4.2 Section I Coverages A-D and Additional Coverages

Section I: The Four Property Coverages

Section I of every homeowners policy is organized into four lettered coverages, A through D. Each has its own limit, and the limits for B, C, and D are typically expressed as percentages of the Coverage A (dwelling) limit. Understanding these default percentages lets you answer the bulk of homeowners math questions on the exam.

Coverage A through D Defaults

Worked example: A home insured for Coverage A = $300,000 under an HO-3 carries the following default limits: Coverage B = 10% = $30,000; Coverage C = 50% = $150,000; Coverage D = 30% = $90,000. These percentages differ by form—on the HO-5, Coverage C defaults to 70% of Coverage A.

Key Limit Rules

• Coverage B is an additional amount, not a sublimit carved out of Coverage A. On a $300,000 home, you have $300,000 plus $30,000 for other structures.
• Coverage C follows the insured worldwide, but property usually located at another residence is limited to 10% of Coverage C (minimum $1,000).
• Coverage D pays the additional (above-normal) costs to maintain the household's standard of living, plus fair rental value if part of the home was rented. It is paid for the shortest time required to repair/replace (ALE) or to permanently relocate—it is not capped by a fixed number of months in the current edition.

Coverage C Special Limits (Sublimits)

Within Coverage C, certain easily-stolen or high-value categories carry special internal sublimits that apply even if the overall Coverage C limit is far higher. The dollar caps and theft restrictions are heavily tested:

• Money, bank notes, coins, precious metals: $200
• Securities, deeds, manuscripts, tickets, stamps: $1,500
• Watercraft (including trailers/equipment): $1,500
• Trailers not used with watercraft: $1,500
• Jewelry, watches, furs — theft only: $1,500
• Firearms — theft only: $2,500
• Silverware/goldware — theft only: $2,500
• Business property on premises: $2,500

Note the theft-only sublimits: jewelry is limited to $1,500 for theft, but a fire loss to jewelry is covered up to the full Coverage C limit. To raise these caps, the insured schedules items via a Scheduled Personal Property endorsement or buys a separate floater.

Additional Coverages

Section I also grants a list of Additional Coverages that typically apply beyond the policy limits or with their own caps. The most-tested ones:

1. Debris removal — included; extra 5% available if the limit is exhausted.
2. Reasonable repairs — costs to protect property from further damage.
3. Trees, shrubs, plants, lawns — up to 5% of Coverage A, max $500 per item, for named perils only (not wind/hail).
4. Fire department service charge — up to $500, no deductible.
5. Property removed — covered against any peril for 30 days while being removed from endangered premises.
6. Credit card / forgery / counterfeit money — up to $500.
7. Loss assessment — up to $1,000 for an assessment charged by a homeowners association.
8. Collapse, glass breakage, landlord's furnishings, ordinance or law (10% of Cov A).

Reading Additional Coverages Correctly

The exam trap with Additional Coverages is assuming they erode the policy limits. Most do not—debris removal, fire department service charge, and loss assessment are payable in addition to the Coverage A/B/C limits, each subject to its own cap. The trees-and-shrubs coverage is the classic distractor: it is 5% of Coverage A in the aggregate, $500 per item, and applies only for named perils such as fire, lightning, explosion, vandalism, theft, or vehicles not owned by an occupant—it does not cover wind or disease damage to landscaping.

Likewise, the $500 credit-card/forgery coverage is a no-deductible additional amount, not a Coverage C item, so a stolen-card fraud loss does not trigger the jewelry sublimit logic.

Coverage D in Practice

Loss of Use deserves a closer look because candidates confuse its two parts. Additional Living Expense (ALE) reimburses the increase over normal living costs when the residence is uninhabitable after a covered loss—hotel bills, restaurant meals above the family's normal grocery spend, and extra commuting. Fair Rental Value applies when part of the home was rented to others and that rental income stops. Both are paid for the shortest time reasonably required to repair or to permanently relocate.

A common error is treating ALE as a fixed monthly stipend; it is an actual-loss-sustained reimbursement of the extra amount, documented by receipts, capped only by the Coverage D limit and the reasonable-repair-time standard.

Section I Coverages and Standard Percentages

Homeowners Section I uses four property coverages with automatic percentage relationships tied to Coverage A:

Additional Coverages layered on top include debris removal, reasonable repairs, trees/shrubs/plants (5% of A, $500/item), fire department service charge ($500), collapse, glass breakage, landlord's furnishings, and loss assessment.

Exam trap: Memorize the default percentages: B = 10%, C = 50%, D = 20-30% of Coverage A. Coverage C contains special sublimits for theft-prone or easily concealed property - typically $1,500 jewelry/watches/furs (theft), $2,500 business property on premises, $200 money, $1,500 securities, $1,500 watercraft/trailers - which the exam loves to test. Personal property is valued at ACV unless a replacement-cost endorsement (HO 04 90) is added; certain property (Coverage C) on HO-4/HO-6 is the primary coverage rather than a percentage of A.