4.2 Section I Coverages A-D and Additional Coverages

Section I: The Four Property Coverages

Section I of every Homeowners policy contains four lettered property coverages plus a list of Additional Coverages. The exam expects you to know each coverage, its default limit relationship, and how the limits interlock.

Critical trap: Coverage B is an additional amount, not carved out of Coverage A. On a $300,000 HO-3, Coverage A is $300,000 and Coverage B is $30,000 on top. Coverage C and D, however, are simply percentages used to set their own separate limits.

Coverage A and Coverage B Details

Coverage A — Dwelling covers the residence and structures attached to it, plus building materials and supplies on or next to the premises. Land is never covered.

Coverage B — Other Structures covers structures separated from the dwelling by clear space (or connected only by a fence/utility line). The default is 10% of Coverage A as additional insurance. Two heavily tested limitations:

• No coverage for a structure used for business, except storage.
• No coverage for a structure rented to anyone who is not a tenant of the dwelling (e.g., a detached studio rented to a stranger).

Worked example: A $400,000 Coverage A home has $40,000 Coverage B. A detached garage and a fence are both covered; a backyard shed used to run a woodworking business is excluded.

Coverage C — Personal Property and Special Limits

Coverage C insures contents anywhere in the world at a default 50% of Coverage A. Property at a residence other than the insured location is limited to 10% of Coverage C or $1,000, whichever is greater.

Within Coverage C, ISO imposes special dollar limits (sublimits) on theft-prone or high-value categories. These are caps regardless of the total Coverage C limit:

Trap: The $1,500 jewelry cap and $2,500 firearm/silverware caps apply only to theft, not to fire or other perils. To insure a $12,000 ring fully, the insured schedules it (HO 04 61 / Personal Property endorsement / a floater), which removes the sublimit and adds open-peril coverage including mysterious disappearance.

Coverage D and Additional Coverages

Coverage D — Loss of Use pays two things when a covered peril makes the home uninhabitable: Additional Living Expense (ALE) — the increase in living costs to maintain the household's normal standard — and Fair Rental Value for any rented portion. Default limit is 30% of Coverage A on the HO-3 (20% on HO-2/HO-4/HO-6 in older editions).

Additional Coverages are extra grants that usually sit on top of, or apply specific sublimits to, the four main coverages. Commonly tested ones:

• Debris removal — included; an extra 5% available if the loss plus debris exceeds the limit.
• Trees, shrubs, plants — 5% of Coverage A, max $500 per item, named perils only (not wind/hail/ice for the plants themselves).
• Credit card / fund transfer / forgery — $500 default.
• Loss assessment — $1,000 for HOA assessments.
• Fire department service charge — $500, no deductible.
• Reasonable repairs, property removed, collapse, glass.

Coverage C Special Limits — Memorize the Caps

Personal property has special internal sublimits that apply even though the overall Coverage C limit is higher. The exam asks these dollar figures directly:

These are caps per category, not per item, and several apply only to the peril of theft. A client with $20,000 of jewelry needs a scheduled personal property endorsement (HO 04 61) or a separate floater, which also adds open-peril coverage and usually waives the deductible — a frequent recommended-fix question.

Coverage C Percentages and the Additional Coverages

Coverage C is set at 50% of Coverage A by default and can be raised or lowered; Coverage B (other structures) defaults to 10% of A, and Coverage D (loss of use) is 30% of A on the HO-3. Coverage C also includes off-premises coverage worldwide (typically the greater of $1,000 or 10% of Coverage C) — distinguishing the homeowners contents grant from the dwelling form's on-premises default.

Among the additional coverages, lock in the standard caps: debris removal, $500 fire-department service charge, $1,500 credit-card/forgery, $500 loss assessment, $2,500 (or higher) collapse, trees/shrubs/plants at 5% of Coverage A capped at $500 per item, and $5,000 land stabilization. Glass breakage, reasonable repairs, and property removed are also included. Examiners pull single dollar figures from this list, so the numbers must be memorized cold.