4.2 Section I Coverages A-D and Additional Coverages
Key Takeaways
- Section I has four primary coverages: A Dwelling, B Other Structures, C Personal Property, D Loss of Use
- On an HO-3, B defaults to 10% of A, C to 50% of A, and D to 30% of A — derive them from Coverage A
- Coverage C special limits cap categories like jewelry/firearms/money for theft regardless of the overall C limit
- Coverage D pays Additional Living Expense and Fair Rental Value for the time reasonably required, plus civil-authority ALE
- Additional Coverages (debris removal, trees/shrubs, fire department charge, loss assessment, ordinance or law) add targeted limits
A homeowners policy is split into two sections. Section I is the property half and contains four primary coverages plus a list of Additional Coverages. Section II is the liability half (Coverages E and F), covered elsewhere. This section focuses on Section I property coverages, which the exam tests heavily through percentage relationships and sublimits.
The Four Primary Section I Coverages
| Coverage | Insures | Typical Relationship (HO-3) |
|---|---|---|
| A — Dwelling | The house and structures attached to it | The base limit chosen by the insured |
| B — Other Structures | Detached garage, shed, fence | 10% of Coverage A |
| C — Personal Property | Contents/belongings | 50% of Coverage A (range 40%-70%) |
| D — Loss of Use | Added living expenses while uninhabitable | 30% of Coverage A (HO-3) |
These percentages are automatic defaults the insured can raise. They are favorite numeric exam items.
Worked Example — Deriving the Other Limits
Suppose a homeowner buys Coverage A = $400,000 on an HO-3.
- Coverage B (Other Structures) = 10% of A = $40,000
- Coverage C (Personal Property) = 50% of A = $200,000
- Coverage D (Loss of Use) = 30% of A = $120,000
These are derived, not separately purchased, so a question that gives only Coverage A expects you to compute B, C, and D from the percentages. If the home is a total loss and Coverage A pays its limit, Coverage B still has its own separate $40,000 — it is not subtracted from A.
Coverage C — Special Limits (Sublimits)
Coverage C contains special limits of liability that cap certain categories regardless of the overall Coverage C amount. These apply to theft (and sometimes any peril) and are sublimits, not deductibles:
| Property Category | Typical Special Limit |
|---|---|
| Money, coins, bank notes | $200-$250 |
| Securities, deeds, manuscripts | $1,500 |
| Watercraft and trailers | $1,500 |
| Jewelry, watches, furs (theft) | $1,500 |
| Firearms (theft) | $2,500 |
| Silverware/goldware (theft) | $2,500 |
| Business property on premises | $2,500 |
Exam Trap: A stolen $6,000 engagement ring on an unendorsed HO-3 recovers only $1,500 — the jewelry theft sublimit — not the full Coverage C limit. Raise it with a scheduled personal property endorsement (HO 04 61).
Coverage D — Loss of Use
Coverage D pays Additional Living Expense (ALE) — the extra cost of maintaining the household's normal standard of living while the home is uninhabitable — and Fair Rental Value for any rented-out portion. It is keyed to the time reasonably required to repair or relocate, not a fixed number of months. A standard policy also pays ALE during a civil authority order prohibiting access following a covered loss to a neighboring property, typically for up to two weeks.
Additional Coverages
Section I also lists Additional Coverages that provide specific limited protections, many on top of Coverages A-D:
- Debris Removal — usually within the Coverage A limit; an extra 5% if the limit is exhausted.
- Reasonable Repairs, Trees/Shrubs/Plants (typically 5% of Cov A, $500/item cap), Fire Department Service Charge (often $500).
- Property Removed (covered 30 days while removed to protect from loss), Credit Card / Forgery (commonly $500), Loss Assessment (commonly $1,000).
- Collapse, Glass or Safety Glazing, Landlord's Furnishings, and Ordinance or Law (commonly 10% of Cov A by default).
An HO-3 is written with Coverage A of $300,000. Using standard automatic percentages, what is the Coverage B (Other Structures) limit?
A burglar steals a $6,000 diamond ring from an unendorsed HO-3 with $200,000 of Coverage C. How much does the policy pay for the ring?
The Four Property Coverages at a Glance
Section I of every homeowners form organizes property protection into four lettered coverages. Knowing the default percentage relationships is heavily tested because most exam questions give you Coverage A and expect you to derive the others.
| Coverage | What it insures | Typical default limit |
|---|---|---|
| A - Dwelling | The house and attached structures | Stated limit (chosen by insured) |
| B - Other Structures | Detached garage, shed, fence | 10% of Coverage A |
| C - Personal Property | Contents, worldwide | 50% of Coverage A (often 50-70%) |
| D - Loss of Use | ALE and fair rental value | 20-30% of Coverage A |
Worked example: an HO-3 with $300,000 Coverage A automatically provides $30,000 Coverage B, $150,000 Coverage C, and roughly $60,000-$90,000 Coverage D, all without separately purchasing each. Coverage C follows the insured's belongings anywhere in the world, though property usually located at a secondary residence is capped at 10% of Coverage C until a loss brings it to the insured location.
Coverage A Derivation and the Other-Structures Trap
Because Coverage B, C, and D are derived from Coverage A, exam questions hinge on the percentage relationships.
| Coverage | Default | $400,000 Coverage A example |
|---|---|---|
| B - Other Structures | 10% of A | $40,000 |
| C - Personal Property | 50% of A (HO-3) | $200,000 |
| D - Loss of Use | 30% of A (HO-3) | $120,000 |
Exam Trap: Coverage B excludes structures used for business or rented to others (other than as a private garage) - a detached workshop used for a side business is not covered under the 10% Other Structures grant and needs a business endorsement or commercial policy.
Quick Recall - The Special Limits Logic
Special limits exist to control theft and high-value exposures within the broad Coverage C grant. The exam rewards remembering why each cap exists:
- Money and cash carry the lowest cap (commonly $200-$250) because cash is easy to overstate after a loss.
- Jewelry, watches, and furs are capped at $1,500 for theft - the most-tested sublimit - because they are high-value and theft-prone.
- Firearms ($2,500 theft) and silverware ($2,500 theft) sit between.
The fix for any client whose item exceeds a sublimit is a scheduled personal property endorsement, which removes the cap and broadens to open peril with no deductible.