CPCU 551 Full Questions and
Correct Detailed Answers
Commercial Package Policy (CPP) 1-1 - Answer: Policy that covers two or more lines of business by
combining ISO's commercial lines coverage parts
Businessowners Policy (BOP) 1-2 - Answer: A package policy that combines most of the property and
liability coverages needed by small and medium-sized businesses
Output Policy 1-3 - Answer: A policy that combines, in one form and associated endorsements, all or
most of the commercial property coverages that the insured organization needs, and uses a flexible
rating plan
Commercial Property Conditions 1-4 - Answer: A required component of the commercial property
coverage part that contains conditions applicable to all commercial property coverage forms
Policy Condition 1-5 - Answer: Any provision that qualifies an otherwise enforceable promise made
in the policy
Actual Cash Value (ACV) 1-6 - Answer: Cost to replace property with new property of like kind and
quality less depreciation
Replacement Cost 1-7 - Answer: Cost to repair or replace property using new materials of like kind
and quality with no deduction for depreciation
Fixture 2-1 - Answer: Any personal property affixed to real property in such a way as to become part
of the real property
Trade Fixtures 2-2 - Answer: Fixtures and equipment that may be attached to a building during a
tenant's occupancy, with the intention that they be removed when the tenant leaves
Improvements and Betterments 2-3 - Answer: Alterations or additions made to the building at the
expense of the insured who does not own the building and who cannot legally remove them
,Commercial Bailment 2-4 - Answer: The temporary possession by one party (the bailee) of personal
property of another party (the bailor) for a specific purpose beneficial to both parties
Agreed Value Optional Coverage 2-5 - Answer: Optional coverage that suspends the Coinsurance
condition if the insured carries the amount of insurance agreed to by the insurer and the insured
Inflation Guard Optional Coverage 2-6 - Answer: Coverage for the effects of inflation that
automatically increases the limit of insurance by the percentage of annual increase shown in the
declarations
Replacement Cost Optional Coverage 2-7 - Answer: Coverage for losses to most types of property on
a replacement cost basis (with no deduction for depreciation or obsolescence) instead of an actual
cash value basis
Causes of Loss - Basic Form 3-1 - Answer: Form that covers Fire, Lightning, Explosion, Windstorm,
Hail, Smoke, Aircraft, Vehicles, Riot, Civil Commotion, Vandalism, Sprinkler Leakage, Sinkhole
Collapse, and Volcanic Action
Causes of Loss - Broad Form 3-2 - Answer: Form that covers basic form perils, plus Falling Objects;
Weight of Snow, Ice, or sleet; Water Damage; and (as additional coverage) Collapse caused by
certain perils
Manufacturer's Selling Price (Finished ""Stock"" Only) Endorsement 4-1 - Answer: A commercial
property endorsement that values finished stock manufactured by the insured at selling price, less
any discounts and expenses that the insured would have otherwise had.
Functional Building Valuation Endorsement 4-2 - Answer: A commercial property endorsement that
provides modified replacement cost coverage on buildings; may be appropriate when insuring a
building with a replacement cost far in excess of its market value
Specific Insurance 4-3 - Answer: Insurance that covers each building for a specific limit of insurance
and personal property at each building for a specific limit of insurance
Blanket Insurance 4-4 - Answer: Insurance that covers either of the following with one limit of
insurance:
1) one type of property in one or more separately rated buildings, or
2) two or more types of property in one or more separately rated buildings"
, Peak Season Limit of Insurance Endorsement 4-5 - Answer: Endorsement that covers the fluctuating
values of business in personal property by providing differing amounts of insurance for certain time
periods during the policy period
Value Reporting Form 4-6 - Answer: A commercial property form that bases the insured's premium
for business personal property on the values that the insured reports to the insurer periodically
during the policy period
Ordinance or Law Coverage Endorsement 4-7 - Answer: Endorsement that covers three types of
losses resulting from the enforcement of building ordinances or laws:
1) the value of the undamaged portion of a building that must be demolished
2) the cost to demolish the building's undamaged portion and remove its debris
3) the increase cost to rebuild the property
Utility Services - Direct Damage Endorsement 4-8 - Answer: A commercial property endorsement
that covers damage to covered property caused by the interruption of utility services (water,
communications , or power) to the insured premises.
Spoilage Coverage Endorsement 4-9 - Answer: Endorsement that covers damage to perishable stock
due to power outages; on-premises breakdown; or contamination of the insured's refrigeration,
cooling, or humidity control equipment
Radioactive Contamination Endorsement 4-10 - Answer: A commercial property endorsement for
organizations that have a radioactive contamination exposure on their premises, other than a
nuclear reactor or fuel for a nuclear reactor; covers physical loss to covered property caused by
sudden and accidental radioactive contamination
Condominium 5-1 - Answer: A real estate development consisting of a group of units, in which the
air space within the boundaries of each unit is owned by the unit owner, and all remaining real and
personal property is owned jointly by all the unit owners.
