CPCU 551 Questions and Correct
Answers
After touring the manufacturing facility of a prospective policyholder, Vincent noted some property
exposures that would not be adequately covered under the standard ISO Building and Personal
Property Coverage Form (BPP). Which one of the following should Vincent use to tailor the BPP
coverage to meet the specific needs of the prospective policyholder?
A. Endorsement
B. Coverage Extension
C. Reinsurance
D. Coinsurance - Answer: A. Endorsement
Huntington Grill suffered a kitchen fire and was forced to close while repairs were being done. The
restaurant owners wanted to reopen as quickly as possible to avoid losing customers to another
restaurant. They decided to pay for express shipping for cooking equipment and other key supplies
in order to expedite the reopening process. The express shipping costs would be considered which
one of the following type of expenses?
A. Non-continuing expense.
B. Continuing expense.
C. Extra expense. - Answer: C. Extra expense.
Easttown Manufacturing (Easttown) makes automobile hubcaps and sells them to auto
manufacturers. Easttown has a fire that destroys their building and stops production for 12 months.
In the year before the fire, Easttown earned a net profit of $500,000. In order to maintain the
operation so that they could resume after the factory is restored, Easttown incurred expenses of
$200,000. What is the amount of Easttown's business income loss? Enter the figure without dollar
signs or commas. - Answer: 700000
Which one of the following policies would respond to a pressure fired boiler explosion?
A. Commercial property policy.
B. Equipment breakdown policy.
C. Business owners policy. - Answer: B. Equipment breakdown policy
, Which one of the following best describes an advantage to insurers of nonfiled classes compared
with filed classes of inland marine insurance?
A. Nonfiled classes are the same in all states.
B. Nonfiled classes are characterized by relatively homogeneous loss exposures.
C. Nonfiled classes are characterized by a relatively large number of potential insureds
D. Nonfiled classes allow for the customization of policy provisions and rates for individual insureds.
- Answer: D. Nonfiled classes allow for the customization of policy provisions and rates for individual
insureds.
Paris Cuisine, a fine-dining restaurant, rents space in a commercial building, which is insured by its
owner. Paris Cuisine spends $50,000 on wallpaper, floor coverings, windows, and other
improvements that would remain in the building if Paris Cuisine were to move out. Paris Cuisine's
interest in these improvements is insured under which one of the following?
The leasehold improvements section of the building owner's BPP
The building portion of Paris Cuisine's Building and Personal Property Coverage Form (BPP)
The property of others section of the building owner's BPP
The business personal property section of Paris Cuisine's BPP - Answer: The business personal
property section of Paris Cuisine's BPP
Which one of the following statements is correct with respect to the Preservation of Property
additional coverage of the Building and Personal Property Coverage Form (BPP)?
It does not provide protection while the property is in transit to a new location.
It protects against "any direct physical loss or damage" and is not limited to either the covered
causes of loss or locations stipulated in the coverage form.
C
The protection provided under this additional coverage is over and above the limits of insurance
stated in the declarations
D
It extends the policy to protect covered property for up to 180 days at the new location. - Answer: It
protects against "any direct physical loss or damage" and is not limited to either the covered causes
of loss or locations stipulated in the coverage form.
Answers
After touring the manufacturing facility of a prospective policyholder, Vincent noted some property
exposures that would not be adequately covered under the standard ISO Building and Personal
Property Coverage Form (BPP). Which one of the following should Vincent use to tailor the BPP
coverage to meet the specific needs of the prospective policyholder?
A. Endorsement
B. Coverage Extension
C. Reinsurance
D. Coinsurance - Answer: A. Endorsement
Huntington Grill suffered a kitchen fire and was forced to close while repairs were being done. The
restaurant owners wanted to reopen as quickly as possible to avoid losing customers to another
restaurant. They decided to pay for express shipping for cooking equipment and other key supplies
in order to expedite the reopening process. The express shipping costs would be considered which
one of the following type of expenses?
A. Non-continuing expense.
B. Continuing expense.
C. Extra expense. - Answer: C. Extra expense.
Easttown Manufacturing (Easttown) makes automobile hubcaps and sells them to auto
manufacturers. Easttown has a fire that destroys their building and stops production for 12 months.
In the year before the fire, Easttown earned a net profit of $500,000. In order to maintain the
operation so that they could resume after the factory is restored, Easttown incurred expenses of
$200,000. What is the amount of Easttown's business income loss? Enter the figure without dollar
signs or commas. - Answer: 700000
Which one of the following policies would respond to a pressure fired boiler explosion?
A. Commercial property policy.
B. Equipment breakdown policy.
C. Business owners policy. - Answer: B. Equipment breakdown policy
, Which one of the following best describes an advantage to insurers of nonfiled classes compared
with filed classes of inland marine insurance?
A. Nonfiled classes are the same in all states.
B. Nonfiled classes are characterized by relatively homogeneous loss exposures.
C. Nonfiled classes are characterized by a relatively large number of potential insureds
D. Nonfiled classes allow for the customization of policy provisions and rates for individual insureds.
- Answer: D. Nonfiled classes allow for the customization of policy provisions and rates for individual
insureds.
Paris Cuisine, a fine-dining restaurant, rents space in a commercial building, which is insured by its
owner. Paris Cuisine spends $50,000 on wallpaper, floor coverings, windows, and other
improvements that would remain in the building if Paris Cuisine were to move out. Paris Cuisine's
interest in these improvements is insured under which one of the following?
The leasehold improvements section of the building owner's BPP
The building portion of Paris Cuisine's Building and Personal Property Coverage Form (BPP)
The property of others section of the building owner's BPP
The business personal property section of Paris Cuisine's BPP - Answer: The business personal
property section of Paris Cuisine's BPP
Which one of the following statements is correct with respect to the Preservation of Property
additional coverage of the Building and Personal Property Coverage Form (BPP)?
It does not provide protection while the property is in transit to a new location.
It protects against "any direct physical loss or damage" and is not limited to either the covered
causes of loss or locations stipulated in the coverage form.
C
The protection provided under this additional coverage is over and above the limits of insurance
stated in the declarations
D
It extends the policy to protect covered property for up to 180 days at the new location. - Answer: It
protects against "any direct physical loss or damage" and is not limited to either the covered causes
of loss or locations stipulated in the coverage form.
