4.2 Section I Coverages A-D and Additional Coverages

The Four Section I Coverages

Section I of every Homeowners form (except HO-4, which has no Coverage A/B) is organized into four lettered coverages plus a list of Additional Coverages. Exam questions almost always test the automatic percentage relationships among these coverages, because the limits for B, C, and D are derived from the Coverage A limit rather than chosen separately.

• Coverage A - Dwelling: the residence structure and attached structures (attached garage, built-in appliances). Limit selected by the insured based on replacement cost.
• Coverage B - Other Structures: detached structures (detached garage, shed, fence). Default limit is 10% of Coverage A on owner forms, provided as additional insurance.
• Coverage C - Personal Property: household contents worldwide. Default limit is 50% of Coverage A (often adjustable to 40%-70%).
• Coverage D - Loss of Use: additional living expense and fair rental value when a covered loss makes the home uninhabitable. Default is 30% of Coverage A on the HO-3/HO-5 (20% on some forms).

Worked Percentage Example

An insured carries an HO-3 with Coverage A = $400,000. The default Section I limits derive automatically:

So a detached shed fire is covered up to $40,000 (Coverage B), and contents are covered up to $200,000 (Coverage C) on a named-peril basis under the HO-3. Coverage B and Coverage D are additional amounts of insurance - they sit on top of Coverage A, not within it. A total dwelling loss does not erode the Coverage B limit.

Coverage C special limits cap categories more likely to be stolen or hard to value, regardless of the overall Coverage C limit. Common 2022-edition special limits: money $200; securities/manuscripts $1,500; jewelry/watches/furs (theft) $1,500; firearms (theft) $2,500; silverware (theft) $2,500. These are sublimits, not deductibles, and are scheduled up via endorsement when higher value exists.

Key Additional Coverages

Every HO form grants Additional Coverages that often carry their own sublimits and may be additional insurance:

• Debris removal - included; if it plus the loss exceeds the limit, an extra 5% is available.
• Reasonable repairs - to protect property from further damage.
• Trees, shrubs, plants, lawns - up to 5% of Coverage A, max $500-$1,000 per item, for named perils only (fire, lightning, vandalism, theft - not wind or ice).
• Fire department service charge - typically $500, no deductible applied.
• Credit card / EFT / forgery / counterfeit money - default $500 (no deductible).
• Loss assessment - default $1,000 for charges levied by an association.
• Collapse, glass, landlord furnishings, ordinance or law (default 10% of Coverage A for ordinance/law upgrade after a covered loss).

Exam trap: Trees and shrubs are covered for named perils only even under an open-peril HO-3/HO-5 - wind damage to landscaping is excluded. And the $500 fire department charge and forgery coverages apply with no deductible.

Loss of Use Components and Coverage C Worldwide

Coverage D (Loss of Use) splits into two parts that the exam tests separately. Additional Living Expense (ALE) reimburses the increase in living costs (hotel, restaurant meals beyond normal grocery spending) while the home is being repaired. Fair Rental Value applies when part of the residence was rented to others - it pays the lost rent, less expenses that do not continue. Both are limited to the time reasonably required to repair or relocate, not the policy period, and a separate civil authority provision pays up to two weeks if a government order bars access.

Coverage C follows the insured's property anywhere in the world, but property usually located at another residence (a vacation home) is capped at the greater of $1,000 or 10% of the Coverage C limit while there. Property of guests and residence employees can be covered at the insured's option. Money, gold, and bank notes are limited to $200 regardless of cause, and these special limits do not increase the overall Coverage C amount - they restrict it for the named category. Scheduling valuable items on a Personal Articles floater removes the sublimit and adds open-peril, no-deductible coverage.

Section I Additional Coverages Worth Memorizing

Beyond Coverages A–D, the HO form's Additional Coverages include: debris removal; reasonable repairs; trees, shrubs, plants and lawns (typically 5% of Coverage A, with a $500–$1,000 per-item cap and a restricted peril list that excludes wind and disease); fire department service charge (often $500); property removed; credit card/forgery (often $500, no deductible); loss assessment; collapse; glass breakage; and landlord's furnishings. These do not generally increase the policy limits.

The exam tests the standard percentages and the fact that trees damaged by wind are typically not covered under the trees/shrubs additional coverage.

Coverage C Special Limits (Sublimits) to Memorize

Within Coverage C, the HO form imposes special limits on theft-prone or high-value categories that do not increase the overall limit: commonly $200 on money/coins/bullion, $1,500 on securities/deeds, $1,500 on watercraft and trailers, $1,500 on theft of jewelry/watches/furs, $2,500 on theft of firearms, $2,500 on theft of silverware, and $2,500 on business property on premises. Scheduling valuables via the HO 04 61 endorsement removes these sublimits and adds open-peril coverage. The exam tests recognizing when a loss exceeds a sublimit and requires scheduling.