4.2 Section I Coverages A-D and Additional Coverages

Section I of a homeowners policy is the property half (Section II is liability). It contains four coverages lettered A through D, and the exam expects you to know both what each covers and its default percentage relationship to Coverage A. The dollar amount of Coverage A — chosen to equal the dwelling's replacement cost — drives the others automatically unless the insured buys higher limits.

• Coverage A — Dwelling: the house itself and structures attached to it (an attached garage), plus materials on the premises to repair it.
• Coverage B — Other Structures: detached structures such as a freestanding garage, shed, or fence.
• Coverage C — Personal Property: the contents and belongings of the insured.
• Coverage D — Loss of Use: additional living expense and fair rental value when a covered loss makes the home uninhabitable.

Default Limit Relationships (HO-3)

Worked example: A home insured for $300,000 of Coverage A carries roughly $30,000 of Coverage B (10%), $150,000 of Coverage C (50%), and $90,000 of Coverage D (30%). On HO-4 and HO-6, where there is little or no Coverage A, the percentages are stated differently — Coverage C is the selected limit and Coverage D commonly runs 30% of C on HO-4 and 50% of C on HO-6.

Coverage C — On- and Off-Premises

Coverage C is the only Section I coverage that follows the insured off the premises. Property usually kept at a residence other than the insured location (such as a college student's dorm items) is limited worldwide to 10% of the Coverage C limit or $1,000, whichever is greater.

Within Coverage C, certain categories carry special internal limits because they are easy to over-insure or steal. These caps apply inside the overall C limit — they do not add money:

Trap: The jewelry limit applies to theft, not to fire. A diamond ring destroyed by a house fire is paid up to the full Coverage C limit; the $1,500 cap bites only when the loss is theft. Insureds raise these caps by scheduling items on a Personal Articles endorsement.

Coverage D — Loss of Use

Coverage D pays when a Section I covered peril makes the residence unfit to live in. It has three parts:

1. Additional Living Expense (ALE): the extra cost of living elsewhere (hotel, restaurant meals above normal grocery spending) while repairs occur, for the shortest time required to repair or relocate.
2. Fair Rental Value: lost rent (minus expenses that stop) if part of the home was rented to others.
3. Civil Authority: ALE for up to two weeks when a civil authority bars access because a neighboring property suffered a covered peril.

ALE pays the difference, not total expenses. A family that spent $600/month on food at home and $1,000/month dining out while displaced collects the $400 increase, not the full $1,000.

Additional Coverages

The policy lists roughly a dozen Additional Coverages that extend protection beyond A–D. Common exam items:

• Debris Removal: cost to remove debris of covered property; extra 5% available if the loss plus removal exceeds the limit.
• Reasonable Repairs: temporary repairs to protect property from further damage.
• Trees, Shrubs, and Other Plants: up to 5% of Coverage A, with a per-item cap (commonly $500), only for named perils such as fire, lightning, vandalism, theft, and not-owned vehicles — not wind or disease.
• Fire Department Service Charge: up to $500, no deductible.
• Credit Card / Forgery / Counterfeit Money: up to $500 for unauthorized charges or accepting counterfeit currency.
• Collapse, Glass Breakage, Landlord's Furnishings, Ordinance or Law (10% of A) round out the list.

Coverage Percentages and Special Limits

The default Section I relationships are pure memorization fodder, and the special internal limits on Coverage C catch many test-takers:

Coverage C also follows the insured worldwide, but property usually kept at another residence is limited to the greater of $1,000 or 10% of the Coverage C limit.

Additional Coverages and Loss of Use Detail

Beyond the four main limits, Section I grants Additional Coverages that provide extra dollars, sometimes outside the Coverage A or C limit. Common examples include debris removal, reasonable repairs to protect property, trees, shrubs, and other plants (typically 5% of Coverage A with a per-item cap), fire department service charge, credit card/forgery (commonly $500), collapse, and loss assessment for condo and association charges. These coverages frequently appear as the correct answer when a scenario describes an expense the four main limits do not obviously cover.

Coverage D (Loss of Use) itself splits into Additional Living Expense (the extra cost to maintain the household's normal standard of living while the home is uninhabitable after a covered loss) and Fair Rental Value (lost rent if part of the home was rented). It also pays for a civil authority prohibition of use, typically for up to two weeks, when a neighboring covered peril forces evacuation.