4.2 Section I Coverages A-D and Additional Coverages

Section I Coverages A-D and Additional Coverages

Section I is the property half of the Homeowners policy. It is organized into four primary coverages plus a list of Additional Coverages that grant small limits for specific exposures. The limits for Coverages B, C, and D are normally expressed as a percentage of Coverage A, so if you change Coverage A the others move automatically. Memorize these percentages — they are tested numerically nearly every exam.

The four Section I coverages

Worked example: With Coverage A = $300,000, the default limits are Coverage B = $30,000, Coverage C = $150,000, and Coverage D = $90,000 (using 30%). Coverage C also covers personal property anywhere in the world but typically at a reduced 10% of Cov C for property usually located at a secondary/other residence.

Coverage D — Loss of Use

Coverage D pays when a covered peril makes the residence uninhabitable. It has two parts:

• Additional Living Expense (ALE): the increase in normal living costs (hotel, restaurant meals above normal grocery cost) so the household can maintain its standard of living.
• Fair Rental Value: lost rent if part of the home was rented to others, less expenses that don't continue.

If access is denied by civil authority (e.g., a neighboring fire forces evacuation), Coverage D applies for a limited period (commonly up to 2 weeks).

Common Additional Coverages

These sit on top of A-D and provide extra limits for narrow exposures:

• Debris removal — typically built in; an extra 5% available if the loss plus removal exceeds the limit.
• Reasonable repairs, trees/shrubs/plants (usually 5% of Cov A, capped per item, e.g., $500/tree),
• Fire department service charge (commonly $500),
• Property removed from premises endangered by a covered peril (covered open-peril for 30 days),
• Credit card / forgery / counterfeit money (commonly $500),
• Loss assessment (commonly $1,000 for HO-6 charges levied by the association),
• Collapse, glass breakage, and landlord's furnishings (small limit).

Special limits of liability on Coverage C

Coverage C imposes per-category sublimits even though it is a named insured's total contents limit. Typical ISO sublimits:

To restore full value on jewelry or firearms, the insured schedules the items via a Scheduled Personal Property endorsement (inland marine floater), which removes the sublimit and adds open-peril coverage.

How the percentages flex and the world-wide limit

Because B, C, and D are tied to Coverage A, an agent only needs to set the dwelling limit correctly and the rest scale automatically. Many insureds increase Coverage C to 70% or 75% for households with significant furnishings, or decrease it to 40% for sparsely furnished homes — both done by endorsement. Coverage B can likewise be increased when a detached garage or large workshop exceeds the 10% default.

Coverage C follows the insured's property anywhere in the world, but property usually kept at a secondary residence is limited to 10% of Coverage C or $1,000, whichever is greater, until a loss occurs at the primary residence. Property of guests and residence employees can be covered at the insured's option. Understanding that these limits move together is essential for the percentage-based math problems on the exam.

Property NOT covered and the business-property trap

Coverage C explicitly excludes certain property: motorized land vehicles licensed for road use (the Personal Auto Policy covers those), aircraft and parts, animals/birds/fish, property of roomers not related to the insured, and property covered under more specific insurance such as a scheduled floater. Articles separately described and priced (a scheduled diamond) are removed from Coverage C to avoid double payment.

Business property on the residence premises is capped (commonly $2,500) and off-premises business property even lower (often $1,500). This is a classic exam trap: a home-based business owner who assumes the HO policy fully protects inventory or equipment is badly underinsured and needs a Business Pursuits / home-business endorsement or a separate commercial policy. Likewise, money is limited to $200 and securities to $1,500 - amounts that surprise insureds who keep cash at home.

The Four Property Coverages at a Glance

Section I of a homeowners policy uses four lettered coverages whose limits are set as percentages of Coverage A on most forms:

Coverage C also applies off-premises (typically 10% of C or $1,000, whichever is greater) for property away from home, and special limits cap categories like cash, jewelry, firearms, and silverware.

Special Limits and Additional Coverages

Within Coverage C, special limits of liability cap theft-prone or easily inflated items even though the overall C limit is higher — common figures include $200 on money, $1,500 on jewelry/watches/furs for theft, $2,500 on business property on premises, and $2,500 on firearms for theft. Scheduling these items on a Personal Property endorsement removes the cap.

Section I also grants Additional Coverages above the main limits: Debris Removal, Reasonable Repairs, Trees/Shrubs/Plants (5% of A, $500 per item), Fire Department Service Charge ($500), Credit Card/Forgery ($500), and Collapse. Loss of Use (Coverage D) pays Additional Living Expense for an owner forced to live elsewhere and Fair Rental Value for any rented portion of the home.