4.2 Section I Coverages A-D and Additional Coverages

Section I: The Property Coverages

Section I of the homeowners policy contains the four lettered property coverages plus a list of Additional Coverages. Memorize the letter, the name, and the default limit expressed as a percentage of Coverage A — exam questions almost always give you Coverage A and ask you to compute B, C, or D.

Note that Coverage B is additive in modern forms - it does not reduce Coverage A. Coverage C follows the insured's property worldwide (with a 10% off-premises sublimit for property usually kept at another residence). Coverage D pays Additional Living Expense (the extra cost to maintain the household's standard of living) and Fair Rental Value for any rented portion, for the reasonable time to repair or relocate.

Computing the Coverages

If Coverage A is $300,000 on an HO-3:

• Coverage B (Other Structures): 10% × $300,000 = $30,000
• Coverage C (Personal Property): 50% × $300,000 = $150,000
• Coverage D (Loss of Use): 30% × $300,000 = $90,000

These percentages are minimum/default limits and can be increased by endorsement; Coverage C can also be written on a replacement-cost rather than ACV basis with an endorsement. On an HO-4 or HO-6, the layout flips: there is no Coverage A as the primary limit, so Coverage C is the chosen dollar amount and Coverage D defaults to a percentage of Coverage C (commonly 30% on HO-4 / 50% on HO-6 depending on edition).

Coverage C Special Limits (Sub-limits)

Section I caps recovery on theft-prone or high-value categories regardless of the overall Coverage C limit. These dollar caps are a heavy exam target:

• Money, bank notes, coins: ~$200
• Securities, deeds, manuscripts, tickets, stamps: ~$1,500
• Watercraft (incl. trailers/motors): ~$1,500
• Trailers (non-watercraft): ~$1,500
• Jewelry, watches, furs - theft only: ~$1,500
• Firearms - theft only: ~$2,500
• Silverware/goldware - theft only: ~$2,500
• Business property on premises: ~$2,500

To recover full value on jewelry or fine arts, the insured should schedule the items on a Personal Articles/Scheduled Personal Property endorsement, which also adds open-peril coverage with no theft sublimit and often no deductible.

Additional Coverages

Beyond A-D, Section I grants Additional Coverages - some are extra limits, some are sublimits within Coverage A or C. Tested examples:

• Debris removal - usually included; an extra 5% available if the loss plus removal exceeds the limit.
• Reasonable repairs to protect property from further damage.
• Trees, shrubs, plants, lawns - typically 5% of Coverage A, with a per-item cap (~$500) for named perils (fire, lightning, vandalism, etc. - not wind/ice).
• Fire department service charge - ~$500, no deductible.
• Credit card / forgery / counterfeit money - ~$500.
• Loss assessment (charges levied by an association) - ~$1,000.
• Collapse, glass breakage, landlord's furnishings, ordinance or law (commonly 10% of Coverage A).

Coverage D in Depth: ALE vs. Fair Rental Value

Coverage D (Loss of Use) splits into two distinct payments, and the exam expects you to separate them:

• Additional Living Expense (ALE): the extra cost over normal living expenses to maintain the household's standard of living while the home is uninhabitable from a covered loss - hotel, restaurant meals above the normal grocery budget, laundry, extra commuting. It pays only the increase, not total living costs.
• Fair Rental Value: if part of the residence was rented to others, this pays the lost rent (less expenses that do not continue) while the rented portion is unfit to live in.

Both are payable for the shortest reasonable time to repair/replace the damaged premises or for the household to settle elsewhere - there is no dollar deductible typically applied to Coverage D, and the time limit is the practical cap rather than a fixed dollar figure on some editions.

Worldwide Coverage C and the Off-Premises Limit

Coverage C follows the insured's personal property anywhere in the world - belongings stolen from a hotel room on vacation are covered. However, property usually located at another residence (e.g., a college dorm or vacation home) is limited to the greater of $1,000 or 10% of Coverage C, restored to full limit when the property is moved to a newly acquired principal residence.

A worked illustration: with Coverage A of $300,000, Coverage C is $150,000; the off-premises cap on goods kept at a second home is the greater of $1,000 or 10% × $150,000 = $15,000. A student's $20,000 of dorm property would be capped at $15,000 unless endorsed. Producers also flag that Coverage C is ACV by default - to collect full new-for-old value on contents, the insured must add the personal property replacement-cost endorsement and actually replace the items, which converts the depreciation holdback into a paid claim once receipts are submitted.