4.2 Section I Coverages A-D and Additional Coverages

Section I of every HO form uses the same four lettered coverages. Memorize them, because exam questions read like 'a detached shed is destroyed - which coverage responds?'

The Four Section I Coverages

Exam Tip: When a question gives a Coverage A figure, instantly derive the rest. If A = $300,000, then B = $30,000, C = $150,000, and D = $90,000. Spotting these relationships turns a wordy scenario into a one-step calculation.

Coverage A - Dwelling

Coverage A insures the dwelling on the residence premises plus structures attached to it. Materials and supplies on or next to the premises used to build the dwelling are included. Land is never covered - if a question asks about the value of the lot or the cost to stabilize soil, that is excluded.

Coverage B - Other Structures

Coverage B covers detached structures set apart by clear space (or connected only by a fence or utility line): a detached garage, tool shed, or gazebo. The default limit is 10% of Coverage A and is additional insurance - it does not reduce Coverage A. A structure rented to others (except as a private garage) or used for business is excluded under Coverage B.

Coverage C - Personal Property and Its Special Sublimits

Coverage C insures contents anywhere in the world at 50% of Coverage A, on a named-peril basis under HO-2/HO-3 and open perils under HO-5. The heavily tested feature is the special limits of liability - internal caps on property that is easily stolen or hard to value. These caps apply within the Coverage C limit, not on top of it:

Exam Trap: The jewelry/furs cap is $1,500 for theft only. A fire that destroys $10,000 of jewelry is paid in full (up to Coverage C); the $1,500 cap does not apply because the loss was not theft. To raise these limits, schedule the items on a Personal Articles Floater (PAF) or Scheduled Personal Property endorsement.

Coverage D - Loss of Use

When a covered Section I loss makes the residence uninhabitable, Coverage D pays in three ways:

1. Additional Living Expense (ALE) - the increase in living costs (hotel, meals, laundry) needed to keep the household at its normal standard of living while repairs occur. Only the extra cost is paid, not the family's normal expenses.
2. Fair Rental Value - if part of the home was rented out, the lost rental income (less expenses that do not continue).
3. Civil Authority - if a covered peril damages a neighboring property and a civil authority bars access to the insured's home, ALE/fair rental value is paid (HO-3 limits this to two weeks).

Additional Coverages

Every HO form layers on a set of small, specific Additional Coverages. Common tested limits:

• Debris Removal - reasonable cost to remove debris of covered property; an extra 5% is available if the loss plus removal exceeds the limit.
• Trees, Shrubs, Plants - up to 5% of Coverage A, but no more than $500 per item, and only for named perils such as fire, lightning, vandalism, theft, or vehicles not owned by an insured. Wind and ice are NOT covered perils for plants.
• Credit Card / Electronic Fund Transfer / Forgery / Counterfeit Money - up to $500.
• Fire Department Service Charge - up to $500, no deductible.
• Ordinance or Law - up to 10% of Coverage A for the increased cost to rebuild to current building codes.
• Collapse, Glass, Landlord's Furnishings, and Loss Assessment - each with its own modest cap.

These Additional Coverages are usually small and often have no deductible - a frequent exam point that separates them from the main Coverages A-D.

Coverage C Property Not Covered and Off-Premises Limits

Coverage C also lists property it will not insure: motor vehicles and their equipment (covered by auto, not HO), aircraft, animals/birds/fish, property of roomers/boarders not related to an insured, and property in an apartment regularly rented to others. A heavily tested wrinkle is off-premises personal property: while contents are insured worldwide, property usually situated at another residence the insured owns (a vacation home) is capped at the greater of $1,000 or 10% of Coverage C until the insured actually moves in.

Worked Example: With Coverage A = $300,000, Coverage C is 50% = $150,000. Property kept at a second home is limited to the greater of $1,000 or 10% x $150,000 = $15,000. The full $150,000 limit applies only to property at the insured residence premises.

How the Section I Limits Stack

It helps to see the lettered limits as a layered structure. Coverage A is chosen first; B, C, and D are then derived as percentages of A but are additional amounts of insurance - paying a Coverage B loss does not erode Coverage A, and vice versa. The special sublimits inside Coverage C, by contrast, are internal caps that share the single Coverage C limit. Keeping the difference between additional limits (B, C, D vs. A) and internal sublimits (the theft caps within C) straight is exactly the distinction the exam uses to separate prepared candidates from guessers.