4.2 Section I Coverages A-D and Additional Coverages

The Four Section I Coverages

Section I of every homeowners form is organized into four lettered property coverages. The Coverage A limit chosen by the insured drives the limits of B, C, and D, which are expressed as a percentage of A in the standard forms.

Coverage B is additive, not carved out of A — a $300,000 Coverage A automatically provides $30,000 of Coverage B on top, so the total available building coverage is $330,000. Coverage C follows the property worldwide, but property usually located at a secondary residence is limited to 10% of Coverage C or $1,000, whichever is greater. A structure on the residence premises rented to others or used wholly for business is excluded from Coverage B, which protects only the insured's own appurtenant structures.

The percentage relationships are not optional minimums the insured must accept passively — Coverage C can be raised by endorsement (common choices are 60% or 70% of A for households with extensive contents), and Coverage D is increased automatically in lockstep with Coverage A. Because B, C, and D all flow from the Coverage A limit, an under-insured dwelling silently under-insures the entire Section I package, which is why proper Coverage A valuation is the most consequential number on the Declarations.

Coverage C Special Limits (Sub-Limits)

Coverage C imposes special dollar limits on theft of certain categories regardless of the overall Coverage C amount. These sub-limits are heavily tested; the insured must schedule property or add a Scheduled Personal Property endorsement (HO 04 61) to get full value.

• $200 — money, bank notes, coins, precious metals (bullion).
• $1,500 — securities, deeds, manuscripts, tickets, stamps.
• $1,500 — watercraft including trailers and equipment.
• $1,500 — trailers not used with watercraft.
• $1,500 — theft of jewelry, watches, furs, precious/semi-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.

Trap: the jewelry sub-limit applies to theft only; a fire that destroys jewelry is paid up to the full Coverage C amount. The dollar caps are per-occurrence, not per item.

Coverage D — Loss of Use

Coverage D pays the necessary increase in living costs after a covered Section I loss makes the residence uninhabitable. It has two parts:

• Additional Living Expense (ALE) — extra costs to maintain the household's normal standard of living (hotel, restaurant meals above normal grocery cost). Only the increase is paid, not the entire expense.
• Fair Rental Value — if part of the home was rented to others, the lost rental income (less expenses that do not continue).

Civil authority prohibiting use of the home due to a neighboring covered loss is covered, but typically limited to two weeks. Coverage D in the ISO forms is not subject to a separate time limit otherwise — it pays for the shortest time required to repair or permanently relocate. A common exam trap: ALE pays only the increase over normal expenses, so if a family normally spends $600/month on groceries and now spends $1,400 eating out, only the $800 increase is reimbursed, not the full $1,400.

Coverage D applies only after a covered Section I peril renders the home uninhabitable. If the home becomes unlivable for an uncovered reason — say a flood (excluded) — there is no Coverage D, because the triggering loss was never covered in the first place. This linkage between the cause of loss and loss-of-use eligibility is a frequently tested point.

Additional Coverages (Section I)

The forms add several Additional Coverages that may apply over or in addition to the limits above:

• Debris Removal — included; if debris + loss exceeds the limit, an extra 5% is available.
• Reasonable Repairs — cost to protect property from further damage.
• Trees, Shrubs, Plants — up to 5% of Coverage A, max $500 per tree/shrub, for named perils (fire, lightning, vandalism, etc. — NOT wind or weight of ice).
• Fire Department Service Charge — up to $500, no deductible.
• Property Removed — covered against all perils for 30 days while removed to protect from loss.
• Credit Card / Forgery / Counterfeit Money — up to $500 (no deductible).
• Loss Assessment — up to $1,000 for an insured's share of an association assessment.
• Collapse, Glass or Safety Glazing, and Landlord's Furnishings ($2,500).

Worked Example — Coverage Limits

An HO-3 carries Coverage A = $400,000. Standard percentage limits then apply:

• Coverage B (Other Structures) = 10% × $400,000 = $40,000
• Coverage C (Personal Property) = 50% × $400,000 = $200,000
• Coverage D (Loss of Use) = 30% × $400,000 = $120,000

A detached garage is destroyed at a repair cost of $52,000. Coverage B pays only $40,000 (its limit); the insured eats the $12,000 gap unless Coverage B was raised by endorsement. Separately, $9,000 of jewelry is stolen — theft of jewelry caps at $1,500, so the policy pays $1,500 unless the items were scheduled.