Condominium Unit 5-2 - Answer: The portion of a condominium that is owned solely by a unit
owner
Condominium Association 5-3 - Answer: The entity composed of the unit owners in a condominium
to manage the condominium and to own the common elements
Correct Detailed Answers
Commercial Package Policy (CPP) 1-1 - Answer: Policy that covers two or more lines of business by
combining ISO's commercial lines coverage parts
Businessowners Policy (BOP) 1-2 - Answer: A package policy that combines most of the property and
liability coverages needed by small and medium-sized businesses
Output Policy 1-3 - Answer: A policy that combines, in one form and associated endorsements, all or
most of the commercial property coverages that the insured organization needs, and uses a flexible
rating plan
Commercial Property Conditions 1-4 - Answer: A required component of the commercial property
coverage part that contains conditions applicable to all commercial property coverage forms
Policy Condition 1-5 - Answer: Any provision that qualifies an otherwise enforceable promise made
in the policy
Actual Cash Value (ACV) 1-6 - Answer: Cost to replace property with new property of like kind and
quality less depreciation
Replacement Cost 1-7 - Answer: Cost to repair or replace property using new materials of like kind
and quality with no deduction for depreciation
Fixture 2-1 - Answer: Any personal property affixed to real property in such a way as to become part
of the real property
Trade Fixtures 2-2 - Answer: Fixtures and equipment that may be attached to a building during a
tenant's occupancy, with the intention that they be removed when the tenant leaves
Improvements and Betterments 2-3 - Answer: Alterations or additions made to the building at the
expense of the insured who does not own the building and who cannot legally remove them
,Commercial Bailment 2-4 - Answer: The temporary possession by one party (the bailee) of personal
property of another party (the bailor) for a specific purpose beneficial to both parties
Agreed Value Optional Coverage 2-5 - Answer: Optional coverage that suspends the Coinsurance
condition if the insured carries the amount of insurance agreed to by the insurer and the insured
Inflation Guard Optional Coverage 2-6 - Answer: Coverage for the effects of inflation that
automatically increases the limit of insurance by the percentage of annual increase shown in the
declarations
Replacement Cost Optional Coverage 2-7 - Answer: Coverage for losses to most types of property on
a replacement cost basis (with no deduction for depreciation or obsolescence) instead of an actual
cash value basis
Causes of Loss - Basic Form 3-1 - Answer: Form that covers Fire, Lightning, Explosion, Windstorm,
Hail, Smoke, Aircraft, Vehicles, Riot, Civil Commotion, Vandalism, Sprinkler Leakage, Sinkhole
Collapse, and Volcanic Action
Causes of Loss - Broad Form 3-2 - Answer: Form that covers basic form perils, plus Falling Objects;
Weight of Snow, Ice, or sleet; Water Damage; and (as additional coverage) Collapse caused by
certain perils
Manufacturer's Selling Price (Finished ""Stock"" Only) Endorsement 4-1 - Answer: A commercial
property endorsement that values finished stock manufactured by the insured at selling price, less
any discounts and expenses that the insured would have otherwise had.
Functional Building Valuation Endorsement 4-2 - Answer: A commercial property endorsement that
provides modified replacement cost coverage on buildings; may be appropriate when insuring a
building with a replacement cost far in excess of its market value
Specific Insurance 4-3 - Answer: Insurance that covers each building for a specific limit of insurance
and personal property at each building for a specific limit of insurance
Blanket Insurance 4-4 - Answer: Insurance that covers either of the following with one limit of
insurance:
1) one type of property in one or more separately rated buildings, or
2) two or more types of property in one or more separately rated buildings"
, Peak Season Limit of Insurance Endorsement 4-5 - Answer: Endorsement that covers the fluctuating
values of business in personal property by providing differing amounts of insurance for certain time
periods during the policy period
Value Reporting Form 4-6 - Answer: A commercial property form that bases the insured's premium
for business personal property on the values that the insured reports to the insurer periodically
during the policy period
Ordinance or Law Coverage Endorsement 4-7 - Answer: Endorsement that covers three types of
losses resulting from the enforcement of building ordinances or laws:
1) the value of the undamaged portion of a building that must be demolished
2) the cost to demolish the building's undamaged portion and remove its debris
3) the increase cost to rebuild the property
Utility Services - Direct Damage Endorsement 4-8 - Answer: A commercial property endorsement
that covers damage to covered property caused by the interruption of utility services (water,
communications , or power) to the insured premises.
Spoilage Coverage Endorsement 4-9 - Answer: Endorsement that covers damage to perishable stock
due to power outages; on-premises breakdown; or contamination of the insured's refrigeration,
cooling, or humidity control equipment
Radioactive Contamination Endorsement 4-10 - Answer: A commercial property endorsement for
organizations that have a radioactive contamination exposure on their premises, other than a
nuclear reactor or fuel for a nuclear reactor; covers physical loss to covered property caused by
sudden and accidental radioactive contamination
Condominium 5-1 - Answer: A real estate development consisting of a group of units, in which the
air space within the boundaries of each unit is owned by the unit owner, and all remaining real and
personal property is owned jointly by all the unit owners.
Condominium Unit 5-2 - Answer: The portion of a condominium that is owned solely by a unit
owner
Condominium Association 5-3 - Answer: The entity composed of the unit owners in a condominium
to manage the condominium and to own the common elements
