CPCU 551 EXAM QUESTIONS COMPILATION 20
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25| BRAND NEW ACTUAL EXAM WITH 100%VER
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IFIED QUESTIONS AND CORRECT SOLUTIONS|
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GUARANTEED VALUE PACK| ACEYOUR GRADE n n n n n
S.
1. How do you calculate the agreed value payment if the limit is less thanth
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e agreed value? - Correct Answer-= (limit/agreed value x loss)-
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deductible.
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2. An insured chooses the "Agreed Value" option for its Building and Pe
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rsonal Property Coverage Form (BPP). The agreed value for thepro
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perty is $100,000 and the limit of insurance is $120,000 with a
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$5,000 deductible. The building is totally destroyed by a covered causeof
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nloss. At the time of the loss, the value of the building was $130,000. The i
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nsurer would pay - Correct Answer-$120k.
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3. What is the agreed value payment if the limit of insurance is greater thanor
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equal to the agreed value stated in the declarations? (BPP) -
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Correct Answer-
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Losses will be paid in full up to the limit of insurance (each loss subject to d
n n n n n n n n n n n n n n n n
eductible).
4. How is the deductible applied in BPP? - Correct Answer-
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Once peroccurrence.
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1|Page
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,5. When analyzing what deductible amount to choose for its Building and P
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ersonal Property Coverage Form (BPP), an insured should consider -
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Correct Answer-
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If the items on the BPP will be listed separately or on ablanket basis.
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6. ACV. 100K limit. 1K deductible. 110K loss. What is payment? -
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Correct Answer-100K, since 110K-
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1K deductible exceeds the limit of insurance.NOT 99K!
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7. If blanket insurance w/ a $100K deductible, what would the payment beif
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a fire loss caused $800 to building and $400 to business personal propert
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y (if these items were scheduled separately). - Correct Answer- Zero.
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8. If the improvements and betterments sustained a loss sometime during a
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business's lease and if the building owner repairs the rental space, butthe
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company (lessee) does not replace the improvements and betterments o
n n n n n n n n n
nce the space is repaired, what valuation method is used under the lessee
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's BPP policy? - Correct Answer-Pro-
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rata based on the length of the lease, the time expired since the improvem
n n n n n n n n n n n n n
ents and betterments were installed, and the original cost
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9. A building is insured for $200,000 under an agreed value policy. The poli
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cy has a $10,000 deductible and the agreed value of the building is
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$250,000. After suffering a $43,000 loss, the insurer will pay (rounded tothe
n n n n n n n n n n n n
nearest $100) - Correct Answer-24,400
n n n n n
2|Page
n n n
,10. The risk manager for a painting company has purchased an outdoor pr
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operty extension policy to cover their trees, shrubs and signs not attache
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d to the building. Which of the following would not be considereda covere
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d cause of loss? Civil Commotion, lightning, explosion, windstorm? -
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Correct Answer-Windstorm.
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11. A building had been vacant for 60 days, and the insurer didn't know abo
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ut it, when it sustained 100K, 5K, and 1K losses due to windstorm, theft, a
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nd sprinkler leakage, respectively. What amount is covered underCPP? -
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Correct Answer-
n n
85K, 0, and 0. If a building is vacant for 60 or more consecutive days befor
n n n n n n n n n n n n n n n
e the loss, they won't pay for any loss caused by vandalism, sprinkler leak
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age, building glass breakage, water damage, theft, or attempted theft... ot
n n n n n n n n n n
herwise you'll only get 85% n n n n
12. Various building design features can help prevent the spread of ah
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ostile fire. For example, a solid piece of material that is inserted betwe
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en wall studs to delay the flow of heat or fire through this openspace is
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a - Correct Answer-Fire stop.
