Personal Property Insurance
Structure of a Homeowners Policy
Most personal property questions center on the HO forms and their coverage parts: Coverage A (dwelling), B (other structures), C (personal property), D (loss of use), and Coverages E and F (liability and medical payments). Know that Coverage C is typically written at a percentage of Coverage A (commonly 50%), and that special limits apply to categories like money, jewelry, silverware, and firearms.
Concepts a candidate must understand:
- Named perils vs. open perils (all risk) - HO-2 and HO-3 differ in how perils are treated for the structure and contents. Open-peril coverage still has exclusions; "all risk" never means "everything."
- Special limits and sub-limits - theft of jewelry may be capped well below the Coverage C limit unless scheduled. Questions often test whether a loss exceeds the sub-limit.
- Replacement cost vs. ACV - many HO forms provide replacement cost on contents only above a threshold, or require the insured to insure to a minimum percentage of replacement cost.
- Loss of use - pays additional living expenses and fair rental value when the home is uninhabitable; it is not the same as lost income.
- Flood and earthquake exclusions - standard homeowners forms exclude these; separate policies or endorsements are needed.
Traps to watch: Assuming a scheduled endorsement and a blanket sub-limit behave the same; forgetting that a deductible applies per occurrence, not per item; and confusing Coverage B (detached structures) with Coverage C (contents stored in them).
Rule of thumb: For any contents loss, first check the peril is covered, then the special sub-limit for that category, then the valuation method, then the deductible.
Worked example: A burglar steals $9,000 of jewelry. The HO-3 has a $1,000 theft sub-limit for jewelry and a $500 deductible. Recovery is capped at $1,000; the deductible typically does not reduce a sub-limit below the cap in most forms, but candidates should read the form - the key point is the sub-limit governs, not the $9,000 loss.