4.2 Section I Coverages A-D and Additional Coverages
Key Takeaways
- Section I uses four coverages: A Dwelling, B Other Structures (10% of A), C Personal Property (50% of A), D Loss of Use (30% of A on HO-3).
- Coverages B, C, and D are derived as percentages of the Coverage A limit.
- Personal property off-premises is limited to the greater of $1,000 or 10% of Coverage C.
- Special limits cap theft-prone items: jewelry/watches/furs $1,500, firearms $2,500, silverware $2,500, money $200.
- Additional Coverages (debris removal, trees/shrubs, credit card, collapse) sit alongside the lettered limits.
Section I: The Four Property Coverages
Every owner-occupant homeowners form (HO-2/3/5/8) organizes Section I property protection into four lettered coverages — A, B, C, and D. The Coverage A limit is the anchor; B, C, and D are written as percentages of Coverage A in the standard form. Memorize the standard percentages, because the exam loves to give you a Coverage A limit and ask for the B, C, or D dollar amount.
Coverages A through D at a Glance
| Cov | Name | What It Insures | Standard Limit |
|---|---|---|---|
| A | Dwelling | The house and attached structures (attached garage, built-ins) | Chosen by insured |
| B | Other Structures | Detached garage, shed, fence, gazebo | 10% of Cov A |
| C | Personal Property | Contents (furniture, clothing, electronics) | 50% of Cov A (50%-70% range) |
| D | Loss of Use | Additional Living Expense (ALE) + Fair Rental Value | 30% of Cov A (HO-3) |
Coverage A (Dwelling) insures the residence and structures attached to it, plus materials and supplies on or next to the premises used to build, alter, or repair it. Coverage B (Other Structures) covers structures separated from the dwelling by clear space — a detached garage, tool shed, or fence. Coverage C (Personal Property) is contents-coverage that follows the insured anywhere in the world. Coverage D (Loss of Use) is the most misunderstood: it pays Additional Living Expense (ALE) to maintain the household's normal standard of living when the home is uninhabitable, plus Fair Rental Value for any rented portion.
Worked Example: Deriving the Limits
Suppose a homeowner buys an HO-3 with Coverage A = $300,000. Using standard percentages:
- 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 C also limits property away from the premises to the greater of $1,000 or 10% of the Coverage C limit — here, 10% x $150,000 = $15,000. Coverage B similarly limits any structure rented to others (other than a private garage) — watch for that trap. Coverage D (Loss of Use) has no deductible and pays only the additional expense above normal living costs; if a family normally spends $2,000 a month and motel-plus-meals runs $3,200, ALE pays the $1,200 difference, not the full $3,200.
Additional Coverages and Special Limits
Section I includes Additional Coverages that pay over and above the lettered limits or fall within Coverage C with their own sublimits. High-value categories carry special limits of liability to discourage over-insurance of theft-prone items.
| Category | Typical Special Limit |
|---|---|
| Money, coins, bullion | $200 |
| Securities, deeds, manuscripts | $1,500 |
| Jewelry, watches, furs (theft) | $1,500 |
| Firearms (theft) | $2,500 |
| Silverware/goldware (theft) | $2,500 |
| Business property on premises | $2,500 |
Key Additional Coverages include Debris Removal, Reasonable Repairs, Trees/Shrubs/Plants (5% of Cov A; $500 per item), Fire Department Service Charge ($500), Property Removed, Credit Card/EFT ($500), Loss Assessment ($1,000), and Collapse. These are tested as recognition items — know that jewelry theft caps at $1,500 and firearms at $2,500.
Raising the Special Limits
The special limits are theft sublimits in most cases — jewelry destroyed by a covered fire is paid up to the full Coverage C limit, but jewelry stolen is capped at $1,500. To insure high-value items for their full value and on an open-perils basis, the insured adds scheduled personal property via the HO 04 61 endorsement, which lists each item with an agreed value and removes the deductible. The exam routinely tests the difference between a fire loss (full Cov C) and a theft loss (special sublimit) on the same item, so read every question for the cause of loss, not just the item type.
Loss of Use (Coverage D) Components
Coverage D pays two things when a covered peril makes the residence uninhabitable: Additional Living Expense (ALE) — the increase in normal living costs (hotel, meals above normal) while the home is repaired — and Fair Rental Value if part of the home was rented out. ALE is capped by time ("the shortest time to repair or replace") rather than a flat sublimit in many editions, and a civil-authority prohibition on access triggers up to two weeks of Coverage D.
Other Structures (Coverage B) Nuances
Coverage B insures detached structures — a garage, shed, or fence — for 10% of Coverage A as an additional amount (it does not erode Coverage A). Structures used for business or rented to a non-tenant are excluded, a frequent distractor. A detached garage rented to a tenant of the dwelling remains covered.
Quick Limit-Derivation Table
| Coverage | Standard relationship to Coverage A |
|---|---|
| B — Other structures | 10% of A (additional) |
| C — Personal property | 50% of A (often 70% available) |
| D — Loss of use | 30% of A (HO-3); 20% under some editions |
Memorize these percentages: the exam routinely gives Coverage A and asks you to compute B, C, and D. For a $300,000 Coverage A: B=$30,000, C=$150,000, D=$90,000. Coverage C also follows personal property worldwide, and property usually at a second residence is limited to 10% of Coverage C or $1,000, whichever is greater.
An HO-3 has Coverage A = $400,000 with standard percentages. The insured's detached workshop (other structure) is destroyed in a covered loss valued at $48,000. How much will the policy pay before any deductible?
A burglar steals the insured's jewelry valued at $6,000 from the home. The HO-3 has $250,000 of Coverage C. How much will the policy pay for the jewelry theft?