6.4 Section I – Property Coverages

Coverage A – Dwelling

Under most policy forms, Coverage A—Dwelling protects the residence located on the premises identified in the Declarations. This coverage includes the dwelling itself and structures attached to it, such as porches, breezeways, attached garages, and decks. Coverage A also applies to building materials and supplies located on or next to the residence premises when they are intended for use in constructing, altering, or repairing the dwelling or another covered structure. For example, lumber stored in the insured's backyard for the construction of a new deck would be covered under Coverage A. If the lumber were destroyed by a covered fire before construction began, the policy could provide coverage for the loss.

Coverage A does not insure the land beneath or surrounding the dwelling. Coverage applies to the dwelling and other eligible property, but the land itself is excluded from coverage.

Coverage A on the HO–6

An HO–6 policy is designed for condominium unit owners. Because the insured owns an individual unit rather than the entire building, Coverage A applies differently than it does under a traditional homeowners policy.

Coverage A may insure:

• Alterations, appliances, fixtures, and improvements that form part of the insured unit
• Property the insured is required to cover under an agreement with the condominium association, property owners' association, or similar organization
• Other structures located on the residence premises that are owned solely by the insured

Coverage A under an HO–6 policy generally focuses on the interior features of the unit and other property for which the unit owner is responsible.

Under the HO–6 Unit-Owners Form, Coverage A does not insure:

• The land beneath or surrounding the residence premises
• Structures rented or held for rental to someone who is not a tenant of the insured, unless the structure is used solely as a private garage
• Structures used to conduct business activities

Coverage A is intended primarily to protect the parts of the condominium unit and other structures for which the insured is personally responsible. It does not cover land or structures used for certain rental or business purposes.

Coverage A Limit of Liability

When the insured selects a limit of liability for Coverage A—Dwelling, the policy automatically establishes limits for the other property coverages. These limits are generally calculated as specified percentages of the Coverage A limit. If an automatic limit is not sufficient to cover the value of the property, the insured may purchase additional coverage. For example, if a detached garage is worth more than the automatic limit provided under Coverage B—Other Structures, the insured may increase the Coverage B limit by adding an endorsement to the policy.

The automatic percentage limits should be reviewed carefully to ensure they are adequate for the insured property.

Coverage B – Other Structures

Coverage B—Other Structures provides coverage for structures located on the residence premises that are physically separated from the dwelling by a clear space. A structure may still qualify for Coverage B if it is connected to the dwelling only by a fence, utility line, or similar connection. Common examples include detached garages, storage sheds, and in-ground swimming pools.

Coverage B—Other Structures does not provide coverage for:

• Land, including the land on which an other structure is located
• Structures rented or held for rental to anyone who is not a tenant of the dwelling, unless the structure is used solely as a private garage
• Structures used to conduct business activities
• Structures used to store business property owned by someone other than an insured or a tenant of the dwelling

The Coverage B—Other Structures limit of insurance is automatically set at 10% of the Coverage A—Dwelling limit. Coverage B is provided as a separate amount of insurance; therefore, a payment for a covered loss to an other structure does not reduce the amount available under Coverage A.

Coverage C – Personal Property

Coverage C—Personal Property provides coverage for personal property owned or used by an insured. This coverage applies whether the property is located at the residence premises or temporarily located anywhere else in the world.

Following a covered loss, the insured may request that Coverage C—Personal Property apply to property belonging to guests or residence employees while the property is located on the residence premises. This coverage does not apply to property owned by roomers or boarders. The insured may also request coverage for personal property owned by other individuals while it is located on the residence premises.

The Coverage C—Personal Property limit of insurance is generally equal to 50% of the Coverage A—Dwelling limit. However, certain categories and locations of personal property are subject to lower limits. Personal property usually located at a secondary residence that does not qualify as the residence premises is limited to 10% of the Coverage C limit or $1,000, whichever is greater. For example, this limitation may apply to an insured's property kept at a summer home or a college student's belongings while away at school. The same limitation applies to personal property stored in a self-storage facility.

Because the HO–4 Tenants Form does not include dwelling coverage and the HO–6 Unit-Owners Form provides only limited dwelling coverage, the Coverage C limit is not calculated as a percentage of Coverage A. Instead, the insured selects an appropriate Coverage C limit based on the value of their personal property.