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13. Pete insures his motorcycle rental property for $100,000 on an actualc
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ash value (ACV) basis. The ACV of the property is $150,000 and his Com
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mercial Insurance Policy (CIP) has a 90 percent coinsurance clause. A fir
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e caused $50,000 of damage to the building structure. How much will Pet
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e recoup under his insurance policy? - Correct Answer-
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$37,037
3|Page
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, 14. A manufacturing company has business personal property valued at
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$1,500,000. The risk manager is considering insuring the business perso
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nal property with 80 percent coinsurance at a $0.40 rate per $100 of cover
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age. The 100 percent rate is $0.35 per $100 of coverage. if the business p
n n n n n n n n n n n n n n
ersonal property is insured with an 80 percent coinsurance, how much pre
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mium will be saved? - Correct Answer-The savings will be
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$5,250 − $4,800 = $450 n n n n
15. When (if) can an insurer examine their insured's books and records?
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- Correct Answer- n
Anytime during the policy period and up to 3 years after. The final prem
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ium is established after the policy period expires.Premiums are estima
n n n n n n n n n n
ted at its formation.
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16. Can an insured transfer duties under common policy conditions? -
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Correct Answer-Only with the insurer's written consent.
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17. Can an insurer cancel a policy verbally?
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How many days notice?
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To whom is it communicated? - Correct Answer-
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No, it must be in writing.10 days notice for nonpayment. 30 days for all oth
n n n n n n n n n n n n n n n
er reasons.
n
To the First Named Insured.
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18. Who develops a standard form? n n n n
Who does a non-standard form typically favor? - Correct Answer-
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TheISO, ASIS, or other insurance advisory organization.
n n n n n n n
Non-standard forms typically favor insureds. n n n n
4|Page n n n
n n n n n
25| BRAND NEW ACTUAL EXAM WITH 100%VER
n n n n n n n
IFIED QUESTIONS AND CORRECT SOLUTIONS|
n n n n n
GUARANTEED VALUE PACK| ACEYOUR GRADE n n n n n
S.
1. How do you calculate the agreed value payment if the limit is less thanth
n n n n n n n n n n n n n n
e agreed value? - Correct Answer-= (limit/agreed value x loss)-
n n n n n n n n n
deductible.
n
2. An insured chooses the "Agreed Value" option for its Building and Pe
n n n n n n n n n n n
rsonal Property Coverage Form (BPP). The agreed value for thepro
n n n n n n n n n n
perty is $100,000 and the limit of insurance is $120,000 with a
n n n n n n n n n n n
$5,000 deductible. The building is totally destroyed by a covered causeof
n n n n n n n n n n n
nloss. At the time of the loss, the value of the building was $130,000. The i
n n n n n n n n n n n n n n n
nsurer would pay - Correct Answer-$120k.
n n n n n
3. What is the agreed value payment if the limit of insurance is greater thanor
n n n n n n n n n n n n n n n
equal to the agreed value stated in the declarations? (BPP) -
n n n n n n n n n n
Correct Answer-
n n
Losses will be paid in full up to the limit of insurance (each loss subject to d
n n n n n n n n n n n n n n n n
eductible).
4. How is the deductible applied in BPP? - Correct Answer-
n n n n n n n n n
Once peroccurrence.
n n
1|Page
n n n
,5. When analyzing what deductible amount to choose for its Building and P
n n n n n n n n n n n
ersonal Property Coverage Form (BPP), an insured should consider -
n n n n n n n n n
Correct Answer-
n n
If the items on the BPP will be listed separately or on ablanket basis.
n n n n n n n n n n n n n n
6. ACV. 100K limit. 1K deductible. 110K loss. What is payment? -
n n n n n n n n n n
Correct Answer-100K, since 110K-
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1K deductible exceeds the limit of insurance.NOT 99K!
n n n n n n n n
7. If blanket insurance w/ a $100K deductible, what would the payment beif
n n n n n n n n n n n n n
a fire loss caused $800 to building and $400 to business personal propert
n n n n n n n n n n n n
y (if these items were scheduled separately). - Correct Answer- Zero.
