WEBCE - COMMERCIAL
PROPERTIES 2026/2027 ACTUAL
QUESTIONS WITH VERIFIED
ANSWERS.
Major Manufacturing has a commercial property policy that
includes the business income and extra expense coverage
form. When electrical transmission lines on Major's premises
are blown down in a storm, Major's operations are brought to a
halt until the lines have been repaired, causing a loss of
income. Does Major have coverage for this utility service
interruption loss? - correct answer-No, because a special
exclusion in the causes of loss forms prevents coverage unless
the disruption originates inside a covered building.
Unlike the commercial property exclusion for direct damage
losses, which requires that the failure originate on the
described premises—which might include land surrounding the
building, the exclusion in time element forms precludes
coverage unless the utility service failure originates inside a
covered building.
Dickie's Diner is located at the end of a dead-end street. When
a tornado destroys several buildings on the block where
Dickie's is located, the police close the street, preventing
customers from getting to the diner. If Dickie's has a
commercial property policy that includes the business income
,and extra expense coverage form, is there coverage for the
loss of income that Dickie's suffers? - correct answer-The civil
authority coverage extension provides up to 4 weeks of
coverage.
The tornado is a covered peril, and the police who closed the
street clearly represent civil authority. If property damage to
someone else's premises occurs by a covered peril, the civil
authority additional coverage provides 4 weeks' coverage for
the insured's income or extra expense loss.
Small World Importers has a commercial property policy with
the business income and extra expense coverage form. An 80
percent coinsurance provision applies to the business income
coverage. Small World's controller is considering cutting the
business income limit in half to save premium. What should you
advise Small World's controller? - correct answer-If the
business income limit of insurance is not high enough to
comply with the coinsurance provision, Small World will be paid
only a portion of any covered business income loss.
As with coinsurance on property insurance forms covering
direct damage losses, the coinsurance clause in a business
income form imposes a so-called coinsurance penalty that
reduces—but does not eliminate—the amount of recovery if the
limit of insurance is less than the amount required by the
coinsurance provision.
, Your client, Bernard's Bowling and Billiards, has come to you
for help in selecting an appropriate business income coverage
limit. Bernard's advises you that the machinery for the bowling
alley would have to be ordered from a plant in Germany and
that it could take up to 18 months to receive it. Based on this
information, what percentage of Bernard's estimated business
income for the upcoming 12 months should Bernard's use in
selecting a business income coverage limit? - correct answer-
Since Bernard's could be out of business for 18 months,
Bernard's should use 150 percent (18 months divided by 12
months) of the estimated business income for the upcoming 12
months in selecting a business income coverage limit.
Ignoring the extended period of interruption likely to result when
bowling leagues that now patronize Bernard decide to bowl
down other alleys, the case information indicates that Bernard
can reasonably expect an interruption extending for 150
percent of a year (18 months) resulting in a commensurate
income loss. A 150 percent business income coinsurance
provision is available and appropriate in this case. Business
income coverage differs from direct damage property insurance
under which a greater-than-total loss is essentially impossible.
Vancamp company's business income coverage limit is
$200,000. Vancamp suffers a $150,000 business income loss
due to damage to its building that was caused by a windstorm.
The business would normally have earned $500,000 during the
year following the policy inception date. Vancamp's policy has a
60 percent coinsurance clause. What will Vancamp recover for
this loss? - correct answer-$100,000
PROPERTIES 2026/2027 ACTUAL
QUESTIONS WITH VERIFIED
ANSWERS.
Major Manufacturing has a commercial property policy that
includes the business income and extra expense coverage
form. When electrical transmission lines on Major's premises
are blown down in a storm, Major's operations are brought to a
halt until the lines have been repaired, causing a loss of
income. Does Major have coverage for this utility service
interruption loss? - correct answer-No, because a special
exclusion in the causes of loss forms prevents coverage unless
the disruption originates inside a covered building.
Unlike the commercial property exclusion for direct damage
losses, which requires that the failure originate on the
described premises—which might include land surrounding the
building, the exclusion in time element forms precludes
coverage unless the utility service failure originates inside a
covered building.
Dickie's Diner is located at the end of a dead-end street. When
a tornado destroys several buildings on the block where
Dickie's is located, the police close the street, preventing
customers from getting to the diner. If Dickie's has a
commercial property policy that includes the business income
,and extra expense coverage form, is there coverage for the
loss of income that Dickie's suffers? - correct answer-The civil
authority coverage extension provides up to 4 weeks of
coverage.
The tornado is a covered peril, and the police who closed the
street clearly represent civil authority. If property damage to
someone else's premises occurs by a covered peril, the civil
authority additional coverage provides 4 weeks' coverage for
the insured's income or extra expense loss.
Small World Importers has a commercial property policy with
the business income and extra expense coverage form. An 80
percent coinsurance provision applies to the business income
coverage. Small World's controller is considering cutting the
business income limit in half to save premium. What should you
advise Small World's controller? - correct answer-If the
business income limit of insurance is not high enough to
comply with the coinsurance provision, Small World will be paid
only a portion of any covered business income loss.
As with coinsurance on property insurance forms covering
direct damage losses, the coinsurance clause in a business
income form imposes a so-called coinsurance penalty that
reduces—but does not eliminate—the amount of recovery if the
limit of insurance is less than the amount required by the
coinsurance provision.
, Your client, Bernard's Bowling and Billiards, has come to you
for help in selecting an appropriate business income coverage
limit. Bernard's advises you that the machinery for the bowling
alley would have to be ordered from a plant in Germany and
that it could take up to 18 months to receive it. Based on this
information, what percentage of Bernard's estimated business
income for the upcoming 12 months should Bernard's use in
selecting a business income coverage limit? - correct answer-
Since Bernard's could be out of business for 18 months,
Bernard's should use 150 percent (18 months divided by 12
months) of the estimated business income for the upcoming 12
months in selecting a business income coverage limit.
Ignoring the extended period of interruption likely to result when
bowling leagues that now patronize Bernard decide to bowl
down other alleys, the case information indicates that Bernard
can reasonably expect an interruption extending for 150
percent of a year (18 months) resulting in a commensurate
income loss. A 150 percent business income coinsurance
provision is available and appropriate in this case. Business
income coverage differs from direct damage property insurance
under which a greater-than-total loss is essentially impossible.
Vancamp company's business income coverage limit is
$200,000. Vancamp suffers a $150,000 business income loss
due to damage to its building that was caused by a windstorm.
The business would normally have earned $500,000 during the
year following the policy inception date. Vancamp's policy has a
60 percent coinsurance clause. What will Vancamp recover for
this loss? - correct answer-$100,000
