CISR Insuring Commercial Property Question and
Answer [2026] | UPDATED ACTUAL Exam | Ultimate
Study Guide
• Coinsurance -✓✓ A promise made between the insurer and insured of what to
expect as to what the insurer will pay
• Benefits of coinsurance for insured -✓✓ 1. encourages insured to adequately
insure their property
2. lowers premiums
• Benefits of coinsurance for insurer -✓✓ 1. provides better premium levels per
risk insured
2. prevents the insured purchasing insurance for payment of small losses only
3. knowing the true property exposures within an insurer's portfolio allows better
rate adequacy over time
• Coinsurance is only a factor in ____ loss -✓✓ partial loss
• Coinsurance formula -✓✓ (amount of insurance carried/amount of insurance
required) x loss = amount of recovery
• real property -✓✓ things that are affixed or comprise a part of the real estate
• personal property -✓✓ things that are not affixed to the real estate or can be
physically moved. also includes property owned by others that are in the care,
custody or control of an insured.
,• commercial property insurance covers real and personal property, but not ____ -
✓✓ land
• real property includes -✓✓ - buildings
- structures (fences, carports, walkways)
- outdoor fixtures
- fixtures in a building that are permanently attached (ex. ceiling fans)
• insurable interest -✓✓ a party having a financial stake in property
• examples of insurable interest -✓✓ owner of the property, mortgage or lienholder
of the property, lessee, tenant, bailee, those having contractual rights to the
property
• direct loss -✓✓ the actual damage to the tangible property
• indirect loss -✓✓ the financial consequences of the direct loss
• actual cash value formula -✓✓ replacement cost at time of loss - depreciation =
actual cash value
• replacement cost -✓✓ the cost to replace the property or item with like kind and
quality at today's cost at the time of the loss
• indemnity -✓✓ the insured is made whole after a loss
,• this valuation is much lower than the cost to replace the property with property of
like kind and quality -✓✓ functional replacement cost
• functional replacement cost -✓✓ the amount needed to buy or rebuild a property
that serves the same purpose as the original property
• selling price valuation -✓✓ property the insured has sold but not delivered can be
valued at its selling price
• why would an insured want to value their property with selling price valuation? -
✓✓ because replacement cost valuation wouldn't consider the profit an insured
made from the sale, it would only consider the cost to replace the property at
wholesale prices or current manufacturing costs
• how is the use interest of tenant's improvements and betterments calculated? -✓✓
original cost at a pro rata value based on the remaining time left on the lease
• valued policy laws -✓✓ law in some states that requires insurance companies to
pay the full value of a policy to the insured in the event of a total loss
• purpose of valued policy laws -✓✓ to discourage insurance companies from
overvaluing property they insure in order to increase premiums
• coinsurance clause -✓✓ imposes a penalty on a claim payment if the insurance-
to-value requirement is not met
• coinsurance applies to what type of loss? -✓✓ partial loss
, • coinsurance -✓✓ if an insured fails to purchase a limit at or above their
coinsurance %, then loss payment for the partial loss is reduced by the same
percentage the insured underinsured their property
• what amount of coverage SHOULD the policy carry? -✓✓ the value of the
property at the time of loss multiplied by the coinsurance percentage shown on the
declarations
• optional coverage that insurance carriers offer to avoid coinsurance penalties after
a loss -✓✓ agreed value
• agreed value -✓✓ an upfront agreement between the insured and the insurance
company on the amount of insurance for the property that suspends the
coinsurance clause if certain conditions are met
• statement of values -✓✓ a list of the insured property that includes the value of
each item expressed either in terms of its replacement cost or actual cash value
• how to obtain coverage based on agreed value -✓✓ the insured submits an SOV
at the beginning of the policy term, the carrier agrees to the stated values, and the
coinsurance is suspended for one year. for following renewals the insured has to
submit a new SOV
• what happens if the insured doesn't submit a new SOV at renewal? -✓✓ the
agreed value coverage lapses and the coinsurance provision will be reinstated
• 3 different types of commercial property limits -✓✓ specific, scheduled, blanket
Answer [2026] | UPDATED ACTUAL Exam | Ultimate
Study Guide
• Coinsurance -✓✓ A promise made between the insurer and insured of what to
expect as to what the insurer will pay
• Benefits of coinsurance for insured -✓✓ 1. encourages insured to adequately
insure their property
2. lowers premiums
• Benefits of coinsurance for insurer -✓✓ 1. provides better premium levels per
risk insured
2. prevents the insured purchasing insurance for payment of small losses only
3. knowing the true property exposures within an insurer's portfolio allows better
rate adequacy over time
• Coinsurance is only a factor in ____ loss -✓✓ partial loss
• Coinsurance formula -✓✓ (amount of insurance carried/amount of insurance
required) x loss = amount of recovery
• real property -✓✓ things that are affixed or comprise a part of the real estate
• personal property -✓✓ things that are not affixed to the real estate or can be
physically moved. also includes property owned by others that are in the care,
custody or control of an insured.
