CALIFORNIA COMMERCIAL INSURANCE RELIABLE EXAM
QUESTIONS WITH SOLUTIONS GRADED A+2025/2026
✔✔Coverage A of the Commercial Building and Personal Property coverage form
covers which of the following:
A riding lawn mower.
Personal Property
Buildings and sparate structures and a riding lawn mower are both correct answers.
Buildings and Separate Structures - ✔✔Buildings and sparate structures and a riding
lawn mower are both correct answers.
NOTES: Buildings and separate structures as well as a riding lawn mower is considered
part of Coverage A, as it is used to maintain/service the property
✔✔Which of the following is a coverage extension on the Commercial Building and
Personal property coverage form?
Indoor and Outdoor fixtures
Stock or Inventory
Improvements and Betterments
Debris Removal - ✔✔Debris Removal
NOTES: Debris removal is a coverage extension with no extra premium charge and
does not reduce the limit of insurance.
✔✔Coverage A of a Building and Personal Property form would exclude all but:
Vacuum and Floor waxer
Patios and Driveways
Indoor Furnishings
Piers, wharves, docks - ✔✔Vacuum and Floor waxer
NOTE: Equipment used to service the premises is covered under Coverage A on the
BPP.
✔✔What is the formula for calculating the coinsurance penalty? - ✔✔Amount carried,
divided by required amount, multiplied by loss, minus deductible
NOTE: Carried = $60,000 X Loss $10,000 - ded.= Loss Pmt. -------------------- $7,500
Required = $80,000
,✔✔Which of the residential policies are basic perils?
All the DP policies
DP-1 and HO-8
DP-1, HO-8 and HO-2
DP-2 and HO-2 - ✔✔DP-1 and HO-8
NOTE: The Basic forms used to insure residential property are DP-1 and HO-8.
✔✔The loss condition states the insurer must pay the claim within: - ✔✔30 Days
NOTE: Upon both parties being in agreement payment must be made within 30 days.
✔✔When a covered loss occurs and two policies are in force for the same property, with
the same terms and conditions, how will the loss be settled? - ✔✔Each company will
pay their share of the loss on a pro rata basis.
NOTE: Only when the policies have the SAME terms and conditions will they pay their
portion on a pro rata basis. If the terms and conditions of the two policies are
DIFFERENT, then one is primary and the other excess. Payment is determined by the
companies involved, considering inception dates, coverage, etc.
✔✔The modular concept refers to: - ✔✔Parts of a package policy.
NOTE: Modules are the coverage parts that make up a package policy, such as GL or
Auto.
✔✔All of the following are true about the cancellation of a commercial policy, EXCEPT:
The first named insured may cancel the policy at any time.
The insurer must be able to prove the delivery of a notice of cancellation.
All refunds will be mailed to the first named insured on the policy.
10 days notice must be given for non-payment of premium and 45 days notice for all
other reasons. - ✔✔The insurer must be able to prove the delivery of a notice of
cancellation.
NOTE: No proof of delivery is needed. Only proof of mailing.
✔✔How much would you receive if you carried $40K, the requirement was $30K, the
loss was $10K, and the deductible was $1K? - ✔✔$9,000
NOTE: First look at the amount required and see if the amount carried was enough. If it
meets the 80% coinsurance, then the full amount is paid for a covered loss, minus any
deductible.
,✔✔Coverage C of the Commercial Building and Personal Property coverage form does
NOT cover:
Property at a repair shop
Property at a dry cleaners
Property on consignment
Property being transported in a vehicle. - ✔✔Property being transported in a vehicle.
NOTE: Property in a vehicle must be within 100 feet of the building or the property must
be covered on a Motor Truck Cargo form.
✔✔Which of the following describes a person eligible for insurance through the FAIR
plan?
Any person who has insurable interest in real or tangible personal property.
Any person who has insurable interest in real or tangible personal property who, after
diligent effort, has been unable to obtain basic property insurance through normal
channels from an admitted insurer or licensed surplus lines broker.
Any person who cannot afford insurance through the insurer of their choice.
Any person who has insurable interest in personal property and currently has insurance
that cannot afford extended coverage from insurers in the standard market. - ✔✔Any
person who has insurable interest in real or tangible personal property who, after
diligent effort, has been unable to obtain basic property insurance through normal
channels from an admitted insurer or licensed surplus lines broker.
