while others (trees and shrubs, loss assessment) carry their own internal caps. Read whether the coverage is "in addition to" or "part of" the limit, because the exam tests that distinction directly with multi-part loss scenarios.