CPCU 551 EXAM QUESTIONS COMPILATION 2025
QUESTIONS AND ANSWERS
1. A building had been vacant for 60 days, and the insurer didn't know about it, when
it sustained 100K, 5K, and 1K losses due to windstorm, theft, and sprinkler
leakage, respectively. What amount is covered under CPP? - Correct answer-85K, 0,
and 0. If a building is vacant for 60 or more consecutive days before the loss, they
won't pay for any loss caused by vandalism, sprinkler leakage, building glass
breakage, water damage, theft, or attempted theft... otherwise you'll only get 85%
2. Various building design features can help prevent the spread of a hostile fire. For
example, a solid piece of material that is inserted between wall studs to delay the
flow of heat or fire through this open space is a - Correct answer-Fire stop.
3. Pete insures his motorcycle rental property for $100,000 on an actual cash value
(ACV) basis. The ACV of the property is $150,000 and his Commercial Insurance
Policy (CIP) has a 90 percent coinsurance clause. A fire caused $50,000 of damage
to the building structure. How much will Pete recoup under his insurance policy? -
Correct answer-
$37,037
4. A manufacturing company has business personal property valued at
$1,500,000. The risk manager is considering insuring the business personal
property with 80 percent coinsurance at a $0.40 rate per $100
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, of coverage. The 100 percent rate is $0.35 per $100 of coverage. if the business
personal property is insured with an 80 percent coinsurance, how much premium
will be saved? - Correct answer-The savings will be
$5,250 − $4,800 = $450
5. When (if) can an insurer examine their insured's books and records? - Correct
answer-Anytime during the policy period and up to 3 years after. The final
premium is established after the policy period expires. Premiums are estimated at
its formation.
6. Can an insured transfer duties under common policy conditions? - Correct
answer-Only with the insurer's written consent.
7. Can an insurer cancel a policy verbally? How
many days notice?
To whom is it communicated? - Correct answer-No, it must be in writing. 10 days
notice for nonpayment. 30 days for all other reasons.
To the First Named Insured.
8. Who develops a standard form?
Who does a non-standard form typically favor? - Correct answer-The SO, ASIS, or
other insurance advisory organization.
Non-standard forms typically favor insureds.
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,9. Bridges, piers, wharves, and docks are initially excluded from the Building
and Personal Property Coverage Form primarily because - Correct answer-
They require careful underwriting
10. Agreed Value optional coverage is often elected by risk averse firms in order to
- Correct answer-Alleviate the risk of not complying with the Coinsurance
condition.
11. An insurance company recently leased a new office location in Dallas, Texas.
On September 26, 2010, prior to occupying the building, the company spent
$250,000 on building improvements. The useful life of these improvements was
10 years. On September 26, 2011, the improvements were destroyed and replaced
by the building owner at a cost of $300,000. Under the company's Building and
Personal Property Coverage Form policy the amount reimbursable for this loss is -
Correct answer-Under the company's Building and Personal Property Coverage
Form policy the amount reimbursable for this loss is $0. The building owner made
the repairs, not the tenant.
12. The maximum amount of coverage provided at each building under the Newly
Acquired or Constructed Property extension in the Building and Personal Property
Coverage Form is - Correct answer-(for up to 30 days) $250K of your building
coverage and $100 of your contents coverage at any acquired location, but we'll
charge you for the coverage.
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, 13. How do you calculate the agreed value payment if the limit is less than the
agreed value? - Correct answer-= (limit/agreed value x loss)- deductible.
14. An insured chooses the "Agreed Value" option for its Building and Personal
Property Coverage Form (BPP). The agreed value for the property is $100,000
and the limit of insurance is $120,000 with a
$5,000 deductible. The building is totally destroyed by a covered cause of loss. At
the time of the loss, the value of the building was $130,000. The insurer would
pay - Correct answer-$120k.
15. What is the agreed value payment if the limit of insurance is greater than or
equal to the agreed value stated in the declarations? (BPP) - Correct answer-
Losses will be paid in full up to the limit of insurance (each loss subject to
deductible).
16. How is the deductible applied in BPP? - Correct answer-Once per
occurrence.
17. When analyzing what deductible amount to choose for its Building and
Personal Property Coverage Form (BPP), an insured should consider - Correct
answer-If the items on the BPP will be listed separately or on a blanket basis.
