4.2 Section I Coverages A-D and Additional Coverages

The Four Section I Coverages

Section I of the homeowners policy contains four property coverages, lettered A through D. Coverage A is the anchor: the insured selects a Coverage A limit (the dwelling limit), and Coverages B, C, and D are calculated as percentages of Coverage A in the owner forms. Knowing those default percentages is essential exam knowledge.

Coverage Structure and Default Percentages

In tenant (HO-4) and condo (HO-6) forms, the insured selects a Coverage C limit instead, and Coverage D is then a percentage of Coverage C (HO-4 Loss of Use is commonly 30% of Coverage C; HO-6 is 50% of Coverage C).

Worked Example: Deriving the Limits

An insured carries HO-3 with Coverage A = $300,000. Under the unendorsed form the derived limits are:

• Coverage B = 10% × $300,000 = $30,000 (this is ON TOP OF Coverage A, not carved out of it)
• Coverage C = 50% × $300,000 = $150,000
• Coverage D = 30% × $300,000 = $90,000

So a single fire that destroys the home, detached garage, and contents, and forces the family into a rental, can pay up to $300,000 + $30,000 + $150,000 + $90,000 = $570,000 before any sublimits or deductible. A common trap: candidates subtract Coverage B from Coverage A. It is additive — the dwelling still has its full $300,000.

Loss of Use - Two Components

Coverage D pays whichever applies after a covered loss makes the residence uninhabitable:

• Additional Living Expense (ALE) — the extra cost to maintain the household's normal standard of living (rent, restaurant meals above normal grocery costs). Only the increase is paid.
• Fair Rental Value — if part of the home was rented to others, the lost rental income (less non-continuing expenses). A prohibited use / civil authority provision extends Loss of Use (commonly up to 2 weeks) when a neighboring loss bars access even though the insured's own home is undamaged.

Additional Coverages

Section I also grants Additional Coverages, most of which provide their own limits and do NOT reduce Coverage A:

• Debris removal — included; an additional 5% of the applicable limit is available if the loss plus removal exceeds the limit.
• Reasonable repairs — emergency repairs to protect property from further damage.
• Trees, shrubs, plants, lawns — limited to 5% of Coverage A, with a per-item cap (commonly $500 per tree/shrub), and only for named perils such as fire, lightning, vandalism, theft — not wind or ice.
• Fire department service charge — commonly $500 (additive, no deductible).
• Credit card, forgery, counterfeit money — commonly $500.
• Collapse, glass breakage, landlord's furnishings, and loss assessment (commonly $1,000) round out the list.

Special Limits on Coverage C

Watch the sublimits that apply within Coverage C regardless of the total limit: money/coins commonly $200; securities/manuscripts commonly $1,500; theft of jewelry/furs commonly $1,500; theft of firearms commonly $2,500; silverware theft commonly $2,500; business property on premises $2,500.

Coverage C Off-Premises and Special Categories

Coverage C follows the insured's property worldwide, but two limits frequently appear on the exam. First, personal property usually located at another residence (a vacation home or a student's dorm) is limited to the greater of 10% of Coverage C or $1,000, restored to full coverage only while the insured is temporarily residing there.

Second, certain categories are excluded from Coverage C entirely — animals, motor vehicles and their equipment (other than those used to service the residence, like a riding mower), aircraft, and property of roomers not related to the insured. A tenant who wants higher limits on jewelry or a home business must schedule the property or add the appropriate endorsement rather than rely on Coverage C.

Loss Assessment and Ordinance Coverages

Two Additional Coverages deserve a closer look because they are commonly tested. Loss assessment (commonly $1,000) pays the insured's share of a charge levied by a homeowners or condo association for a covered loss to commonly owned property — vital for HO-6 owners. Ordinance or law Additional Coverage provides a small built-in percentage (often 10% of Coverage A) toward the increased cost of rebuilding to current code, with higher limits available by the HO 04 77 endorsement. Because base policies exclude the increased cost of code compliance, this coverage is the only way an older home is made whole after a major loss.

Reading a Limits Question

When a scenario lists a Coverage A limit and asks for available coverage on a detached structure, contents, or living expenses, derive each figure from the default percentages, confirm whether the coverage is additive (B, C, D are on top of A) or a sublimit (jewelry theft, money), and only then subtract the deductible. The most common error is treating Coverage B or D as carved out of Coverage A rather than added to it, which understates the total recovery.