Risk Management/Insurance Planning

Question 1

Permitted 1035 Exchanges

Answer 1

Triangle visual from p. 186:

1. Life Insurance
2. Endowment
3. Annuity
4. Qualified LTCi

You can exchange across or down the hill but never up hill!

Question 2

Named Perils (HO Ins)

Answer 2

Coverage specifies perils or “causes of loss” that are covered. Everything else is not covered.

Question 3

Open Perils (HO Ins)

Answer 3

Coverage specifies excluded perils or “causes of loss” that will not be paid. Everything else is covered.

Question 4

Homeowner’s Policy Parts

Answer 4

Property:
A - is for Address (main dwelling)
B - is for Backyard (other structures)
C - is for your Crap (personal property)
D - is for Damaged/Destroyed Digs (loss of use)

Liability:
E - is for Exposure to legal action (personal liability)
F - is for Funds for others’ Fractured Femurs (medical payments)

Question 5

Homeowner’s Policy Form HO-02

Answer 5

Description:
- Broad Form
- Basic Homeowners Coverage

Dwelling and structures: Named peril; Contents coverage up to 50% of dwelling coverage

Question 6

Homeowner’s Policy Form HO-03

Answer 6

Special Form
- Better Homeowners Coverage

Losses are covered unless specifically excluded. Dwelling and structures: Open peril; Contents coverage up to 50% of dwelling coverage

Question 7

Homeowner’s Policy Form HO-04

Answer 7

Contents Broad Form
- For Tenants/Renters (only covers CONTENTS)

Covers contents and personal liability of renters. No coverage on dwelling and other structures.

Question 8

Homeowner’s Policy Form HO-05

Answer 8

Comprehensive Form
- BEST Homeowner’s coverage

Losses are covered unless specifically excluded. Open perils coverage on dwelling, structures, and contents.

Question 9

Homeowner’s Policy Form HO-06

Answer 9

Unit Owner’s Form
- For Condo/Co-Op Owners (“studs in”)

Property interest, contents, and personal liability of people owning a unit in a condominium or co-op

Question 10

Homeowner’s Policy Form HO-08

Answer 10

Modified Coverage
- For older or historic homes only (less coverage)

Homes having a replacement cost greater than FMV. Typically, historic homes

Question 11

Homeowners Coinsurance Formula

Answer 11

([Did Have / Should Have] x Loss Amount) - Deductible

Question 12

Coinsurance Clause

Answer 12

Requirement that the dwelling is insured for AT LEAST 80% of the Replacement Cost Value (RCV) for a partial loss to be paid in full.

Question 13

If a dwelling is insured for 80% or more of the replacement cost…

Answer 13

The policy pays the LESSER of:
- The actual cost to repair damage or replace the building
- The stated limit of coverage under the policy

Question 14

If a dwelling is insured for less than 80% of the replacement cost…

Answer 14

The homeowners policy will pay the GREATER of:
- The “actual cash value” of the damage (replacement cost minus depreciation)
- Proportion of the loss that is equal to the proportion of insurance maintained as compared to 80% of the replacement cost