Section I Coverages A-D and Additional Coverages
Key Takeaways
- Section I = Coverage A (dwelling), B (other structures, 10% of A, additive), C (personal property, 50% of A), D (loss of use, 30% of A on HO-3).
- Coverage B is in addition to Coverage A; Coverage C and D can be increased by endorsement.
- Coverage D pays only the INCREASE in living costs (ALE) plus fair rental value, triggered by a covered loss making the home uninhabitable.
- Additional Coverages carry flat sublimits: trees/shrubs 5% of A but $500/item, fire dept charge $500, loss assessment $1,000.
- Civil-authority/prohibited-use ALE is capped at two weeks.
The Four Section I Coverages
Section I of every owner-occupant HO form contains four property coverages, lettered A through D. Their relationships are set by percentage rules keyed to Coverage A, which is why exam math problems give you a Coverage A limit and ask you to derive the others.
| Coverage | What It Insures | Standard Limit Rule (HO-3) |
|---|---|---|
| A - Dwelling | The house and attached structures | Set by insured (replacement cost) |
| B - Other Structures | Detached garage, fence, shed | 10% of Coverage A (additional) |
| C - Personal Property | Contents, anywhere in the world | 50% of Coverage A (default) |
| D - Loss of Use | ALE + fair rental value | 30% of Coverage A (HO-3) |
Coverage B is additive (it does not reduce A). Coverage C and D can usually be increased by endorsement and pay regardless of where the loss occurs.
Worked Example: Deriving Limits from Coverage A
A homeowner buys an HO-3 with Coverage A = $300,000. Using the standard ISO percentages:
- Coverage B (Other Structures): 10% x $300,000 = $30,000
- Coverage C (Personal Property): 50% x $300,000 = $150,000
- Coverage D (Loss of Use): 30% x $300,000 = $90,000
If a detached garage worth $40,000 burns to the ground, Coverage B pays only $30,000 (its limit), and the insured absorbs the $10,000 gap. The exam tests whether you apply the sublimit, not the full Coverage A.
Coverage D - Loss of Use Has Two Triggers
Coverage D pays only when a covered peril makes the residence uninhabitable. It has two parts:
- Additional Living Expense (ALE) - the increase in living costs (hotel, restaurant meals, laundry) so the family can maintain its normal standard of living.
- Fair Rental Value - lost rent if part of the home was rented to others.
A third trigger, Prohibited Use / Civil Authority, pays ALE for up to two weeks when a neighboring covered loss causes a government order barring access. Coverage D pays only the increase in expense - a trap candidates miss (a $200/week grocery bill the family pays anyway is not reimbursed).
Additional Coverages (Section I)
Beyond A-D, the form grants Additional Coverages that may be within or in addition to limits. High-yield ones:
- Debris Removal - usually within the limit, with an extra 5% if the limit is exhausted.
- Trees, Shrubs, Plants - up to 5% of Coverage A, but no more than $500 per item (not covered for windstorm).
- Fire Department Service Charge - up to $500, no deductible applied.
- Credit Card / Forgery - up to $500 for unauthorized use.
- Collapse, Glass breakage, Landlord's furnishings ($2,500), Ordinance or Law (10% of Cov. A).
- Loss Assessment - up to $1,000 for charges levied by an HOA.
These sublimits are favorite exam material because they are flat dollar amounts, not percentages.
An HO-3 policy has Coverage A of $400,000. A detached storage shed is destroyed by a covered fire. What is the maximum Coverage B (Other Structures) limit available, absent any endorsement?
A covered kitchen fire forces a family into a hotel. Before the fire their groceries cost $150/week; now hotel and restaurant costs total $900/week. How does Coverage D (Loss of Use - ALE) respond?
The Four Section I Coverages and Their Default Relationships
Homeowners Section I property coverages are linked to Coverage A by standard percentages, so the limits flow from a single number:
| Coverage | What it insures | Typical default |
|---|---|---|
| A — Dwelling | The house and attached structures | The chosen limit |
| B — Other Structures | Detached garage, fence, shed | 10% of A (additional) |
| C — Personal Property | Contents anywhere in the world | 50% of A (often 50-70%) |
| D — Loss of Use | ALE + fair rental value | 20-30% of A (varies by form) |
Worked derivation: With Coverage A of $300,000 and standard percentages, Coverage B = $30,000, Coverage C = $150,000 (at 50%), and Coverage D = $60,000 (at 20%). Off-premises personal property remains insured (worldwide), but special limits cap categories such as jewelry theft ($1,500), money ($200), and firearms theft ($2,500) unless scheduled.
Coverage D Triggers and the Key Additional Coverages
Coverage D (Loss of Use) has two triggers tested as a pair: (1) Additional Living Expense pays the owner-occupant's extra costs when the residence is uninhabitable due to a covered loss, and (2) Fair Rental Value reimburses lost rent on a portion the insured rents to others. A third, often-missed trigger is civil authority — loss of use when a government order bars access because a neighboring covered peril made the area unsafe (commonly limited to two weeks).
The homeowners Additional Coverages round out Section I and frequently appear on the exam: debris removal, reasonable repairs, trees/shrubs/plants (commonly 5% of Coverage A with a per-item cap), fire department service charge ($500), property removed from a peril, credit card/forgery ($500), collapse, glass breakage, landlord's furnishings, and ordinance or law (often 10% of Coverage A). Knowing which additional coverage applies — and its small sublimit — answers many "how much is paid" questions on a homeowners loss.
Special Limits of Liability and Scheduling
Even when Coverage C is generous, the homeowners form imposes special limits of liability on categories prone to theft or hard to value. These are internal sublimits, not additional coverage, and apply per the policy regardless of the overall Coverage C limit:
| Category | Typical special limit |
|---|---|
| Money, bank notes, coins | $200 |
| Securities, deeds, manuscripts | $1,500 |
| Watercraft and trailers | $1,500 |
| Jewelry, watches, furs (theft) | $1,500 |
| Firearms (theft) | $2,500 |
| Silverware, goldware (theft) | $2,500 |
| Business property on premises | $2,500 |
Worked example: A homeowner with a $200,000 Coverage C limit suffers a theft of $6,000 in jewelry. Recovery is capped at the $1,500 special limit unless the jewelry was scheduled under a personal-articles floater or HO 04 61 endorsement, which provides higher, often agreed-value, coverage with no special-limit cap and broader (open-peril) perils. The fix for any of these gaps is to schedule the item, converting a sublimited, named-peril exposure into broad, full-value coverage.