,• commercial property insurance covers real and personal property, but not ____ -
✓✓ land
• real property includes -✓✓ - buildings
- structures (fences, carports, walkways)
- outdoor fixtures
- fixtures in a building that are permanently attached (ex. ceiling fans)
• insurable interest -✓✓ a party having a financial stake in property
• examples of insurable interest -✓✓ owner of the property, mortgage or lienholder
of the property, lessee, tenant, bailee, those having contractual rights to the
property
• direct loss -✓✓ the actual damage to the tangible property
• indirect loss -✓✓ the financial consequences of the direct loss
• actual cash value formula -✓✓ replacement cost at time of loss - depreciation =
actual cash value
• replacement cost -✓✓ the cost to replace the property or item with like kind and
quality at today's cost at the time of the loss
• indemnity -✓✓ the insured is made whole after a loss
,• this valuation is much lower than the cost to replace the property with property of
like kind and quality -✓✓ functional replacement cost
• functional replacement cost -✓✓ the amount needed to buy or rebuild a property
that serves the same purpose as the original property
• selling price valuation -✓✓ property the insured has sold but not delivered can be
valued at its selling price
• why would an insured want to value their property with selling price valuation? -
✓✓ because replacement cost valuation wouldn't consider the profit an insured
made from the sale, it would only consider the cost to replace the property at
wholesale prices or current manufacturing costs
• how is the use interest of tenant's improvements and betterments calculated? -✓✓
original cost at a pro rata value based on the remaining time left on the lease
• valued policy laws -✓✓ law in some states that requires insurance companies to
pay the full value of a policy to the insured in the event of a total loss
• purpose of valued policy laws -✓✓ to discourage insurance companies from
overvaluing property they insure in order to increase premiums
• coinsurance clause -✓✓ imposes a penalty on a claim payment if the insurance-
to-value requirement is not met
• coinsurance applies to what type of loss? -✓✓ partial loss
, • coinsurance -✓✓ if an insured fails to purchase a limit at or above their
coinsurance %, then loss payment for the partial loss is reduced by the same
percentage the insured underinsured their property
• what amount of coverage SHOULD the policy carry? -✓✓ the value of the
property at the time of loss multiplied by the coinsurance percentage shown on the
declarations
• optional coverage that insurance carriers offer to avoid coinsurance penalties after
a loss -✓✓ agreed value
• agreed value -✓✓ an upfront agreement between the insured and the insurance
company on the amount of insurance for the property that suspends the
coinsurance clause if certain conditions are met
• statement of values -✓✓ a list of the insured property that includes the value of
each item expressed either in terms of its replacement cost or actual cash value
• how to obtain coverage based on agreed value -✓✓ the insured submits an SOV
at the beginning of the policy term, the carrier agrees to the stated values, and the
coinsurance is suspended for one year. for following renewals the insured has to
submit a new SOV
• what happens if the insured doesn't submit a new SOV at renewal? -✓✓ the
agreed value coverage lapses and the coinsurance provision will be reinstated
• 3 different types of commercial property limits -✓✓ specific, scheduled, blanket
