4.2 Section I Coverages A-D and Additional Coverages
Key Takeaways
- Coverages B (10%), C (50%), and D (30%) default to percentages of the Coverage A dwelling limit on owner-occupant forms, and Coverage B/D are additional, not carved out of Coverage A.
- On HO-4 and HO-6 the insured selects Coverage C as the primary limit and Coverage D derives from it.
- Coverage D (Loss of Use) pays only the increase in living costs (ALE) plus fair rental value, and responds to a civil-authority order up to two weeks.
- Internal Coverage C sublimits cap whole classes per occurrence (e.g., $1,500 jewelry theft, $2,500 firearms theft, $200 money) and several apply to theft only.
- Scheduling valuables on HO 04 61 removes the sublimit and provides open-peril coverage.
The Four Section I Coverages
Section I of every Homeowners form is built on four lettered property coverages. On owner-occupant forms (HO-2/3/5), the coverage limits are linked: Coverages B, C, and D are expressed as percentages of the Coverage A dwelling limit, which is the limit the insured selects.
| Coverage | Name | What it insures | Standard limit (HO-3) |
|---|---|---|---|
| A | Dwelling | The house and attached structures | Selected by insured |
| B | Other Structures | Detached garage, shed, fence | 10% of Cov A |
| C | Personal Property | Contents owned/used by insured | 50% of Cov A |
| D | Loss of Use | Additional living expense / fair rental value | 30% of Cov A |
These are minimum default percentages — the insured can buy higher Coverage B or C by endorsement.
Worked Example: How the Percentages Cascade
Assume an HO-3 written with Coverage A = $400,000. The default limits become:
- Coverage B (Other Structures): 10% x $400,000 = $40,000
- Coverage C (Personal Property): 50% x $400,000 = $200,000
- Coverage D (Loss of Use): 30% x $400,000 = $120,000
If a covered fire destroys the detached garage, the most Coverage B will pay is $40,000 — independent of and in addition to the $400,000 dwelling limit. Loss of Use is also additional. So the maximum Section I property recovery from a total loss is the sum, not capped at Coverage A.
Note the contrast with HO-4/HO-6: there Coverage C is the primary limit selected by the insured (e.g., $60,000), and Coverage D defaults to a percentage of Coverage C (commonly 30% on HO-4, 50% on HO-6).
Coverage D: Loss of Use Has Two Parts
- Additional Living Expense (ALE) reimburses the increase in living costs (hotel, meals, storage) so the household can maintain its normal standard of living while the residence is uninhabitable. The key word is additional — the insurer pays only the extra above normal spending.
- Fair Rental Value covers lost rent on a portion the insured rents to others.
- Coverage D also responds to a civil authority order (no more than two weeks) prohibiting use of the residence because a neighboring premises suffered a covered peril.
Section I Additional Coverages and Internal Sublimits
The forms grant Additional Coverages that often pay in addition to the lettered limits, plus special internal sublimits within Coverage C for theft-prone or high-value classes:
| Item / Coverage | Typical limit (HO 2011) |
|---|---|
| Debris removal | Within Cov A/B/C (extra 5% if needed) |
| Trees, shrubs, plants | 5% of Cov A, max $500 per item |
| Fire department service charge | $500 |
| Credit card / forgery / counterfeit money | $500 |
| Money, bank notes, coins (theft) | $200 |
| Securities, deeds, manuscripts | $1,500 |
| Jewelry, watches, furs (theft) | $1,500 |
| Firearms (theft) | $2,500 |
| Silverware, goldware (theft) | $2,500 |
| Business property on premises | $2,500 |
Trap: these are per-occurrence caps on the class, not per-item, and the jewelry/firearm/silverware limits apply to theft only. Scheduling the items on a Scheduled Personal Property endorsement (HO 04 61) removes the sublimit and adds open-peril coverage.
The Default Percentage Limits
On HO-3, the standard internal limits are anchored to Coverage A and are heavily tested:
| Coverage | Default | Tested point |
|---|---|---|
| B — Other Structures | 10% of A | Detached garage, fence, shed; additive, not part of A |
| C — Personal Property | 50% of A | Worldwide; off-premises capped at the greater of $1,000 or 10% of C |
| D — Loss of Use | 30% of A (HO-3) | ALE + Fair Rental Value combined |
Special Limits on Coverage C
Even within the Coverage C limit, the forms impose special dollar sublimits on theft-prone or high-value categories. Memorize the common ISO numbers: $200 on money, bank notes, and precious metals; $1,500 on securities, deeds, and manuscripts; $1,500 on watercraft and trailers; $1,500 on theft of jewelry, watches, and furs; $2,500 on theft of firearms; $2,500 on theft of silverware; and $2,500 on business property on premises. These are per-occurrence caps, not deductibles, and can be raised by scheduling property on a Personal Articles Floater (endorsement HO 04 61) or an increased-limits endorsement.
Additional Coverages You Must Know
Section I grants Additional Coverages that often pay over and above the lettered limits:
- Debris removal — typically pays within Coverage A but adds up to 5% more if the limit is exhausted.
- Reasonable repairs to protect property after a loss.
- Trees, shrubs, plants, lawns — up to 5% of Coverage A, capped at $500 per item, for named perils (fire, lightning, vandalism, theft, aircraft, vehicles not owned by an insured); wind and ice are not covered perils for plants.
- Fire department service charge — commonly $500, no deductible.
- Credit card / EFT / forgery / counterfeit money — commonly $500.
- Collapse, glass breakage, and landlord's furnishings (on rented portions) round out the list.
These small sublimits generate quick recall questions, so memorize the dollar figures and which perils trigger the tree/shrub coverage.
An HO-3 is written with Coverage A of $350,000. A burglar steals $9,000 of jewelry. Ignoring the deductible, how much does the unendorsed policy pay for the jewelry?