CPCU 551 COMPLETE QUESTIONS AND VERIFIED
ANSWERS TEST (100% CORRECT) GRADE A+
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?
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%
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
Fire stop.
Under equipment breakdown coverage, which one of the following meets the
definition of a "breakdown?"
A. Failure of vacuum equipment
B. Failure of a safety device
C. Damage to a vacuum tube
D. Malfunction because of improper calibration
Failure of vacuum equipment
What is the main advantage for the insured under a BOP?
it encompasses most property and liability needs of the insured.
Is property in furnished rooms covered by an unendorsed or endorsed
businessowners Coverage Form?
Unendorsed
The Completed Operations Aggregate Limit of the BOP may be increased by
endorsement to ______ times the liability and medical expense limit.
three
Which one of the following exposures is not included in a standard BOP, but can
be purchased as an optional coverage?
A. Forgery
B. Electronic data
C. Employee dishonesty
D. Interruption of computer operations
Employee dishonesty
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?
$37,037
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 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?
The savings will be $5,250 − $4,800 = $450
When (if) can an insurer examine their insured's books and records?
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.
Can an insured transfer duties under common policy conditions?
Only with the insurer's written consent.
Can an insurer cancel a policy verbally?
How many days notice?
To whom is it communicated?
No, it must be in writing.
10 days notice for nonpayment. 30 days for all other reasons.
To the First Named Insured.
Who develops a standard form?
Who does a non-standard form typically favor?
The ISO, ASIS, or other insurance advisory organization.
Non-standard forms typically favor insureds.
Bridges, piers, wharves, and docks are initially excluded from the Building and
Personal Property Coverage Form primarily because
They require careful underwriting
Agreed Value optional coverage is often elected by risk averse firms in order to
Alleviate the risk of not complying with the Coinsurance condition.
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
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.
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
(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.
How do you calculate the agreed value payment if the limit is less than the agreed
value?
= (limit/agreed value x loss)-deductible.
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
$120k.
, 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)
Losses will be paid in full up to the limit of insurance (each loss subject to deductible).
How is the deductible applied in BPP?
Once per occurrence.
When analyzing what deductible amount to choose for its Building and Personal
Property Coverage Form (BPP), an insured should consider
If the items on the BPP will be listed separately or on a blanket basis.
ACV. 100K limit. 1K deductible. 110K loss. What is payment?
100K, since 110K-1K deductible exceeds the limit of insurance. NOT 99K!
If blanket insurance w/ a $100K deductible, what would the payment be if a fire
loss caused $800 to building and $400 to business personal property (if these
items were scheduled separately).
Zero.
If the improvements and betterments sustained a loss sometime during a
business's lease and if the building owner repairs the rental space, but the
company (lessee) does not replace the improvements and betterments once the
space is repaired, what valuation method is used under the lessee's BPP policy?
Pro-rata based on the length of the lease, the time expired since the improvements and
betterments were installed, and the original cost
A building is insured for $200,000 under an agreed value policy. The policy has a
$10,000 deductible and the agreed value of the building is $250,000. After
suffering a $43,000 loss, the insurer will pay (rounded to the nearest $100)
24,400
The risk manager for a painting company has purchased an outdoor property
extension policy to cover their trees, shrubs and signs not attached to the
building. Which of the following would not be considered a covered cause of
loss? Civil Commotion, lightning, explosion, windstorm?
Windstorm.
A landlord leases a portion of a strip mall to a dry cleaning business. When the
tenant moved into the building, the tenant installed dry cleaning equipment for
the business. It also installed new carpeting and tile throughout the building.
Under the landlord's BPP - are the improvements considered part of building
coverage or personal property of others?
Building Coverage. The owners' use interest in improvements and betterments are
covered as the 'owner's property'
What is the payment under BPP if the insured does not meet the coinsurance
requirement?
Did/shouldxloss-deductible
(should = value of covered property x coinsurance %)
A small business owner purchased an unendorsed Building and Personal
Property Coverage Form (BPP). The limit on the policy is $500,000 which meets
the coinsurance requirements. The deductible is $1,000. The total value of the
insured property is $525,000. The insured suffered a $510,000 covered loss to the
property. What will the insurer pay?
