CISR Insuring Commercial Property Question and
Answer [2026] | UPDATED ACTUAL Exam | Final
Review
• Types of Commercial Property -✓✓ Real Property and Personal Property
• Real Property -✓✓ Land (generally not the subject of insurance), Buildings
(defined in policy), Structures (Examples: walls, carports, fences), Outdoor fixtures
(Examples: light poles, benches)
• Personal Property -✓✓ Insured's Personal Property
Examples - equipment, supplies, and materials used to operate the insured's
business
Personal Property of Others (In the Care, Custody, or Control of the Insured)
• Insurable Interest -✓✓ To have a financial stake or equity in a property (Owner,
Mortgage or Lien Holder, Lessees or Tenants, Signers of Contractual Agreements).
• Direct Loss -✓✓ Damage to Tangible Property
• Indirect Loss -✓✓ Loss of Business Income and/or Extra Expense Resulting
From Loss to Tangible Property
• Actual Cash Value (ACV) -✓✓ Cost to replace the premises or item at the time
of the loss, minus depreciation due to the fact that the property has been used for a
period of time
, • Replacement Cost -✓✓ The amount needed to replace a premises or item with
like kind and quality in today's dollars
• Functional Replacement Cost -✓✓ Limit of insurance is based on the amount
needed to buy or rebuild property that will serve the same purpose as the original
property - does not have to be like kind and quality. Addresses the obsolescence
problem of old and out‐of‐date properties
• Selling Price clause for stock sold, but not delivered -✓✓ The limit of insurance
needs to reflect any change in stock valuation due to selling price
• Coinsurance -✓✓ The insurance‐to‐value requirement wherein the insurer
stipulates that the insured must carry an amount of insurance equal to a specified
percentage of the value of the property. The percentages may be 80%, 90%, and
100%, and either Actual Cash Value or Replacement
Cost may be used in valuation of the property.
• Benefit of coinsurance to the insured -✓✓ - Adequate protection in the event of
loss
- Lower rate per $100 of insurance, making it more economical to buy the higher
amount required
• Benefit of coinsurance to the insurer -✓✓ - Better premium level per risk insured
- Prevents the purchase of insurance for the payment of small maintenance losses
- Insures rate adequacy over time
• Coinsurance formula -✓✓ Insurance Carried/(Value of property x Coinsurance
%) x Loss = Loss Payment
Answer [2026] | UPDATED ACTUAL Exam | Final
Review
• Types of Commercial Property -✓✓ Real Property and Personal Property
• Real Property -✓✓ Land (generally not the subject of insurance), Buildings
(defined in policy), Structures (Examples: walls, carports, fences), Outdoor fixtures
(Examples: light poles, benches)
• Personal Property -✓✓ Insured's Personal Property
Examples - equipment, supplies, and materials used to operate the insured's
business
Personal Property of Others (In the Care, Custody, or Control of the Insured)
• Insurable Interest -✓✓ To have a financial stake or equity in a property (Owner,
Mortgage or Lien Holder, Lessees or Tenants, Signers of Contractual Agreements).
• Direct Loss -✓✓ Damage to Tangible Property
• Indirect Loss -✓✓ Loss of Business Income and/or Extra Expense Resulting
From Loss to Tangible Property
• Actual Cash Value (ACV) -✓✓ Cost to replace the premises or item at the time
of the loss, minus depreciation due to the fact that the property has been used for a
period of time
, • Replacement Cost -✓✓ The amount needed to replace a premises or item with
like kind and quality in today's dollars
• Functional Replacement Cost -✓✓ Limit of insurance is based on the amount
needed to buy or rebuild property that will serve the same purpose as the original
property - does not have to be like kind and quality. Addresses the obsolescence
problem of old and out‐of‐date properties
• Selling Price clause for stock sold, but not delivered -✓✓ The limit of insurance
needs to reflect any change in stock valuation due to selling price
• Coinsurance -✓✓ The insurance‐to‐value requirement wherein the insurer
stipulates that the insured must carry an amount of insurance equal to a specified
percentage of the value of the property. The percentages may be 80%, 90%, and
100%, and either Actual Cash Value or Replacement
Cost may be used in valuation of the property.
• Benefit of coinsurance to the insured -✓✓ - Adequate protection in the event of
loss
- Lower rate per $100 of insurance, making it more economical to buy the higher
amount required
• Benefit of coinsurance to the insurer -✓✓ - Better premium level per risk insured
- Prevents the purchase of insurance for the payment of small maintenance losses
- Insures rate adequacy over time
• Coinsurance formula -✓✓ Insurance Carried/(Value of property x Coinsurance
%) x Loss = Loss Payment