n n n n n n n n n n
8. If the improvements and betterments sustained a loss sometime during a
n n n n n n n n n n n
business's lease and if the building owner repairs the rental space, butthe
n n n n n n n n n n n n n
company (lessee) does not replace the improvements and betterments o
n n n n n n n n n
nce the space is repaired, what valuation method is used under the lessee
n n n n n n n n n n n n
's BPP policy? - Correct Answer-Pro-
n n n n n
rata based on the length of the lease, the time expired since the improvem
n n n n n n n n n n n n n
ents and betterments were installed, and the original cost
n n n n n n n n
9. A building is insured for $200,000 under an agreed value policy. The poli
n n n n n n n n n n n n
cy has a $10,000 deductible and the agreed value of the building is
n n n n n n n n n n n n
$250,000. After suffering a $43,000 loss, the insurer will pay (rounded tothe
n n n n n n n n n n n n
nearest $100) - Correct Answer-24,400
n n n n n
2|Page
n n n
,10. The risk manager for a painting company has purchased an outdoor pr
n n n n n n n n n n n
operty extension policy to cover their trees, shrubs and signs not attache
n n n n n n n n n n n
d to the building. Which of the following would not be considereda covere
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d cause of loss? Civil Commotion, lightning, explosion, windstorm? -
n n n n n n n n n
Correct Answer-Windstorm.
n n
11. A building had been vacant for 60 days, and the insurer didn't know abo
n n n n n n n n n n n n n
ut it, when it sustained 100K, 5K, and 1K losses due to windstorm, theft, a
n n n n n n n n n n n n n n
nd sprinkler leakage, respectively. What amount is covered underCPP? -
n n n n n n n n n n
Correct Answer-
n n
85K, 0, and 0. If a building is vacant for 60 or more consecutive days befor
n n n n n n n n n n n n n n n
e the loss, they won't pay for any loss caused by vandalism, sprinkler leak
n n n n n n n n n n n n n
age, building glass breakage, water damage, theft, or attempted theft... ot
n n n n n n n n n n
herwise you'll only get 85% n n n n
12. Various building design features can help prevent the spread of ah
n n n n n n n n n n n
ostile fire. For example, a solid piece of material that is inserted betwe
n n n n n n n n n n n n
en wall studs to delay the flow of heat or fire through this openspace is
n n n n n n n n n n n n n n n
a - Correct Answer-Fire stop.
n n n n n
13. Pete insures his motorcycle rental property for $100,000 on an actualc
n n n n n n n n n n n
ash value (ACV) basis. The ACV of the property is $150,000 and his Com
n n n n n n n n n n n n n
mercial Insurance Policy (CIP) has a 90 percent coinsurance clause. A fir
n n n n n n n n n n n
e caused $50,000 of damage to the building structure. How much will Pet
n n n n n n n n n n n n
e recoup under his insurance policy? - Correct Answer-
n n n n n n n n
$37,037
3|Page
n n n
, 14. A manufacturing company has business personal property valued at
n n n n n n n n
$1,500,000. The risk manager is considering insuring the business perso
n n n n n n n n n
nal property with 80 percent coinsurance at a $0.40 rate per $100 of cover
n n n n n n n n n n n n n
age. The 100 percent rate is $0.35 per $100 of coverage. if the business p
n n n n n n n n n n n n n n
ersonal property is insured with an 80 percent coinsurance, how much pre
n n n n n n n n n n n
mium will be saved? - Correct Answer-The savings will be
n n n n n n n n n
$5,250 − $4,800 = $450 n n n n
15. When (if) can an insurer examine their insured's books and records?
n n n n n n n n n n
- Correct Answer- n
Anytime during the policy period and up to 3 years after. The final prem
n n n n n n n n n n n n n
ium is established after the policy period expires.Premiums are estima
n n n n n n n n n n
ted at its formation.
n n n
16. Can an insured transfer duties under common policy conditions? -
n n n n n n n n n
Correct Answer-Only with the insurer's written consent.
n n n n n n n
17. Can an insurer cancel a policy verbally?
n n n n n n n
How many days notice?
n n n
To whom is it communicated? - Correct Answer-
n n n n n n n
No, it must be in writing.10 days notice for nonpayment. 30 days for all oth
n n n n n n n n n n n n n n n
er reasons.
n
To the First Named Insured.
n n n n
18. Who develops a standard form? n n n n
Who does a non-standard form typically favor? - Correct Answer-
n n n n n n n n n
TheISO, ASIS, or other insurance advisory organization.
n n n n n n n
Non-standard forms typically favor insureds. n n n n
4|Page n n n
