Property and Casualty Insurance · Property Insurance · 8 min read
Home Buildings and Personal Belongings
- Differentiate the property coverages provided under Coverage A, Coverage B, and Coverage C in standard ISO Homeowners forms.
- Identify the major exclusions, special sublimits, and limited exceptions that apply to personal property under Coverage C.
- Explain how building and personal property losses are settled, including the eighty percent coinsurance rule, functional replacement cost, and available endorsements.
Coverage A and Coverage B: Dwelling and Other Structures
Section I of standard Insurance Services Office (ISO) Homeowners policies provides property coverages for your home and belongings. Insurers may use their own proprietary forms and endorsements, but standard ISO forms serve as the national reference across the country. Coverage A protects the dwelling located on the described residence premises shown in the declarations. This coverage includes structures physically attached to the dwelling, such as an attached garage, a breezeway, or a porch. Coverage A also covers building materials and supplies on or next to the residence premises that are used to construct, alter, or repair the dwelling or other structures on the residence premises. Coverage A specifically excludes the land on which the dwelling is located.
Coverage B protects other structures on the residence premises that are set apart from the dwelling by a clear space. This includes detached structures connected to the dwelling by only a fence, a utility line, or a similar connection. Typical examples of Coverage B structures include detached garages, storage sheds, gazebos, and fences. Like Coverage A, Coverage B specifically excludes the land on which these other structures are built. In standard ISO Homeowners forms, the Coverage B limit of liability is typically set at ten percent of the Coverage A limit.
Specific exclusions apply to other structures under Coverage B. The policy excludes structures rented or held for rental to anyone who is not a tenant of the dwelling, unless the space is used solely as a private garage. Structures from which any business is conducted are also excluded. Furthermore, Coverage B excludes structures used to store business property, unless that property is owned solely by an insured or a tenant of the dwelling and contains no gaseous or liquid fuel, other than fuel safely stored inside a permanently installed fuel tank of a vehicle or craft parked there.
Coverage provisions also vary across specific Homeowners policy types. In standard owner-occupied forms such as HO-2, HO-3, and HO-5, both Coverage A and Coverage B are present. In contrast, the HO-4 contents broad form designed for renters does not provide Coverage A dwelling coverage. The HO-6 unit-owners form provides a specialized Coverage A designed for condominium units, which applies to specified parts of the unit such as covered alterations, improvements, and interior fixtures according to policy terms.
Common mistakes
- Assuming the special sublimits for jewelry, firearms, and silverware apply to all perils, when standard ISO forms restrict those limits specifically to losses caused by theft.
- Believing that an attached garage falls under Coverage B Other Structures, when any structure physically attached to the residence is covered under Coverage A.
- Do not assume a personal property replacement cost endorsement applies to every item; check its exclusions, including those for articles of rarity or antiquity that cannot be replaced.
- Assuming that the special sublimits for personal property increase the total Coverage C limit of liability, rather than functioning as internal caps within the existing Coverage C limit.
Key points
- Section I of standard ISO Homeowners policies establishes property coverages, with Coverage A insuring the dwelling and attached structures, while excluding the land itself.
- Coverage B covers detached other structures separated from the dwelling by clear space, typically carrying a limit equal to ten percent of Coverage A.
- Coverage C provides worldwide coverage for personal property owned or used by an insured, typically with a limit equal to fifty percent of Coverage A on standard owner-occupied policies.
- Motor vehicles are generally excluded under Coverage C, with exceptions for motorized conveyances that are not required to be registered for use on public roads or property and are used solely to service an insured's residence or designed to assist a person with a disability.
- Special sublimits establish internal maximum payout caps for certain personal property items, such as money, business property, watercraft, and theft of jewelry, firearms, and silverware.
- Covered buildings qualify for replacement cost settlement under HO-2, HO-3, and HO-5 forms if the eighty percent insurance-to-value requirement is met, while HO-8 uses functional replacement cost.
- Coverage C personal property is generally settled at actual cash value under standard ISO Homeowners forms, including HO-5, unless a replacement cost endorsement applies; the policy and state law govern how actual cash value is calculated.
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