Coverage C Special Limits

Certain categories of personal property are subject to special limits of liability because they may have a greater risk of loss or present unique valuation concerns. These limits establish the maximum amount the insurer will pay for a covered loss involving the specified property. They are included within—and do not increase—the overall Coverage C limit of insurance. Although the following limits are commonly used, the amounts may vary among insurers and policy forms.

Personal Property Category	Special Limits of Liability
Money, bank notes, bullion, coins, medals, etc.	$200
Securities, deeds, evidences of debt, notes other than bank notes, personal records, manuscripts, passports, tickets, and stamps.	$1,500
Watercraft of all types, including their trailers, furnishings, equipment, engines, and outboard motors. Losses to watercraft caused by collision or sinking are excluded.	$1,500
Trailers or semitrailers not used with any watercraft.	$1,500
Theft loss to jewelry, watches, furs, and precious or semiprecious stones. On the HO–5 only, loss by misplacing or losing is also covered.	$1,500
Theft loss to firearms and related equipment, such as holsters and ammunition. On the HO–5 only, loss by misplacing or losing is also covered.	$2,500
Theft loss to silverware, goldware, pewterware, platinum ware, including tea sets, trays, trophies, and flatware made of any of those materials. On the HO–5 only, loss by misplacing or losing is also covered.	$2,500
Portable electronic equipment that reproduces, receives, or transmits audio, visual, or data signals, and that can be operated by more than one power source, including a motor vehicle's electrical system. Examples would include a phone, tablet, and computer, as long as they are not permanently installed in a vehicle. This limit applies only if the electronics are located in or on a motor vehicle; otherwise, coverage is provided under Coverage C's regular limit.	$1,500
Accessories for electronics that are located in or on a motor vehicle. This includes antennas, tapes, wires, records, disks, and other media used with electronics.	$250
Property on the residence premises used primarily for business purposes, such as a computer used by the insured in a home-based business. The limit does not apply to a personal computer used by the insured occasionally when bringing work home from the office that is otherwise used primarily for personal and household purposes.	$2,500
Property away from the residence premises used primarily for business purposes. This limit does not apply to antennas, tapes, wires, etc. that are used with electronic equipment and located in or on a motor vehicle.	$1,500

An Insurance Story

Sofia's stolen watch: Sofia's watch is stolen from her car. Because a Personal Auto policy generally does not cover personal belongings inside a vehicle, the claim would be handled under Coverage C of the Nelsons' HO–3 policy. The policy would provide coverage up to the $1,500 special limit for theft of jewelry and watches. However, if Sofia had simply lost or misplaced the watch, the HO–3 would not provide coverage. Mysterious disappearance may be covered under the broader open-perils protection provided by the HO–5, unless otherwise excluded.

Liam's stolen kayak: Liam receives a kayak for his birthday, and the Nelsons take it to a lake, where it is stolen. Although watercraft is subject to a special Coverage C limit, the loss is not covered because the Theft peril excludes certain off-premises theft losses involving watercraft. Coverage could apply if the kayak were stolen from a structure located on the residence premises. Coverage might also apply if the kayak were damaged at the lake by another covered peril, subject to the applicable special limit and other policy provisions.

Coverage C Property Not Covered

Property Not Covered Under Coverage C

Certain types of personal property are excluded from Coverage C—Personal Property, often because they may be insured under another policy, another section of the Homeowners policy, or a specialized form of coverage. Property not covered includes:

• Property specifically described and insured elsewhere, whether under a separate policy or another coverage within the Homeowners policy
• Animals, birds, and fish
• Motor vehicles, including their equipment, accessories, and parts Exceptions: Coverage may apply to:
  • Motor vehicles that are not required to be registered for use on public roads and are used solely to service an insured residence, such as a riding lawn mower
  • Vehicles designed to assist people with disabilities, such as motorized wheelchairs
• Aircraft and their parts Exception: Model or hobby aircraft may be covered if they are not designed or used to carry people or cargo.
• Hovercraft and their parts
• Property belonging to roomers, boarders, or other tenants who are not related to an insured
• Property located in an apartment that an insured regularly rents or holds for rental to others, except property covered under the Landlord's Furnishings Additional Coverage
• Property that an insured rents or holds for rental to others while it is located away from the residence premises
• Business information or data stored on paper records, computers, or other electronic devices
• Credit cards and electronic fund transfer cards, except to the extent that coverage is provided under an applicable Additional Coverage
• Water or steam, including expenses such as an increased water bill resulting from a broken toilet, pipe, or similar incident

Coverage D – Loss of Use

A Homeowners policy defines property damage as physical injury to tangible property, including the loss of its use. Coverage D—Loss of Use protects the insured against certain indirect, or consequential, financial losses that result when a covered loss affects the use of the residence premises.

