4.2 Section I Coverages A-D and Additional Coverages

Section I Property Coverages

Section I of the homeowners policy contains four numbered property coverages plus a list of Additional Coverages. The exam tests both the scope of each coverage and the automatic percentage relationships among them, because most are derived from the Coverage A limit the insured selects.

Note the Coverage D percentage varies by form/edition (HO-3 2011 = 30%; some forms 20%). Coverage B is additional insurance — it does not reduce Coverage A.

Coverage A — Dwelling

Covers the residence and structures attached to it (an attached garage, attached deck), plus materials and supplies on or next to the premises used to build or repair the dwelling. It excludes land. Worked example: if a home is insured for Coverage A = $300,000, then Coverage B = $30,000, Coverage C = $150,000, and Coverage D = $90,000 are generated automatically.

Coverage B — Other Structures

Covers structures separated from the dwelling by clear space or connected only by a fence/utility line: detached garage, tool shed, gazebo. The default 10% is additional insurance. Trap: structures used for business or rented to a non-tenant are excluded under Coverage B.

Coverage C — Personal Property

Covers personal property owned or used by an insured, anywhere in the world (off-premises personal property is limited to the greater of 10% of Coverage C or $1,000 in the 2011 form). Coverage C is written on an ACV basis unless a Personal Property Replacement Cost endorsement is added.

Coverage C carries special limits (sublimits) that cap recovery for theft-prone or hard-to-value categories regardless of the overall Coverage C limit:

Trap: the jewelry sublimit applies to theft only. A diamond ring destroyed by a covered fire is paid up to the full Coverage C limit. To raise theft protection on jewelry, schedule it via the Scheduled Personal Property endorsement (a floater).

Coverage D — Loss of Use

Three parts: (1) Additional Living Expense (ALE) — the increase in living costs when the residence is uninhabitable after a covered loss; (2) Fair Rental Value — lost rent on a portion the insured rented to others; (3) Civil Authority — ALE/rental value up to two weeks when a civil authority bars access due to a neighboring covered loss. Coverage D pays only the increase in expenses, not total expenses.

Additional Coverages

A standardized list, including: Debris Removal, Reasonable Repairs, Trees/Shrubs/Plants (5% of Cov A, max $500 per item, named perils only — NOT wind), Fire Department Service Charge ($500), Property Removed (30 days while being protected), Credit Card/Forgery ($500), Loss Assessment ($1,000), Collapse, Glass breakage, and Ordinance or Law (10% of Cov A).

Most Additional Coverages are additional insurance that does not erode Coverage A or C — but a few (such as Credit Card and Loss Assessment) carry their own small per-occurrence caps. Trap: the Trees, Shrubs, and Plants coverage explicitly excludes loss caused by wind or hail, so a tree blown over in a storm is generally not paid.

Ordinance or Law answers the classic exam scenario where a partially destroyed older home must be rebuilt to current code at extra cost: the base policy excludes that increased cost, and the 10%-of-Coverage-A Additional Coverage (increasable by endorsement) is what responds.

The Automatic Coverage Relationships

The exam expects the automatic percentage links among Section I coverages on the unendorsed HO-3:

• Coverage B — Other Structures: 10% of Coverage A (additional amount).
• Coverage C — Personal Property: 50% of Coverage A (raisable; HO-4/HO-6 set C as the primary limit).
• Coverage D — Loss of Use: 30% of Coverage A (20% on some older editions).

Given a Coverage A of $300,000, the defaults are B = $30,000, C = $150,000, D = $90,000. A stem that changes Coverage A and asks for the other-structures or loss-of-use limit is pure arithmetic on these percentages.

Coverage C Special Limits (Sub-Limits)

Coverage C imposes special dollar sub-limits on theft-prone or high-value categories regardless of the overall C limit. Recognize the standard caps: money/coins/bullion ~$200; securities, deeds, manuscripts ~$1,500; watercraft/trailers ~$1,500; jewelry, watches, furs — theft ~$1,500; firearms — theft ~$2,500; silverware — theft ~$2,500; business property on premises ~$2,500. These are sub-limits, not deductibles — the policy pays up to the cap, then nothing more for that category unless a Scheduled Personal Property (HO 04 61) endorsement raises it.

Off-Premises and Worldwide Coverage

Unlike the premises-focused dwelling form, homeowners Coverage C follows the insured worldwide, with off-premises personal property covered up to the greater of 10% of Coverage C or $1,000. Property usually situated at a secondary residence is limited to 10% of Coverage C while there. Property of guests and residence employees can be covered at the insured's option.

Additional Coverages

Section I additional coverages include Debris Removal, Reasonable Repairs, Trees/Shrubs/Plants (5% of A, $500 per item, named perils only), Fire Department Service Charge ($500), Property Removed, Credit Card/EFT/Forgery/Counterfeit Money ($500 default), Loss Assessment ($1,000 default), Collapse, and Ordinance or Law (10% of A). Several have their own sub-limits separate from Coverages A–D, so on a settlement question identify which additional coverage and its specific cap before applying the deductible.