Insurance Planning

CFP — Insurance Planning Exam: CFP Board Certification Exam Last Updated: June 2026 --- ## Property and Casualty Insurance ### Homeowners Insurance (HO Policies) | Policy Form | Coverage | |---|---| | HO-1 | Basic named perils (rarely used) | | HO-2 | Broad named perils | | HO-3 | Open perils on dwelling; named perils on contents (most common) | | HO-4 | Renters insurance (contents only; open perils) | | HO-5 | Open perils on both dwelling and contents (broadest) | | HO-6 | Condo owners (interior unit; personal property) | | HO-8 | Older homes (replacement cost exceeds market value) | Covered perils (HO-3 named perils for contents include): Fire, lightning, windstorm, hail, explosion, vandalism, theft, and others. NOT covered by standard HO policy: Flood (requires separate NFIP policy), earthquake (separate rider or policy), sewer backup (endorsement), business activities. ### Coinsurance Requirement Homeowners must insure their home for at least 80% of replacement cost to collect full partial losses. Formula if underinsured: `` Reimbursement = (Insurance carried / Insurance required) × Loss `` Example: Home has $400K replacement cost; insured carries $240K (60%). 80% requirement = $320K. If $100K loss: Reimbursement = ($240K / $320K) × $100K = $75K. > Exam Tip: Carry at least 80% of replacement cost or risk partial payment on claims. Fully insure to replacement cost (not market value) for full coverage. ### Auto Insurance Personal Auto Policy (PAP) — Six coverages: | Coverage | Description | |---|---| | A — Liability | Bodily injury and property damage caused to others | | B — Medical Payments | Medical expenses regardless of fault | | C — Uninsured/Underinsured Motorist | Covers you…