Coverage D includes three types of protection:

• Additional Living Expense
• Fair Rental Value
• Civil Authority Prohibits Use

Coverage D does not cover financial losses or expenses resulting from the cancellation of a lease.

Additional Living Expense (ALE)

If a covered Section I property loss makes the residence premises unfit to live in, Additional Living Expense (ALE) coverage pays the necessary increase in living costs incurred by the named insured so the household can maintain its normal standard of living.

Covered expenses may include:

• Temporary lodging, such as a hotel
• The additional cost of meals when the household must eat away from home
• Incidental expenses, such as laundry costs

ALE covers only the increase above the household's normal living expenses.

Additional living expenses are paid only for the shortest reasonable period needed to:

• Repair or replace the damaged property and restore the residence premises to livable condition; or
• Permanently relocate the household when the insured cannot return to the residence premises

Coverage does not continue beyond the time reasonably necessary to complete the repairs, replace the damaged property, or establish a new permanent residence.

Fair Rental Value

If a covered Section I property loss makes a rented portion of the residence premises unfit to live in, Coverage D—Loss of Use pays the insured for the loss of rental income. Payment is based on the fair rental value of the rented portion, reduced by any expenses that continue while the property is uninhabitable. Coverage applies only for the shortest reasonable period required to repair or replace the damaged rented portion of the residence premises.

Civil Authority Prohibits Use

If a civil authority prevents the named insured from using the residence premises because a neighboring property was directly damaged by a covered peril, Coverage D—Loss of Use may provide:

• Additional living expenses
• Fair rental value, when applicable

Coverage is limited to a maximum period of two weeks.

Example

A wildfire occurs near the insured's home. If the wildfire directly damages the residence premises and makes it unfit to live in, Coverage D may provide additional living expenses and fair rental value, as applicable. If the insured's home is not directly damaged, but a neighboring property is damaged by the wildfire and a civil authority orders the insured to evacuate, the Civil Authority Prohibits Use coverage may apply for up to two weeks.

Coverage D Limits of Coverage

The Coverage D—Loss of Use limit represents the total amount available for all payments involving:

• Additional living expenses
• Fair rental value
• Civil authority prohibiting use

These coverages share one combined limit rather than having separate limits. The applicable amount may vary based on the state, insurer, policy form, and expenses actually incurred. Common Coverage D limits include:

• HO–2, HO–3, and HO–5: 30% of the Coverage A limit
• HO–4: 30% of the Coverage C limit
• HO–6: 50% of the Coverage C limit
• HO–8: 10% of the Coverage A limit

Because limits may differ among policies, the insured should review the policy Declarations and applicable forms to determine the exact Coverage D limit.

Coverage D payments may continue after the policy expires, provided the covered loss occurred during the policy period. Therefore, the expiration of the policy does not automatically end eligible payments for additional living expenses, fair rental value, or civil authority prohibiting use.

Coverage	HO-2 Broad Form: Loss Settlement	HO-2 Broad Form: Limit of Coverage	HO-3 Special Form: Loss Settlement	HO-3 Special Form: Limit of Coverage	HO-5 Comprehensive Form: Loss Settlement	HO-5 Comprehensive Form: Limit of Coverage
Coverage A	RC	Limit of Liability	RC	Limit of Liability	RC	Limit of Liability
Coverage B	RC	10% Coverage A	RC	10% Coverage A	RC	10% Coverage A
Coverage C	ACV	50% Coverage A	ACV	50% Coverage A	ACV	50% Coverage A
Coverage D		30% Coverage A		30% Coverage A		30% Coverage A

Coverage	HO-4 Tenants Form: Loss Settlement	HO-4 Tenants Form: Limit of Coverage	HO-6 Condominium Owners Form: Loss Settlement	HO-6 Condominium Owners Form: Limit of Coverage	HO-8 Modified Form: Loss Settlement	HO-8 Modified Form: Limit of Coverage
Coverage A			RC	Limit of Liability	FRC	Limit of Liability
Coverage B					FRC	10% Coverage A
Coverage C	ACV	Limit of Liability	ACV	Limit of Liability	ACV	50% Coverage A
Coverage D		30% Coverage C		50% Coverage C		10% Coverage A