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CPCU - EXAM 7 (SURVEY OF COMMERCIAL RISK
MANAGEMENT AND INSURANCE) 2026/2027 |
INSURANCE CERTIFICATION | 50 VERIFIED Q&A |
PASS GUARANTEED – A+ GRADED
Section 1: Commercial Property and Business Income (Q1–Q12)
1. Under the Building and Personal Property Coverage Form (BPP), Coverage A – Building includes:
A. The insured’s stock and inventory
B. The building, completed additions, permanently installed fixtures, and outdoor fixtures
C. Employees’ personal property
D. Vehicles on the premises
Correct Answer: B
Rationale: Coverage A covers the building structure, completed additions, permanently installed
fixtures, machinery, and outdoor fixtures. Stock (A) is Coverage B; employee property and vehicles
are generally excluded or covered elsewhere.
2. A commercial property policy’s coinsurance clause is designed to:
A. Penalize insureds who carry adequate limits
B. Encourage insurance to a specified percentage of value and share losses proportionally if
underinsured
C. Eliminate deductibles
D. Guarantee full recovery regardless of limit
Correct Answer: B
Rationale: The coinsurance requirement encourages adequate limits (often 80% or 90%); if
underinsured, recovery is reduced proportionally, promoting rate equity.
3. A building with a replacement cost of $2,000,000 is insured for $1,200,000 under an 80%
coinsurance clause. A $200,000 covered loss occurs. Ignoring deductibles, the insurer pays
approximately:
A. $200,000
B. $150,000
C. $120,000
D. $180,000
Correct Answer: B
Rationale: Required insurance = 80% × $2,000,000 = $1,600,000. Carried/required =
$1,200,000/$1,600,000 = 0.75. Payment = 0.75 × $200,000 = $150,000, subject to the limit.
4. “Agreed value” in commercial property insurance:
A. Replaces coinsurance when the insured and insurer agree on the insured value
B. Eliminates all deductibles
, 2
C. Applies only to business income
D. Equals actual cash value
Correct Answer: A
Rationale: Agreed value suspends coinsurance because the value is agreed at inception. It does not
eliminate deductibles or apply only to business income.
5. Business income coverage indemnifies the insured for:
A. The cost to repair damaged property
B. Loss of net income and continuing expenses during the period of restoration, plus extra expense
C. Only payroll
D. Only rental income
Correct Answer: B
Rationale: Business income covers lost net income and continuing operating expenses during the
restoration period; extra expense covers costs to reduce the interruption.
6. The period of restoration in business income coverage begins:
A. When the policy is issued
B. When the physical loss or damage occurs
C. After the deductible is paid
D. When the business reopens
Correct Answer: B
Rationale: The period of restoration begins at the time of the direct physical loss or damage and
ends when the property is repaired/replaced or operations could resume.
7. A business with a coinsurance basis of $800,000 insures business income for $400,000 under an
80% coinsurance clause. A $100,000 business income loss occurs. Ignoring deductibles, the payment
is approximately:
A. $100,000
B. $62,500
C. $80,000
D. $50,000
Correct Answer: B
Rationale: Required = 80% × $800,000 = $640,000. Carried/required = $400,000/$640,000 = 0.625.
Payment = 0.625 × $100,000 = $62,500.
8. Extra expense coverage is most appropriate for:
A. A manufacturer that can relocate production
B. A service business that must continue operations at any cost
C. A vacant building
D. A business with no income
Correct Answer: B
Rationale: Extra expense covers costs to continue operations and reduce interruption, especially for
service businesses (banks, hospitals, newspapers) that must remain open.
CPCU - EXAM 7 (SURVEY OF COMMERCIAL RISK
MANAGEMENT AND INSURANCE) 2026/2027 |
INSURANCE CERTIFICATION | 50 VERIFIED Q&A |
PASS GUARANTEED – A+ GRADED
Section 1: Commercial Property and Business Income (Q1–Q12)
1. Under the Building and Personal Property Coverage Form (BPP), Coverage A – Building includes:
A. The insured’s stock and inventory
B. The building, completed additions, permanently installed fixtures, and outdoor fixtures
C. Employees’ personal property
D. Vehicles on the premises
Correct Answer: B
Rationale: Coverage A covers the building structure, completed additions, permanently installed
fixtures, machinery, and outdoor fixtures. Stock (A) is Coverage B; employee property and vehicles
are generally excluded or covered elsewhere.
2. A commercial property policy’s coinsurance clause is designed to:
A. Penalize insureds who carry adequate limits
B. Encourage insurance to a specified percentage of value and share losses proportionally if
underinsured
C. Eliminate deductibles
D. Guarantee full recovery regardless of limit
Correct Answer: B
Rationale: The coinsurance requirement encourages adequate limits (often 80% or 90%); if
underinsured, recovery is reduced proportionally, promoting rate equity.
3. A building with a replacement cost of $2,000,000 is insured for $1,200,000 under an 80%
coinsurance clause. A $200,000 covered loss occurs. Ignoring deductibles, the insurer pays
approximately:
A. $200,000
B. $150,000
C. $120,000
D. $180,000
Correct Answer: B
Rationale: Required insurance = 80% × $2,000,000 = $1,600,000. Carried/required =
$1,200,000/$1,600,000 = 0.75. Payment = 0.75 × $200,000 = $150,000, subject to the limit.
4. “Agreed value” in commercial property insurance:
A. Replaces coinsurance when the insured and insurer agree on the insured value
B. Eliminates all deductibles
, 2
C. Applies only to business income
D. Equals actual cash value
Correct Answer: A
Rationale: Agreed value suspends coinsurance because the value is agreed at inception. It does not
eliminate deductibles or apply only to business income.
5. Business income coverage indemnifies the insured for:
A. The cost to repair damaged property
B. Loss of net income and continuing expenses during the period of restoration, plus extra expense
C. Only payroll
D. Only rental income
Correct Answer: B
Rationale: Business income covers lost net income and continuing operating expenses during the
restoration period; extra expense covers costs to reduce the interruption.
6. The period of restoration in business income coverage begins:
A. When the policy is issued
B. When the physical loss or damage occurs
C. After the deductible is paid
D. When the business reopens
Correct Answer: B
Rationale: The period of restoration begins at the time of the direct physical loss or damage and
ends when the property is repaired/replaced or operations could resume.
7. A business with a coinsurance basis of $800,000 insures business income for $400,000 under an
80% coinsurance clause. A $100,000 business income loss occurs. Ignoring deductibles, the payment
is approximately:
A. $100,000
B. $62,500
C. $80,000
D. $50,000
Correct Answer: B
Rationale: Required = 80% × $800,000 = $640,000. Carried/required = $400,000/$640,000 = 0.625.
Payment = 0.625 × $100,000 = $62,500.
8. Extra expense coverage is most appropriate for:
A. A manufacturer that can relocate production
B. A service business that must continue operations at any cost
C. A vacant building
D. A business with no income
Correct Answer: B
Rationale: Extra expense covers costs to continue operations and reduce interruption, especially for
service businesses (banks, hospitals, newspapers) that must remain open.