NOTE: The individual or agent must show efforts to place the risk through an admitted
or non-admitted carrier before going to the FAIR plan. It is designed only for high risk
properties.
✔✔Tenant Improvements and Betterment Losses are valued at: - ✔✔Actual Cash Value
NOTE: Tenant Improvements & Betterments is written on an ACV basis, but
Replacement cost is available.
✔✔An apartment building is insured for $300,000 with an 80% coinsurance clause. The
property is valued at $500,000. A covered loss occurs in the amount of $200,000. How
much will the insurance company pay? - ✔✔$150,000
NOTE: C Apply the coinsurance formula: 80% of the value of the home ($500,000) is
$400,000, which is what they should have carried. Divide the limit they carried
($300,000) by what they should have carried ($400,000). Multiply that figure by the loss
amount. When there is no known deductible, figure it as zero.
✔✔Which of the following is a disadvantage of having a coinsurance clause on a
commercial policy?
, Premiums are generally higher.
Small
None of the above.
Keeping up with property replacement values. - ✔✔Keeping up with property
replacement values.
NOTE: Keeping informed of building cost increases is sometimes a difficult thing for the
insured to do.
✔✔Inventory more than 100 feet off premise is: - ✔✔Excluded from the policy.
NOTE: Inventory off premise needs to be insured by a Commercial Inland Marine policy.
✔✔Which HO form does not provide coverage for real property? - ✔✔HO-4
NOTE: HO-4 tenant form does not cover the dwelling or other structures (real property).
✔✔Which of the following is NOT considered subrogation?
An insured assists an insurer in seeking recovery for payments made.
The insurer collects damages from the responsible party.
The rights to sue a third party are transferred to the insurer.
The insured collects damages from the responsible party. - ✔✔The insured collects
damages from the responsible party.
NOTE: Subrogation is the transferring of rights to recover damages from a third party to
the insurer.
✔✔All of the following are major differences between DPs and HOs, except:
Theft coverage
Occupancy requirements
None are exceptions
Worldwide coverage - ✔✔None of these are exceptions.
NOTE: The DP and HO policies are different in each one of these areas.
✔✔Two perils that can be excluded from the vacancy permit are:
Vandalism and Sprinkler
Theft and Attempted theft
Glass and Water
Theft and Water - ✔✔Vandalism and Sprinkler
QUESTIONS WITH SOLUTIONS GRADED A+2025/2026
✔✔Coverage A of the Commercial Building and Personal Property coverage form
covers which of the following:
A riding lawn mower.
Personal Property
Buildings and sparate structures and a riding lawn mower are both correct answers.
Buildings and Separate Structures - ✔✔Buildings and sparate structures and a riding
lawn mower are both correct answers.
NOTES: Buildings and separate structures as well as a riding lawn mower is considered
part of Coverage A, as it is used to maintain/service the property
✔✔Which of the following is a coverage extension on the Commercial Building and
Personal property coverage form?
Indoor and Outdoor fixtures
Stock or Inventory
Improvements and Betterments
Debris Removal - ✔✔Debris Removal
NOTES: Debris removal is a coverage extension with no extra premium charge and
does not reduce the limit of insurance.
✔✔Coverage A of a Building and Personal Property form would exclude all but:
Vacuum and Floor waxer
Patios and Driveways
Indoor Furnishings
Piers, wharves, docks - ✔✔Vacuum and Floor waxer
NOTE: Equipment used to service the premises is covered under Coverage A on the
BPP.
✔✔What is the formula for calculating the coinsurance penalty? - ✔✔Amount carried,
divided by required amount, multiplied by loss, minus deductible
NOTE: Carried = $60,000 X Loss $10,000 - ded.= Loss Pmt. -------------------- $7,500
Required = $80,000
,✔✔Which of the residential policies are basic perils?
All the DP policies
DP-1 and HO-8
DP-1, HO-8 and HO-2
DP-2 and HO-2 - ✔✔DP-1 and HO-8
NOTE: The Basic forms used to insure residential property are DP-1 and HO-8.
✔✔The loss condition states the insurer must pay the claim within: - ✔✔30 Days
NOTE: Upon both parties being in agreement payment must be made within 30 days.
✔✔When a covered loss occurs and two policies are in force for the same property, with
the same terms and conditions, how will the loss be settled? - ✔✔Each company will
pay their share of the loss on a pro rata basis.