500K. The deductible comes off the loss not the limit of insurance.
ANSWERS TEST (100% CORRECT) GRADE A+
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?
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%
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
Fire stop.
Under equipment breakdown coverage, which one of the following meets the
definition of a "breakdown?"
A. Failure of vacuum equipment
B. Failure of a safety device
C. Damage to a vacuum tube
D. Malfunction because of improper calibration
Failure of vacuum equipment
What is the main advantage for the insured under a BOP?
it encompasses most property and liability needs of the insured.
Is property in furnished rooms covered by an unendorsed or endorsed
businessowners Coverage Form?
Unendorsed
The Completed Operations Aggregate Limit of the BOP may be increased by
endorsement to ______ times the liability and medical expense limit.
three
Which one of the following exposures is not included in a standard BOP, but can
be purchased as an optional coverage?
A. Forgery
B. Electronic data
C. Employee dishonesty
D. Interruption of computer operations
Employee dishonesty
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?
$37,037
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 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?
The savings will be $5,250 − $4,800 = $450
When (if) can an insurer examine their insured's books and records?
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.
Can an insured transfer duties under common policy conditions?
Only with the insurer's written consent.
Can an insurer cancel a policy verbally?
How many days notice?
To whom is it communicated?
No, it must be in writing.
10 days notice for nonpayment. 30 days for all other reasons.
To the First Named Insured.
Who develops a standard form?
Who does a non-standard form typically favor?
The ISO, ASIS, or other insurance advisory organization.
Non-standard forms typically favor insureds.
Bridges, piers, wharves, and docks are initially excluded from the Building and
Personal Property Coverage Form primarily because
They require careful underwriting
Agreed Value optional coverage is often elected by risk averse firms in order to
Alleviate the risk of not complying with the Coinsurance condition.
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
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.
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
(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.
How do you calculate the agreed value payment if the limit is less than the agreed
value?
= (limit/agreed value x loss)-deductible.
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
$120k.
, 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)
Losses will be paid in full up to the limit of insurance (each loss subject to deductible).
How is the deductible applied in BPP?
Once per occurrence.
When analyzing what deductible amount to choose for its Building and Personal
Property Coverage Form (BPP), an insured should consider
If the items on the BPP will be listed separately or on a blanket basis.
ACV. 100K limit. 1K deductible. 110K loss. What is payment?
100K, since 110K-1K deductible exceeds the limit of insurance. NOT 99K!
If blanket insurance w/ a $100K deductible, what would the payment be if a fire
loss caused $800 to building and $400 to business personal property (if these
items were scheduled separately).
Zero.
If the improvements and betterments sustained a loss sometime during a
business's lease and if the building owner repairs the rental space, but the
company (lessee) does not replace the improvements and betterments once the
space is repaired, what valuation method is used under the lessee's BPP policy?
Pro-rata based on the length of the lease, the time expired since the improvements and
betterments were installed, and the original cost
A building is insured for $200,000 under an agreed value policy. The policy has a
$10,000 deductible and the agreed value of the building is $250,000. After
suffering a $43,000 loss, the insurer will pay (rounded to the nearest $100)
24,400
The risk manager for a painting company has purchased an outdoor property
extension policy to cover their trees, shrubs and signs not attached to the
building. Which of the following would not be considered a covered cause of
loss? Civil Commotion, lightning, explosion, windstorm?
Windstorm.
A landlord leases a portion of a strip mall to a dry cleaning business. When the
tenant moved into the building, the tenant installed dry cleaning equipment for
the business. It also installed new carpeting and tile throughout the building.
Under the landlord's BPP - are the improvements considered part of building
coverage or personal property of others?
Building Coverage. The owners' use interest in improvements and betterments are
covered as the 'owner's property'
What is the payment under BPP if the insured does not meet the coinsurance
requirement?
Did/shouldxloss-deductible
(should = value of covered property x coinsurance %)
A small business owner purchased an unendorsed Building and Personal
Property Coverage Form (BPP). The limit on the policy is $500,000 which meets
the coinsurance requirements. The deductible is $1,000. The total value of the
insured property is $525,000. The insured suffered a $510,000 covered loss to the
property. What will the insurer pay?
500K. The deductible comes off the loss not the limit of insurance.
