Section I Coverages A-D
Key Takeaways
- Section I has Coverage A (dwelling), B (other structures, 10% of A), C (personal property, ~50% of A), and D (loss of use, ~30% of A on HO-3).
- Coverage C insures belongings worldwide but imposes special sublimits on money, jewelry, firearms, and silverware that scheduling can override.
- Coverage D pays additional living expense and fair rental value only for covered losses and only for the time reasonably required to repair or relocate.
- Scheduling valuables on a personal articles endorsement provides agreed-value, open-peril coverage above the Coverage C special limits.
Section I: The Property Coverages
Section I of a homeowners policy contains four lettered coverages. The exam expects you to know what each insures, the default limit relationships, and how a loss is placed.
| Coverage | Insures | Default limit |
|---|---|---|
| A - Dwelling | Residence and attached structures | Selected by insured |
| B - Other Structures | Detached garage, shed, fence | 10% of A (additional) |
| C - Personal Property | Belongings worldwide | 50% of A (typical) |
| D - Loss of Use | Additional living expense, fair rental value | 30% of A (HO-3) |
Coverage A and B: Structures
Coverage A (Dwelling) insures the house and attached structures plus building materials on the premises. Coverage B (Other Structures) insures detached structures, with a default limit of 10 percent of Coverage A provided as additional insurance rather than within Coverage A. Structures rented to others or used for business have reduced or no coverage. The exam tests the 10-percent default and the business-use limitation.
Coverage C: Personal Property and Special Limits
Coverage C (Personal Property) insures the insured's belongings anywhere in the world, typically at 50 percent of Coverage A, with an option to raise it. Crucially, Coverage C contains special limits of liability, internal sublimits that cap loss to certain easily stolen or high-value categories regardless of the overall limit. The exam tests these caps:
- Money, bank notes, coins: a low cap (for example, $200)
- Securities, deeds, manuscripts: a modest cap
- Jewelry, watches, furs (theft): a cap (for example, $1,500)
- Firearms (theft): a cap
- Silverware (theft): a higher but still limited cap
- Business property on premises: limited
To insure valuables fully, the insured schedules them on a personal articles endorsement, which provides agreed-value, open-peril coverage above the special limits. A scenario describing $8,000 of stolen jewelry on an unendorsed policy pays only the jewelry sublimit, a favorite exam trap.
Coverage D: Loss of Use
Coverage D (Loss of Use) is the homeowners indirect-loss coverage and has two parts. Additional living expense pays the increase in living costs when a covered loss makes the home uninhabitable, restoring the household's normal standard of living elsewhere. Fair rental value pays lost rent when part of the home is rented to others. A third element, prohibited use, can pay loss of use when a civil authority bars access because of damage to neighboring property from a covered peril, usually for a limited period.
Coverage D responds only to covered Section I losses and only for the time reasonably required to repair, replace, or relocate, which is the boundary the exam tests when it asks how long living expenses continue.
An unendorsed HO-3 has a $300,000 Coverage A limit. Burglars steal $9,000 of jewelry. Approximately how much does the policy pay for the jewelry, and why?
A covered fire forces a family into a rental apartment for three months. Which homeowners coverage pays the increased cost of living elsewhere?
The Special Limits Trap
The single most exploited homeowners trap is the special limits within Coverage C. Even on a $300,000 home with $150,000 of contents coverage, theft of jewelry is capped at a low sublimit (often $1,500), money at a few hundred dollars, and silverware and firearms at their own caps. A scenario describing a large jewelry, cash, or coin theft on an unendorsed policy pays only the sublimit, and the correct answer reflects that cap, not the overall Coverage C limit.
The cure is to schedule valuables on a personal articles endorsement, which provides agreed-value, open-peril coverage above the special limits. The exam frequently contrasts an unendorsed policy (pays the sublimit) with a scheduled policy (pays the full agreed value) to test whether you understand both the limitation and its remedy.
| Category | Typical treatment |
|---|---|
| Jewelry/furs (theft) | Low sublimit unless scheduled |
| Money/coins | Very low sublimit |
| Securities/manuscripts | Modest sublimit |
| Firearms/silverware (theft) | Capped sublimits |
| Business property on premises | Limited |
Coverage D (Loss of Use) has three components worth distinguishing: additional living expense for an owner-occupant displaced by a covered loss, fair rental value for a rented portion, and prohibited use when a civil authority bars access because of covered damage to neighboring property, usually for a limited period. All three respond only to covered Section I losses and only for the time reasonably required to repair, replace, or relocate. When a question asks how long loss-of-use benefits continue, the answer is the reasonable repair period, not the insured's preferred timeline.
The most exploited homeowners trap is the Coverage C special limits: even with ample contents coverage, theft of jewelry, money, firearms, and silverware is capped at low sublimits, and the fix is to schedule the valuables on a personal articles endorsement for agreed-value, open-peril coverage. A scenario describing a large jewelry theft on an unendorsed policy pays only the sublimit.
Coverage D (loss of use) has three parts, additional living expense for a displaced owner-occupant, fair rental value for a rented portion, and prohibited use when a civil authority bars access, and all respond only to covered losses for the reasonable repair or relocation period.
A final exam reminder: Coverage C follows the insured's belongings worldwide, but the special limits and the off-premises percentage cap can sharply reduce a claim for valuables or for property away from home, so a question that moves the loss off the premises or into a high-value category is testing those internal caps rather than the headline limit.