Section I Coverages A-D and Additional Coverages

Section I: The Four Property Coverages

Section I of every owner form organizes property into four lettered coverages. Their limits are interrelated: the Coverage A dwelling limit drives the default percentages for B, C, and D.

Coverage B is an additive limit - it sits on top of Coverage A, not inside it. So a $300,000 dwelling automatically carries $30,000 Coverage B and $150,000 Coverage C.

Coverage A and B Details

Coverage A insures the dwelling on the residence premises, including structures attached to the dwelling (an attached garage, attached deck) and materials/supplies on or next to the premises used to build the dwelling.

Coverage B - Other Structures insures structures separated by clear space from the dwelling, or connected only by a fence/utility line. A detached garage, gazebo, or tool shed is Coverage B. Trap: structures used for business or rented to a non-tenant are excluded from Coverage B (with narrow exceptions). A detached garage rented to the tenant of the dwelling for private garage purposes is still covered.

Coverage C - Personal Property and Special Limits

Coverage C covers personal property anywhere in the world, but property usually located at another residence (a vacation home) is limited to 10% of Coverage C or $1,000, whichever is greater. Coverage C is named-peril in HO-3 (open-peril only in HO-5).

Memorize these special limits of liability (per-occurrence sub-limits, 2011 ISO values) - they are tested every exam:

• $200 - money, coins, bank notes, bullion
• $1,500 - securities, deeds, manuscripts, tickets, stamps
• $1,500 - watercraft including trailers/motors
• $1,500 - trailers not used with watercraft
• $1,500 - theft of jewelry, watches, furs, precious stones
• $2,500 - theft of firearms and related equipment
• $2,500 - theft of silverware/goldware
• $2,500 - property on the residence premises used for business

These are theft sub-limits, not all-peril caps - jewelry destroyed by fire is covered to the full Coverage C limit; only theft of jewelry caps at $1,500. Scheduling valuables on an HO 04 61 endorsement removes these caps.

Coverage D - Loss of Use

Coverage D pays the necessary increase in living expenses (ALE) when a covered loss makes the residence unfit to live in, plus fair rental value for any part rented to others. It also covers prohibited use (a civil authority bars access due to a neighboring covered loss) for up to two weeks. Loss of Use is not a flat reimbursement of the rent or mortgage - it pays only the additional cost above normal living expenses.

Worked ALE example: the insured's normal monthly housing-related spend is $2,400. After a covered fire, the family rents a comparable apartment for $3,500/month and incurs $300/month in extra commuting and laundry costs. The additional living expense is ($3,500 + $300) - $2,400 = $1,400 per month - that is what Coverage D pays, not the full $3,800. Recovery continues for the shortest time required to repair or replace the home, capped at the Coverage D limit.

Section I Additional Coverages

These are paid on top of A-D limits (some additive, some within limits):

• Debris removal - included; extra 5% available if debris cost exhausts the limit
• Reasonable repairs to protect property from further damage
• Trees, shrubs, plants - up to 5% of Coverage A, max $500 per item, for named perils (fire, theft, vandalism, etc. - not wind)
• Fire department service charge - $500
• Property removed from premises endangered by a peril - 30 days
• Credit card / forgery / counterfeit money - $500
• Loss assessment - $1,000 (condo/association assessments)
• Collapse, glass breakage, landlord's furnishings

Section I Coverages A Through D in Detail

A Homeowners policy organizes property coverage into four lettered parts with built-in percentage relationships:

• Coverage A — Dwelling: the residence and attached structures, written at replacement cost on HO-2/3/5.
• Coverage B — Other Structures: detached structures, automatically 10% of Coverage A as additional insurance.
• Coverage C — Personal Property: contents, typically 50% of Coverage A (adjustable up or down), covered on a named-peril basis except on HO-5.
• Coverage D — Loss of Use: ALE and Fair Rental Value, commonly 30% of Coverage A on HO-3 (20% on HO-2/HO-4 editions vary).

A key trap: Coverage C is settled at ACV by default; replacement cost on contents requires an endorsement. Personal property away from the residence is covered up to 10% of Coverage C (or $1,000, whichever is greater).

Additional Coverages and Special Limits

Beyond the lettered coverages, the Homeowners form adds Additional Coverages that supply automatic, often small, amounts: debris removal, reasonable repairs, trees/shrubs/plants (5% of Coverage A, capped per item), fire department service charge ($500), property removed, credit card/forgery ($500), loss assessment, collapse, landlord's furnishings, and ordinance or law (10% of Coverage A in current editions).

The form also imposes special limits of liability on theft-prone or high-value categories within Coverage C — money and bullion, securities, jewelry/watches/furs (theft sub-limit), firearms, silverware, and business property each have caps that apply even though the overall Coverage C limit is much higher. The remedy is a scheduled personal property endorsement (or the Personal Property Replacement Cost endorsement), which raises limits, adds open-peril coverage, and often removes the deductible for scheduled items. Recognizing that these are sub-limits — not deductibles or exclusions — is essential exam knowledge.