©2015, College for Financial Planning, all rights reserved.

Session 14Homeowners Insurance

CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAMFinancial Planning Process & Insurance

Session Details

Module 9

Chapter(s)

2, 3 & 4

LOs 9-3

9-6

9-7

9-8

Compare the characteristics of various forms in the homeowners insurance series.

Explain the characteristics of umbrella liability insurance.

Explain the purpose of title insurance.

Explain the characteristics and uses of inland marine coverage.

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The Planner’s Role

• Learn your state laws

• Identify potential uncovered or under-covered risks

• Make appropriate referrals

• Monitor

Your clients own a home with a barn in addition to a couple of sheds. They have horses, three dogs, a swimming pool, and a gun range on their 40 acre property. They own a couple of snowmobiles and an old fishing boat, which aren’t insured because these aren’t worth much. Your clients are active outdoors people and volunteer in the community for lots of events; they also sit on a board for their homeowner’s association. They own a tractor that they allow neighbors to borrow to mow their grass.

What risks do they face that might not be covered by traditional policies?

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Homeowners Insurance Forms: Perils Insured Against

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Homeowners Coverages: Sections I & II

Look for limits on personal property and exclusions, such as snowmobiles.

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Coinsurance for Property Coverage (coinsurance penalty)

insuranceof Amountrequired

eCoinsurancpercentage

cost tReplacemen

amount Maximumrecovery of

DeductibleLoss*required Insurance

carried Insurance

Coinsurance requirement* usually 80% of replacement

cost.This is primarily a concern in the event of a partial loss.

*Insurance required is generally 80% of current replacement cost, but can vary on a company-specific basis from 70% to 90%.

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Replacement Cost or Actual Cash Value

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Personal Liability Coverage

General (attached as part of HO)

• Personal liabilityo non-businesso non-automobile

• Medical payments to others

Additional• Claim expense

• First aid expense

• Damage to property of others

• Loss assessment coverage

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Comprehensive Personal Liability (CPL) & Umbrella Liability Coverages

States and companies vary in the coverage, so it’s critical to read! For example, uninsured motorists coverage, watercraft with small motors, snowmobiles, etc. may or may NOT be covered based on the state even with the same company!

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Title Insurance

• Protects against defective title to land and improvements

• Defects discovered by title insurance company are listed and excluded—suits from undiscovered defects will be defendedo Policy term indefinite—

terminates when property is sold by insured

o Attorney’s abstract (opinion) not a good substitute

• The Torrens System: an alternative to title insurance, only used in a few states

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Inland Marine Insurance (Personal Property)

Personal Property Floater• Provides open perils-level coverage

Broad coverage for:• Articles that may be moved or are in transit

o Examples: jewelry, furs, silverware, arto Purpose: to cover articles excluded or limited on

homeowners policies• Not used for installed property

(e.g., wall-to-wall carpet)

• May be purchased as a separate policy or by endorsement on homeowners policy as Scheduled Endorsement o Also known as: Personal Articles Floater

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Question 1

Which one of the following is not one of the eight general exclusions that apply to all standard ISO homeowners policies?a. vandalism b. earth movementc. ward. neglect

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Question 2

Which HO policy form, or combination of forms, provides the highest level of building and personal property coverage?I. HO 00 02II. HO 00 03III. HO 00 15IV. HO 00 05

a. I onlyb. III onlyc. II and IV onlyd. II, III, and IV only

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Question 3

Teresa’s residence was insured four years ago for $430,000 with a replacement value policy. Today the market value is $450,000 and replacement costs are $470,000. If her home burned entirely down, what would she receive?a. $430,000b. $450,000c. $470,000d. $376,000

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Question 4

Comprehensive personal liability coverage (CPL) can be acquired in all of the following ways except asa. an individual CPL policy.b. part of a homeowners policy.c. an endorsement to a monoline dwelling

form.d. an endorsement to a personal auto

policy (PAP).

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Question 5

Which one of the following is not generally excluded from coverage in Comprehensive Personal Liability (CPL) policies?a. the use of automobilesb. renting a room in a house to a single

tenantc. liabilities incurred by physiciansd. the use of boats (with some

exceptions)

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Question 6

Personal property floater (inland marine) policies are available for which of the following items?I. silverwareII. musical instrumentsIII. golfing equipmentIV. installed carpeting

a. I and II onlyb. II and III onlyc. I, II, and III onlyd. I, II, III, and IV

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©2015, College for Financial Planning, all rights reserved.

Session 14End of Slides

CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAMFinancial Planning Process & Insurance