NOTE: Only when the policies have the SAME terms and conditions will they pay their
portion on a pro rata basis. If the terms and conditions of the two policies are
DIFFERENT, then one is primary and the other excess. Payment is determined by the
companies involved, considering inception dates, coverage, etc.
✔✔The modular concept refers to: - ✔✔Parts of a package policy.
NOTE: Modules are the coverage parts that make up a package policy, such as GL or
Auto.
✔✔All of the following are true about the cancellation of a commercial policy, EXCEPT:
The first named insured may cancel the policy at any time.
The insurer must be able to prove the delivery of a notice of cancellation.
All refunds will be mailed to the first named insured on the policy.
10 days notice must be given for non-payment of premium and 45 days notice for all
other reasons. - ✔✔The insurer must be able to prove the delivery of a notice of
cancellation.
NOTE: No proof of delivery is needed. Only proof of mailing.
✔✔How much would you receive if you carried $40K, the requirement was $30K, the
loss was $10K, and the deductible was $1K? - ✔✔$9,000
NOTE: First look at the amount required and see if the amount carried was enough. If it
meets the 80% coinsurance, then the full amount is paid for a covered loss, minus any
deductible.
,✔✔Coverage C of the Commercial Building and Personal Property coverage form does
NOT cover:
Property at a repair shop
Property at a dry cleaners
Property on consignment
Property being transported in a vehicle. - ✔✔Property being transported in a vehicle.
NOTE: Property in a vehicle must be within 100 feet of the building or the property must
be covered on a Motor Truck Cargo form.
✔✔Which of the following describes a person eligible for insurance through the FAIR
plan?
Any person who has insurable interest in real or tangible personal property.
Any person who has insurable interest in real or tangible personal property who, after
diligent effort, has been unable to obtain basic property insurance through normal
channels from an admitted insurer or licensed surplus lines broker.
Any person who cannot afford insurance through the insurer of their choice.
Any person who has insurable interest in personal property and currently has insurance
that cannot afford extended coverage from insurers in the standard market. - ✔✔Any
person who has insurable interest in real or tangible personal property who, after
diligent effort, has been unable to obtain basic property insurance through normal
channels from an admitted insurer or licensed surplus lines broker.
NOTE: The individual or agent must show efforts to place the risk through an admitted
or non-admitted carrier before going to the FAIR plan. It is designed only for high risk
properties.
✔✔Tenant Improvements and Betterment Losses are valued at: - ✔✔Actual Cash Value
NOTE: Tenant Improvements & Betterments is written on an ACV basis, but
Replacement cost is available.
✔✔An apartment building is insured for $300,000 with an 80% coinsurance clause. The
property is valued at $500,000. A covered loss occurs in the amount of $200,000. How
much will the insurance company pay? - ✔✔$150,000
NOTE: C Apply the coinsurance formula: 80% of the value of the home ($500,000) is
$400,000, which is what they should have carried. Divide the limit they carried
($300,000) by what they should have carried ($400,000). Multiply that figure by the loss
amount. When there is no known deductible, figure it as zero.
✔✔Which of the following is a disadvantage of having a coinsurance clause on a
commercial policy?
, Premiums are generally higher.
Small
None of the above.
Keeping up with property replacement values. - ✔✔Keeping up with property
replacement values.
NOTE: Keeping informed of building cost increases is sometimes a difficult thing for the
insured to do.
✔✔Inventory more than 100 feet off premise is: - ✔✔Excluded from the policy.
NOTE: Inventory off premise needs to be insured by a Commercial Inland Marine policy.
✔✔Which HO form does not provide coverage for real property? - ✔✔HO-4
NOTE: HO-4 tenant form does not cover the dwelling or other structures (real property).
✔✔Which of the following is NOT considered subrogation?
An insured assists an insurer in seeking recovery for payments made.
The insurer collects damages from the responsible party.
The rights to sue a third party are transferred to the insurer.
The insured collects damages from the responsible party. - ✔✔The insured collects
damages from the responsible party.
NOTE: Subrogation is the transferring of rights to recover damages from a third party to
the insurer.
✔✔All of the following are major differences between DPs and HOs, except:
Theft coverage
Occupancy requirements
None are exceptions
Worldwide coverage - ✔✔None of these are exceptions.
NOTE: The DP and HO policies are different in each one of these areas.
✔✔Two perils that can be excluded from the vacancy permit are:
Vandalism and Sprinkler
Theft and Attempted theft
Glass and Water
Theft and Water - ✔✔Vandalism and Sprinkler