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QUESTIONS AND ANSWERS
1. A building had been vacant for 60 days, and the insurer didn't know about it, when
it sustained 100K, 5K, and 1K losses due to windstorm, theft, and sprinkler
leakage, respectively. What amount is covered under CPP? - Correct answer-85K, 0,
and 0. If a building is vacant for 60 or more consecutive days before the loss, they
won't pay for any loss caused by vandalism, sprinkler leakage, building glass
breakage, water damage, theft, or attempted theft... otherwise you'll only get 85%
2. Various building design features can help prevent the spread of a hostile fire. For
example, a solid piece of material that is inserted between wall studs to delay the
flow of heat or fire through this open space is a - Correct answer-Fire stop.
3. Pete insures his motorcycle rental property for $100,000 on an actual cash value
(ACV) basis. The ACV of the property is $150,000 and his Commercial Insurance
Policy (CIP) has a 90 percent coinsurance clause. A fire caused $50,000 of damage
to the building structure. How much will Pete recoup under his insurance policy? -
Correct answer-
$37,037
4. A manufacturing company has business personal property valued at
$1,500,000. The risk manager is considering insuring the business personal
property with 80 percent coinsurance at a $0.40 rate per $100
1 | Page
, of coverage. The 100 percent rate is $0.35 per $100 of coverage. if the business
personal property is insured with an 80 percent coinsurance, how much premium
will be saved? - Correct answer-The savings will be
$5,250 − $4,800 = $450
5. When (if) can an insurer examine their insured's books and records? - Correct
answer-Anytime during the policy period and up to 3 years after. The final
premium is established after the policy period expires. Premiums are estimated at
its formation.
6. Can an insured transfer duties under common policy conditions? - Correct
answer-Only with the insurer's written consent.
7. Can an insurer cancel a policy verbally? How
many days notice?
To whom is it communicated? - Correct answer-No, it must be in writing. 10 days
notice for nonpayment. 30 days for all other reasons.
To the First Named Insured.
8. Who develops a standard form?
Who does a non-standard form typically favor? - Correct answer-The SO, ASIS, or
other insurance advisory organization.
Non-standard forms typically favor insureds.
2 | Page
,9. Bridges, piers, wharves, and docks are initially excluded from the Building
and Personal Property Coverage Form primarily because - Correct answer-
They require careful underwriting
10. Agreed Value optional coverage is often elected by risk averse firms in order to
- Correct answer-Alleviate the risk of not complying with the Coinsurance
condition.
11. An insurance company recently leased a new office location in Dallas, Texas.
On September 26, 2010, prior to occupying the building, the company spent
$250,000 on building improvements. The useful life of these improvements was
10 years. On September 26, 2011, the improvements were destroyed and replaced
by the building owner at a cost of $300,000. Under the company's Building and
Personal Property Coverage Form policy the amount reimbursable for this loss is -
Correct answer-Under the company's Building and Personal Property Coverage
Form policy the amount reimbursable for this loss is $0. The building owner made
the repairs, not the tenant.
12. The maximum amount of coverage provided at each building under the Newly
Acquired or Constructed Property extension in the Building and Personal Property
Coverage Form is - Correct answer-(for up to 30 days) $250K of your building
coverage and $100 of your contents coverage at any acquired location, but we'll
charge you for the coverage.
3 | Page
, 13. How do you calculate the agreed value payment if the limit is less than the
agreed value? - Correct answer-= (limit/agreed value x loss)- deductible.
14. An insured chooses the "Agreed Value" option for its Building and Personal
Property Coverage Form (BPP). The agreed value for the property is $100,000
and the limit of insurance is $120,000 with a
$5,000 deductible. The building is totally destroyed by a covered cause of loss. At
the time of the loss, the value of the building was $130,000. The insurer would
pay - Correct answer-$120k.
15. What is the agreed value payment if the limit of insurance is greater than or
equal to the agreed value stated in the declarations? (BPP) - Correct answer-
Losses will be paid in full up to the limit of insurance (each loss subject to
deductible).
16. How is the deductible applied in BPP? - Correct answer-Once per
occurrence.
17. When analyzing what deductible amount to choose for its Building and
Personal Property Coverage Form (BPP), an insured should consider - Correct
answer-If the items on the BPP will be listed separately or on a blanket basis.
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