4.2 Section I Coverages A-D and Additional Coverages

The Four Section I Coverages

Section I of every Homeowners form is the property half. It is organized into four lettered coverages plus a list of Additional Coverages. The Section I limits are interrelated - several are expressed as a percentage of Coverage A, so changing the dwelling limit automatically changes the others unless endorsed.

How the Percentages Work in Practice

The percentage limits are default minimums that can usually be increased by endorsement. Coverage B is additional insurance - it sits on top of Coverage A. Coverage C is a separate limit, not additive to A.

Worked example: A homeowner buys an HO-3 with Coverage A = $300,000.

• 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 is destroyed for $42,000, Coverage B pays only $30,000 unless the insured increased the limit - a classic underinsurance trap. Coverage D pays actual ALE/fair-rental loss while the home is uninhabitable, up to the $90,000 cap, and is not reduced by a coinsurance penalty.

Note the percentages vary by form: HO-4/HO-6 Loss of Use is often 30% of Coverage C, and condo Coverage D may differ.

Coverage D - Loss of Use

Coverage D has two parts:

• Additional Living Expense (ALE): the increase in normal living costs (hotel, restaurant meals above normal grocery spend) while the residence is uninhabitable due to a covered loss. Only the extra cost is reimbursed, not the entire expense.
• Fair Rental Value: if part of the home was rented to others, the lost rental income (less expenses that do not continue).

ALE is paid for the shortest time required to repair/replace or for the household to permanently relocate. Civil authority prohibiting use of the home (e.g., a mandatory evacuation order after a covered neighboring loss) triggers ALE for up to 2 weeks.

The Standard Percentage Set and Additional Coverages

Memorize the ISO default relationships keyed to Coverage A. Coverage B (Other Structures) is 10% of A as additional insurance; Coverage C (Personal Property) is 50% of A (adjustable up or down); Coverage D (Loss of Use) is 30% of A under HO-3. Section I Additional Coverages are nearly identical across forms and frequently tested: debris removal, reasonable repairs, trees/shrubs/plants (5% of A, $500/item, named perils only), fire-department service charge ($500), property removed, credit-card/forgery ($500), loss assessment, collapse, glass, landlord's furnishings, and ordinance or law (10% of A).

Off-Premises Personal Property and Special Limits

Coverage C follows the insured's belongings worldwide, but with a key cap: personal property usually away from the residence is limited to the greater of 10% of Coverage C or $1,000. On top of that, special dollar sublimits restrict categories regardless of the overall Coverage C limit — money and bullion (often $200), securities and manuscripts ($1,500), watercraft, trailers, jewelry/furs theft ($1,500), firearms theft ($2,500), and silverware theft ($2,500). These sublimits are why a stolen $8,000 ring recovers only $1,500 unless scheduled, and why scheduling on a personal articles floater is the recommended fix.

Section I Additional Coverages

Beyond A-D, Section I grants a list of Additional Coverages, many with their own sublimits that do not reduce Coverage A or C unless stated. Key ones to memorize:

• Debris Removal - usually included within the applicable limit; an extra 5% is available if the loss plus debris exceeds the limit.
• Trees, Shrubs, Plants - up to 5% of Coverage A, with a per-item cap (commonly $500 or $1,000); limited perils (fire, vandalism, etc.), not wind on growing plants.
• Reasonable Repairs, Property Removed (covered open perils for 30 days while removed to protect from loss).
• Credit Card / Forgery / Counterfeit Money - typically $500 base.
• Loss Assessment - typically $1,000 for the insured's share of a covered association assessment.
• Collapse, Glass breakage, Landlord's Furnishings, Ordinance or Law (commonly 10% of Coverage A, building-code upgrades).

Ordinance or Law - A Frequent Trap

Standard HO forms exclude the increased cost of rebuilding to comply with current building codes. The Ordinance or Law Additional Coverage restores a limited amount - commonly 10% of Coverage A - which can be increased by endorsement. After a major loss, the difference between rebuilding to the original spec and rebuilding to current code can be substantial, so exam questions test whether the candidate knows code-upgrade cost is capped and is separate from the dwelling limit.

Example: a home insured for Coverage A of $300,000 burns. Rebuilding to original spec costs $300,000, but new code requires hurricane straps, updated electrical, and fire sprinklers adding $45,000. The base 10% Ordinance or Law coverage pays only $30,000 of that upgrade, leaving the owner $15,000 short unless the limit was increased by endorsement.