4.2 Section I Coverages A-D and Additional Coverages

The Four Section I Coverages

Section I of every Homeowners policy is organized into four lettered coverages. Coverages A and B are written on a replacement cost basis (subject to the 80% condition discussed in Section 4.4); Coverage C is written on actual cash value unless replacement-cost-on-contents is endorsed; Coverage D pays the extra costs of living elsewhere after a covered loss.

Coverage A - Dwelling and Coverage B - Other Structures

Coverage A insures the dwelling on the residence premises plus structures attached to it, and materials/supplies on or next to the premises used to build the dwelling. It does NOT cover land.

Coverage B insures structures set apart from the dwelling by clear space (or connected only by a fence, utility line, or similar). The standard limit is an additional 10% of Coverage A — meaning a $400,000 Coverage A automatically provides $40,000 for other structures. Watch the trap: structures rented to others (except as a private garage) or used for business are excluded from Coverage B.

Coverage C - Personal Property and Special Limits

Coverage C insures personal property owned or used by an insured, anywhere in the world, defaulting to 50% of Coverage A. Property usually at a secondary/other residence is limited to 10% of Coverage C (or $1,000, whichever is greater). Critically, certain property categories carry special internal sub-limits per occurrence — these are tested constantly:

These are not deductibles — they are the most the policy pays for that class. To insure a $10,000 ring fully, the insured must schedule it (Scheduled Personal Property endorsement / personal articles floater).

Coverage D - Loss of Use

Coverage D pays for the financial consequences of being unable to use the home after a covered Section I loss. It has two parts:

• Additional Living Expense (ALE): The increase in living costs (hotel, restaurant meals above normal grocery spend) so the household can maintain its normal standard of living.
• Fair Rental Value: Lost rental income if part of the home was rented to others, minus expenses that cease.
• Civil Authority: ALE/fair rental for up to 2 weeks when a civil authority bars access because a neighboring premises suffered a covered peril.

Key trap: Coverage D pays only the additional expense, not the entire hotel bill. If the family normally spends $50/day on food and now spends $90/day, only the $40 increase is owed.

Additional Coverages

Beyond A-D, the HO policy grants a list of Additional Coverages that apply on top of (or within) the base limits. Frequently tested ones:

• Debris Removal — within the limit, with extra 5% if the limit is exhausted.
• Reasonable Repairs — temporary measures to protect property from further damage.
• Trees, Shrubs, Plants — up to 5% of Coverage A, max $500 per item, for named perils (fire, lightning, vandalism, theft — NOT wind or disease).
• Fire Department Service Charge — up to $500, no deductible.
• Credit Card / EFT / Forgery / Counterfeit — up to $500, no deductible.
• Loss Assessment — up to $1,000 for charges levied by an association.
• Collapse, Glass breakage, Landlord's furnishings ($2,500), Ordinance or Law (10% of Cov A).

Special Limits Are Caps, Not Deductibles

The Coverage C special-limit table is one of the most heavily tested items in the whole national portion, and the trap is always the same: candidates treat the sublimit as a deductible. It is not. A $1,500 jewelry theft sublimit means the policy pays at most $1,500 for stolen jewelry, full stop. If a burglar takes an $8,000 ring and a $4,000 watch, the most the unendorsed policy pays for that jewelry class is $1,500 total, not per item.

To insure valuables to full value the insured must schedule them on a Scheduled Personal Property endorsement (personal articles floater), which provides agreed-value, open-peril, no-deductible coverage.

Reinforce the worldwide nature of Coverage C and the 10%-of-C / $1,000 cap on property usually located at a secondary residence, which appears whenever a fact pattern mentions a vacation home or a college student's belongings in a dorm.

Loss of Use Pays Only the Increase

Coverage D is conceptually simple but a reliable point-scorer because it pays only the additional cost of living elsewhere, not the entire substitute bill. If a displaced family normally spends $50 a day on food and now spends $90, only the $40 increase is owed; the $50 they would have spent anyway is not.

ALE covers the increase in living costs to maintain the normal standard of living; Fair Rental Value covers lost rent on a portion of the home rented to others (net of expenses that cease); and the Civil Authority provision extends ALE/fair rental for up to two weeks when a civil authority bars access because a neighboring premises suffered a covered peril.

Finally, remember which Additional Coverages carry their own small limits independent of A-D: Trees/Shrubs/Plants (5% of A, $500 per item, named perils only and not wind or disease), Fire Department Service Charge ($500, no deductible), Credit Card/Forgery ($500), and Loss Assessment ($1,000). These flat sublimits are favorite distractor sources.