4.2 Section I Coverages A-D and Additional Coverages

Section I of the Homeowners policy contains the four property coverages. The named insured selects a Coverage A limit (the dwelling's replacement cost); the other three default as percentages of Coverage A, which is the single most-tested numeric fact in this chapter.

Section I Coverages and Default Limits (HO-3)

Worked example: Coverage A = $400,000. Then by default Coverage B = $40,000, Coverage C = $200,000, and Coverage D = $120,000. These are additional amounts of insurance, not carved out of Coverage A.

Coverage B - Other Structures (Key Restrictions)

Coverage B covers structures separated from the dwelling by clear space (or connected only by a fence/utility line). The exam loves two exclusions:

• Structures used for business are not covered under B (a detached workshop used commercially needs a commercial or endorsed form).
• Structures rented to anyone who is not a tenant of the dwelling are excluded (renting the detached garage to a stranger voids Coverage B for it).

Coverage C - Special Internal Limits

Coverage C insures personal property worldwide, but ISO caps certain theft-prone or high-value categories. Memorize these special limits:

Trap: The jewelry/firearm/silverware limits apply to theft only - a fire loss to jewelry is covered up to the full Coverage C limit. To insure theft of a $30,000 ring, schedule it on an HO 04 61 (Scheduled Personal Property) endorsement.

Coverage D - Loss of Use

When a Section I covered peril makes the residence uninhabitable, Coverage D pays three things:

1. Additional Living Expense (ALE): the necessary increase in living costs (hotel, meals, laundry) to maintain the household's normal standard of living - only the increase, not total spending.
2. Fair Rental Value: if part of the home was rented to others, the lost rental income (less expenses that do not continue).
3. Civil Authority: if a neighboring premises is damaged by a covered peril and a civil authority bars access, ALE/Fair Rental is paid for up to two weeks.

Coverage D has no coinsurance and is paid for the shortest time required to repair/replace or for the household to permanently relocate.

ALE math: Normal monthly housing cost = $2,500; while displaced the family spends $4,200/month on a rental plus extra meals. ALE pays the increase of $1,700/month, not the full $4,200.

Additional Coverages (Sublimits to Know)

Beyond A-D, Section I grants a package of small Additional Coverages, each with its own sublimit that does not reduce Coverages A-D:

• Debris Removal - included; an extra 5% of the limit is available if the loss plus debris removal exceeds the limit.
• Trees, Shrubs, Plants, and Lawns - up to 5% of Coverage A, but no more than $500 per item (limited perils such as fire, lightning, vandalism, theft - not wind or disease).
• Fire Department Service Charge - up to $500, no deductible.
• Credit Card / EFT / Forgery / Counterfeit Money - up to $500.
• Reasonable Repairs, Property Removed (covered 30 days while moved to protect from loss), Collapse, and Glass/Safety Glazing.

Worked sublimit example: A windstorm uproots three ornamental trees on the insured's lot. Coverage A is $300,000, so the tree sublimit is 5% = $15,000 aggregate, but capped at $500 per tree. With three damaged trees the maximum recovery is $1,500, not $15,000 - and only because windstorm is a covered tree peril (wind/disease losses to trees are otherwise excluded). Candidates routinely miss the per-item cap nested inside the percentage cap.

Section I Coverage Limits and Relationships

The homeowners Section I coverages are tied together by percentage relationships to Coverage A that the exam expects you to recall:

These percentages can be raised by endorsement. Coverage C follows the insured anywhere in the world, but property usually at another residence is limited.

Additional Coverages

Section I "Additional Coverages" are extra grants that may not erode the main limits, including: Debris Removal (with 5% extra), Reasonable Repairs, Trees/Shrubs/Plants (5% of A, $500 per item, limited perils), Fire Department Service Charge ($500), Property Removed, Credit Card/EFT ($500), Loss Assessment ($1,000), Collapse, Glass, Landlord's Furnishings, and Ordinance or Law (10% of A).

Special Limits of Liability on Coverage C

Certain classes carry internal special limits even though Coverage C itself may be large:

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

Worked example: a homeowner with $250,000 Coverage A has Coverage C at 50% = $125,000. A burglary takes $9,000 of jewelry and $4,000 of silverware. Despite the large Coverage C, recovery is capped by special limits at $1,500 (jewelry) + $2,500 (silverware) = $4,000, unless those items were scheduled - the classic argument for a Scheduled Personal Property endorsement.