4.2 Section I Coverages A-D and Additional Coverages

The Four Section I Coverages

Section I insures the insured's property and the cost of living elsewhere after a loss. The four coverages are linked to Coverage A by percentages, so an accurate Coverage A limit makes the others scale automatically.

Coverage A — Dwelling

Coverage A insures the dwelling on the residence premises, structures attached to it, building fixtures and systems (built-in cabinets, wiring, plumbing, central air), and materials on or next to the premises for construction.

Coverage A does not insure:

• Land — never covered, because land cannot be destroyed by a covered peril.
• Detached structures (those fall under Coverage B).
• Personal property (Coverage C).

Critical: Coverage A should equal replacement cost (cost to rebuild today), not market value, which includes land and location.

Coverage B — Other Structures

Coverage B insures detached structures: a detached garage, tool shed, fence, gazebo, or guest cottage. The standard limit is 10% of Coverage A and it is additional insurance (it does not erode A).

Coverage B excludes any detached structure used for business or rented to others (except as a private garage).

Coverage C — Personal Property and Special Sublimits

Coverage C insures contents anywhere in the world at 50% of Coverage A on HO-3 (often raised to 70-75% by endorsement). On HO-3 it is named perils.

Certain categories carry special limits of liability no matter how high the total Coverage C limit is:

Trap: If a $400,000 Coverage C insured loses $9,000 in coins to theft, the policy still pays only $200. Schedule high-value items to fix this.

Coverage D — Loss of Use

Coverage D pays when a covered loss makes the home uninhabitable. It has two parts:

• Additional Living Expense (ALE): extra costs to maintain the household's normal standard of living (hotel, meals above normal, laundry).
• Fair Rental Value: lost rent if part of the home was rented out.

The HO-3 limit is 30% of Coverage A. Example: a $400,000 Coverage A gives $120,000 of Coverage D. ALE pays only the difference above normal living costs, not total expenses.

Additional Coverages

The homeowners form layers on several Additional Coverages, each with its own small limit:

• Debris Removal — pays to clear debris after a covered loss.
• Trees, Shrubs, and Plants — up to 5% of Coverage A, with a per-item cap (commonly $500); only for listed perils such as fire, not wind.
• Reasonable Repairs, Property Removed, and Fire Department Service Charge (commonly $500).
• Credit Card / Electronic Fund Transfer / Forgery — commonly $500.
• Loss Assessment — commonly $1,000 toward a charge levied by an association.

Why the Percentages Matter

Because B, C, and D are derived from Coverage A, underinsuring the dwelling silently underinsures everything else. If a producer sets Coverage A at $300,000 on a home that truly costs $400,000 to rebuild, the insured also loses $10,000 of Coverage B, $50,000 of Coverage C, and $30,000 of Coverage D versus a correctly valued policy. This cascade is why insurance-to-value on Coverage A is the single most important number on the declarations page, and why exam questions often hide a coverage gap inside an undervalued Coverage A figure.

Coverage C Property Not Covered

Coverage C also lists property it does not insure, tested as distractors. Excluded contents include motor vehicles and equipment, aircraft, animals, property of roomers not related to the insured, and property in an apartment rented to others. Articles separately insured elsewhere are excluded to prevent double recovery.

A producer who spots a high-value collection (fine art, guns, jewelry) should recommend a scheduled personal property / inland marine floater rather than relying on the capped Coverage C sublimits.

Section I Coverage Structure, Percentages, and Worked Examples

Homeowners Section I property coverages are linked by percentage relationships to Coverage A (Dwelling), which the exam tests numerically. Coverage B – Other Structures is typically 10% of A; Coverage C – Personal Property is 50% of A (often adjustable 40-70%); and Coverage D – Loss of Use is commonly 30% of A (20% on some forms).

Worked example: A home insured for $400,000 Coverage A automatically carries about $40,000 other structures, $200,000 personal property, and $120,000 loss of use. If a fire destroys a detached $55,000 garage, Coverage B pays only $40,000 unless the limit was increased by endorsement.

Additional coverages layer on smaller, specific grants: debris removal, reasonable repairs, trees/shrubs/plants (e.g., 5% of A, $500 per item, named perils), fire-department service charge, property removed, credit-card/forgery, and a collapse provision. Loss of Use has two parts — Additional Living Expense (ALE), paying the increase in living costs when the home is uninhabitable, and Fair Rental Value, paying lost rent on a portion the insured rented out. Trap: ALE pays only the extra cost above normal living expenses, not the household's entire new budget.