Section I Coverages A-D and Additional Coverages

The four Section I property coverages

Section I of every HO form divides property into four lettered coverages. Their limits are interrelated, and the percentages that link them are prime exam material.

For the HO-4 (tenant) and HO-6 (condo), the insured selects a Coverage C limit directly, and Coverage D is 30% of Coverage C rather than of A.

How the linked limits work

Because B, C, and D are stated as percentages of A, selecting the right Coverage A is the foundation of an adequate HO policy. Example: A dwelling is insured for $300,000 (Coverage A).

• Coverage B (other structures) = 10% x $300,000 = $30,000
• Coverage C (personal property) = 50% x $300,000 = $150,000
• Coverage D (loss of use) = 30% x $300,000 = $90,000

Coverage B is additional insurance (it does not erode the Coverage A limit), while Coverage C and D limits are the minimums an insured can usually increase for an added premium.

Coverage C special limits (sub-limits)

Coverage C applies worldwide but caps certain classes of property to discourage theft fraud. Tested per-occurrence special limits (2011/2022 ISO HO-3):

• $200 - money, bank notes, coins, precious metals.
• $1,500 - securities, deeds, manuscripts, tickets, stamps.
• $1,500 - watercraft including trailers and equipment.
• $1,500 - theft of jewelry, watches, furs, precious stones.
• $2,500 - theft of firearms and related equipment.
• $2,500 - theft of silverware, goldware, pewterware.
• $2,500 - property on the residence premises used for business.

These are limits, not exclusions - the property is covered, but only up to the sub-limit unless scheduled by endorsement (e.g., the HO 04 61 Scheduled Personal Property Endorsement / personal articles floater).

Coverage D - Loss of Use

Coverage D pays when a covered peril makes the residence uninhabitable, in two parts:

• Additional Living Expense (ALE) - the increase in living costs (hotel, meals) so the household can maintain its normal standard of living.
• Fair Rental Value - lost rental income (less non-continuing expenses) if part of the home was rented out.

ALE is not subject to a coinsurance penalty and continues for the shortest time reasonably required to repair or replace, or for the household to permanently relocate.

A third trigger, civil authority / prohibited use, pays Coverage D for up to two weeks when a neighboring covered loss causes a government order barring the insured from the home (e.g., a wildfire evacuation). Watch the exam trap: ALE pays only the increase over normal expenses, not the household's entire cost of living - if the family normally spends $200/week on food and now spends $350, only the $150 increase is covered.

Additional Coverages

Section I also grants Additional Coverages that sit on top of A-D, each with its own sub-limit:

• Debris removal - included; an extra 5% of the limit is available if removal plus the loss exceeds the limit.
• Reasonable repairs, trees/shrubs/plants (5% of A, max $500 per item), fire department service charge ($500), property removed (30 days while endangered).
• Credit card / EFT / forgery / counterfeit money - $500.
• Loss assessment - $1,000 for charges levied by an HOA.
• Collapse, landlord's furnishings, and grave markers under some editions.

The 2022 ISO edition added/clarified some of these limits, but the $500 forgery / $1,000 loss-assessment figures remain standard test answers.

Section I Limits, Special Limits, and Loss of Use Mechanics

Homeowners Section I property limits relate to Coverage A by default percentages, which the exam tests as fill-in numbers.

Exam trap: Coverage C is 50% of A by default and follows the contents off premises anywhere in the world (often limited to 10% of C for property usually kept at another residence). Coverage B is 10% of A as an additional amount.

Special Limits (Sublimits) on Coverage C

Certain easily stolen or high-value categories carry internal sublimits even though they are covered: money/coins, securities, watercraft, jewelry/furs (a low theft sublimit), firearms, and silverware. Exceeding a sublimit requires scheduling the item (Personal Articles/scheduled property endorsement), which also broadens to open-peril and often drops the deductible.

Loss of Use in Practice

Coverage D pays Additional Living Expense (extra costs to maintain the household's normal standard of living) and Fair Rental Value (lost rent on a rented portion), and uniquely also pays prohibited use (civil authority bars access to the home because of a covered loss to a neighboring property) for a limited period. Loss of Use applies only when the loss stems from a covered peril and only for the time reasonably required to restore the home.