Section I Coverages A-D and Additional Coverages
Key Takeaways
- HO-3 default percentages of Coverage A: B = 10%, C = 50%, D = 30% - compute B/C/D directly from A.
- Coverage C special limits are theft sublimits: money $200, jewelry/watches/furs $1,500, firearms $2,500, silverware $2,500.
- The jewelry $1,500 cap applies only to theft; a covered fire pays jewelry up to the full Coverage C limit.
- Trees/shrubs Additional Coverage is 5% of Coverage A with a $500 per-item cap, for named perils only (not wind).
- Additional Coverages (debris removal, fire dept charge $500, loss assessment $1,000, ordinance/law 10%) supplement A-D.
Section I: The Four Property Coverages
Every Homeowners form organizes property protection into four lettered coverages. The dollar limits flow from a single chosen Coverage A (dwelling) amount, with B, C, and D set as percentages of A under standard ISO defaults. This percentage relationship is heavily tested - if you know Coverage A, you can compute the others.
| Coverage | What It Insures | Standard Default (HO-3) |
|---|---|---|
| A - Dwelling | The house, attached structures, materials on premises | Amount selected by insured |
| B - Other Structures | Detached garage, shed, fence | 10% of Coverage A |
| C - Personal Property | Contents (worldwide) | 50% of Coverage A (often 50-70%) |
| D - Loss of Use | Additional living expense + fair rental value | 30% of Coverage A |
Worked example. A home is insured with Coverage A = $300,000. Standard percentages give: Coverage B = 10% = $30,000; Coverage C = 50% = $150,000; Coverage D = 30% = $90,000. Test items frequently give Coverage A and ask for B, C, or D - just multiply.
Coverage C Special Limits (Sublimits)
Coverage C insures personal property worldwide but imposes special dollar sublimits on theft-prone or high-value categories. These are pure memorization items. Representative ISO HO-3 sublimits:
| Property Category | Special Limit |
|---|---|
| Money, bank notes, coins | $200 |
| Securities, deeds, manuscripts, tickets | $1,500 |
| Watercraft (incl. trailers/equipment) | $1,500 |
| Trailers not used with watercraft | $1,500 |
| Jewelry, watches, furs - theft | $1,500 |
| Firearms - theft | $2,500 |
| Silverware/goldware - theft | $2,500 |
| Business property on premises | $2,500 |
Key trap: the jewelry $1,500 limit applies only to theft - a covered fire that destroys jewelry is paid up to the full Coverage C limit. To insure jewelry above the sublimit against theft, the insured schedules items via the Scheduled Personal Property endorsement (HO 04 61) or buys a personal articles floater.
Additional Coverages
Beyond A-D, Section I provides Additional Coverages that pay over and above (or within stated limits of) the base limits:
- Debris Removal - reasonable cost to remove debris of covered property after a loss.
- Reasonable Repairs - cost to protect property from further damage.
- Trees, Shrubs, Plants, Lawns - up to 5% of Coverage A, with a $500-per-item cap, for named perils only (fire, lightning, vandalism, theft, etc. - NOT wind or disease).
- Fire Department Service Charge - up to $500, no deductible.
- Property Removed - covered against direct loss from any cause for 30 days while removed to protect it from a covered peril.
- Credit Card / EFT / Forgery / Counterfeit Money - up to $500.
- Loss Assessment - up to $1,000 for an assessment by an HOA against the insured.
- Collapse, Glass or Safety Glazing, Landlord's Furnishings, and Ordinance or Law (10% of Coverage A) round out the list.
Worked example - trees: a $300,000 Coverage A home loses six $400 ornamental trees to a covered vandalism event. The 5% cap is $15,000, but each item is capped at $500, so each tree pays its $400 value = $2,400 total (well under the aggregate).
A Homeowners HO-3 policy carries Coverage A of $250,000 with standard ISO default percentages. What is the Coverage D (Loss of Use) limit?
Burglars steal an insured's jewelry valued at $6,000 from the home. The unendorsed HO-3 Coverage C limit is $150,000. How much will the policy pay for the jewelry theft?
The Four Section I Coverages and Their Default Relationships
Homeowners Section I provides Coverage A (Dwelling), Coverage B (Other Structures, typically 10 percent of A as an additional amount), Coverage C (Personal Property, commonly 50 percent of A, adjustable), and Coverage D (Loss of Use, often 30 percent of A on HO-3). These percentage relationships are exam staples: a 400,000-dollar Coverage A typically carries 40,000 dollars of B, 200,000 dollars of C, and 120,000 dollars of D unless the Declarations show otherwise. Coverage C also follows the insured's property worldwide, subject to an off-premises limitation.
Special Limits (Sublimits) on Coverage C
Coverage C imposes special dollar limits on theft-prone or high-value categories that the exam loves to test: money and bullion (a few hundred dollars), securities and manuscripts, watercraft and trailers, jewelry/watches/furs against theft (a low theft sublimit), firearms against theft, silverware against theft, and business property on premises. These sublimits cap recovery regardless of the larger Coverage C limit, so a stolen 8,000-dollar ring may recover only the jewelry theft sublimit (often 1,500 dollars) unless scheduled. Scheduling valuables on a Personal Property endorsement removes the sublimit and broadens perils.
Loss of Use: ALE and Fair Rental Value
Coverage D pays the time-element loss when a covered peril makes the home uninhabitable. Additional Living Expense reimburses the necessary increase in living costs to maintain the household's normal standard of living elsewhere; Fair Rental Value reimburses lost rent on a portion of the residence the insured rented to others. Coverage D also pays Prohibited Use when a civil authority bars access because neighboring premises were damaged by a covered peril, typically for a limited period such as two weeks. The displaced-occupant-versus-landlord distinction again decides which part of D responds.
The Additional Coverages
Homeowners forms add a list of Additional Coverages with their own limits: debris removal, reasonable repairs, trees/shrubs/plants (limited perils and a per-item cap), fire department service charge, property removed, credit card/forgery/counterfeit money, loss assessment (the insured's share of an association assessment after a covered loss), collapse, glass, landlord's furnishings, ordinance or law (a small percentage of Coverage A to meet upgraded building codes during repair), and grave markers. The ordinance-or-law and loss-assessment coverages are frequently tested because candidates overlook their small but meaningful limits.