4.2 Section I Coverages A-D and Additional Coverages

Section I of every homeowners policy contains the property coverages, lettered A through D. On an owner form, the Coverage A limit drives everything: the agent sets A to the home's replacement cost, and B, C, and D follow as default percentages of A (the insured can buy higher limits by endorsement).

The Four Section I Coverages

On HO-5, Coverage C typically defaults to 70% of A. Coverage B is additional insurance (it sits on top of A), while C and D are separate limits.

Worked example: A home insured for Coverage A = $300,000 on HO-3 carries default limits of B = $30,000 (10%), C = $150,000 (50%), and D = $90,000 (30%) unless changed.

Because B, C, and D float off Coverage A, an under-set Coverage A quietly shrinks every other coverage. A producer who insures only the mortgage balance rather than full replacement cost leaves the insured short across the board. The exam frequently rewards recognizing that raising Coverage A also raises the default contents and loss-of-use limits, which is why right-sizing Coverage A is the single most important step in writing the policy.

Coverage A and Coverage B Boundaries

Coverage A covers the dwelling, attached structures, and materials/supplies on or next to the premises used to build it. Coverage B covers detached structures separated from the home by clear space (or connected only by a fence or utility line): a detached garage, tool shed, gazebo, or in-ground pool. A structure rented to others or used for business is excluded from Coverage B unless endorsed, though a detached private garage rented to a tenant of the dwelling is allowed.

Coverage C Details: Worldwide and Special Limits

Coverage C follows the insured's property anywhere. Property usually located away from the residence (a child's dorm belongings, items in a storage unit) is covered up to 10% of the Coverage C limit or $1,000, whichever is greater. Property of guests and residence employees can be covered at the insured's option.

Certain easily stolen or high-value categories carry special dollar limits regardless of the broad Coverage C amount:

• Money, coins, bullion: $200
• Securities, deeds, manuscripts, tickets: $1,500
• Watercraft, trailers: $1,500
• Jewelry, watches, furs (theft only): $1,500
• Firearms (theft): $2,500
• Silverware/goldware (theft): $2,500
• Business property on premises: $2,500

These are not deductibles, they are caps. To insure a $10,000 ring fully the insured must schedule it (Personal Property endorsement / floater).

Coverage D: Loss of Use

Coverage D responds when a covered Section I loss makes the home uninhabitable. It has two parts:

1. Additional Living Expense (ALE): the increase in living costs to maintain the household's normal standard (hotel, meals above normal, laundromat). Only the increase is paid, not the entire new bill.
2. Fair Rental Value: lost rent, less non-continuing expenses, when part of the home was rented to others.

A third trigger, Civil Authority / Prohibited Use, pays ALE/FRV for up to two weeks when a neighboring covered peril causes government to bar access to the home.

Additional Coverages (the Section I add-ons)

These provide modest, often percentage-based, extra protection:

These add-ons are additional uses of coverage, not new dollars beyond the policy, except where a percentage extension is stated (Trees/Shrubs at 5% of A; the extra 5% for Debris Removal). The exam likes to test the per-item cap on Trees, Shrubs, and Plants: a single $900 ornamental tree destroyed by a covered peril is paid only $500, even though the category limit is 5% of Coverage A. It also tests that the Fire Department Service Charge ($500) and Glass breakage apply with no deductible, while most other property losses are subject to the policy deductible.

Coverage C Special Limits — Memorize the Categories

Coverage C imposes special dollar sublimits on theft-prone or high-value categories regardless of the overall Coverage C limit. Typical ISO figures include money/coins ~$200; securities, deeds, and stamps ~$1,500; watercraft including trailers ~$1,500; theft of jewelry/furs ~$1,500; theft of firearms ~$2,500; theft of silverware ~$2,500; and business property on premises ~$2,500. Items that exceed these caps should be scheduled by endorsement (HO 04 61) for full open-peril, no-deductible coverage.