CPCU 551 EXAM QUESTIONS WITH
100% CORRECT DETAILED ANSWERS
, A building and its contents are insured under Building and PP coverage form with the
Agreed Value option in effect. The limit of insurance is $1,000,000 with a $5,000
deductible. The agreed value shown in the policy is $1,500,000. How much will the
insurer pay if the insured sustains a $300,000 loss by an insured peril? - ANSWERThe
insurer will pay $195,000 = [($1,000,000/$1,500,000) x $300,000] - $5,000
Adjacent properties can increase the probability of loss to the insured's building and
contents. When'd aging commercial property exposures, the term used to refer to the
hazard posed by adjacent or surrounding properties is - - ANSWERExternal Exposure
Wholesale Merchandiser leases 5 warehouses, each in a different city, to supply retail
customers in each city with timely service. The average value of the merch at each
warehouse is $750,000. Which blanket insurance limit would bear suit the insured's
needs while minimizing the cost of over-insuring? - ANSWERBlanket $3,375,000 is
best. (5 x $750,000) x 90% = $3,375,000
An important feature of the Standard Property Policy (SPP) is - - ANSWERThe flexibility
of being able to limit the perils covered.
The rate charged for the Legal Liability Coverage Form is - - ANSWERLower than the
usual commercial property contents and building rate
The Riverview Restaurant insures its buildings and BPP on a CPP with an ISO Flood
Endorsement. An insured Flood occurs from the river and the restaurant has the
following losses -
1. Silt & Debris on the restaurant floor
2. Boat pier washed away
3. Chairs and tables housed in the fully enclosed carport lost in the river
4. The golf cart used to service the grounds is washed away in the river
What best describes the covered losses? - ANSWERThe loss to the boat pier is not
covered because it's over the water. All other losses are covered.
For shipments between buyers and sellers, most open cargo policies state that the
value of the covered property will include several elements, including - - ANSWERThe
value of the covered property will contain an advance equal to 10% of the invoice and
freight or a higher percentage if so agreed upon.
A new business, Neighborhood Cleaners, is opening next week. The business is a dry
cleaner for clothing and home items. The major concern is protecting its goodwill with
customers by having coverage for all of the goods it will be receiving from them. Which
is the best coverage choice for them? - ANSWERA bailees' customer policy because it
covers both legal liability and goodwill exposure through one policy
The following is true about the Earthquake and Volcanic Eruption Endorsement (sub-
limit form) - - ANSWERThe Ensuing Loss provision of the endorsement eliminates
100% CORRECT DETAILED ANSWERS
, A building and its contents are insured under Building and PP coverage form with the
Agreed Value option in effect. The limit of insurance is $1,000,000 with a $5,000
deductible. The agreed value shown in the policy is $1,500,000. How much will the
insurer pay if the insured sustains a $300,000 loss by an insured peril? - ANSWERThe
insurer will pay $195,000 = [($1,000,000/$1,500,000) x $300,000] - $5,000
Adjacent properties can increase the probability of loss to the insured's building and
contents. When'd aging commercial property exposures, the term used to refer to the
hazard posed by adjacent or surrounding properties is - - ANSWERExternal Exposure
Wholesale Merchandiser leases 5 warehouses, each in a different city, to supply retail
customers in each city with timely service. The average value of the merch at each
warehouse is $750,000. Which blanket insurance limit would bear suit the insured's
needs while minimizing the cost of over-insuring? - ANSWERBlanket $3,375,000 is
best. (5 x $750,000) x 90% = $3,375,000
An important feature of the Standard Property Policy (SPP) is - - ANSWERThe flexibility
of being able to limit the perils covered.
The rate charged for the Legal Liability Coverage Form is - - ANSWERLower than the
usual commercial property contents and building rate
The Riverview Restaurant insures its buildings and BPP on a CPP with an ISO Flood
Endorsement. An insured Flood occurs from the river and the restaurant has the
following losses -
1. Silt & Debris on the restaurant floor
2. Boat pier washed away
3. Chairs and tables housed in the fully enclosed carport lost in the river
4. The golf cart used to service the grounds is washed away in the river
What best describes the covered losses? - ANSWERThe loss to the boat pier is not
covered because it's over the water. All other losses are covered.
For shipments between buyers and sellers, most open cargo policies state that the
value of the covered property will include several elements, including - - ANSWERThe
value of the covered property will contain an advance equal to 10% of the invoice and
freight or a higher percentage if so agreed upon.
A new business, Neighborhood Cleaners, is opening next week. The business is a dry
cleaner for clothing and home items. The major concern is protecting its goodwill with
customers by having coverage for all of the goods it will be receiving from them. Which
is the best coverage choice for them? - ANSWERA bailees' customer policy because it
covers both legal liability and goodwill exposure through one policy
The following is true about the Earthquake and Volcanic Eruption Endorsement (sub-
limit form) - - ANSWERThe Ensuing Loss provision of the endorsement eliminates
