CPCU 551 EXAM COMMERCIAL PROPERTY MANAGEMENT
QUESTIONS AND ANSWERS (VERIFIED AND WELL DETAILED
ANSWERS) LATEST UPDATE 2025-2026
A building had been vacant for 60 days, and the insurer didn't know about it, when it
| | | | | | | | | | | | | | | |
sustained 100K, 5K, and 1K losses due to windstorm, theft, and sprinkler leakage,
| | | | | | | | | | | | |
respectively. What amount is covered under CPP? - CORRECT ANSWER 85K, 0,
| | | | | | | | | | | |
and 0. If a building is vacant for 60 or more consecutive days before the loss, they
| | | | | | | | | | | | | | | | |
won't pay for any loss caused by vandalism, sprinkler leakage, building glass
| | | | | | | | | | | |
breakage, water damage, theft, or attempted theft... otherwise you'll only get 85%
| | | | | | | | | | | |
Various building design features can help prevent the spread of a hostile fire. For
| | | | | | | | | | | | |
example, a solid piece of material that is inserted between wall studs to delay the flow
| | | | | | | | | | | | | | | |
of heat or fire through this open space is a - CORRECTANSWER Fire stop.
| | | | | | | | | | | | | | |
Pete insures his motorcycle rental property for $100,000 on an actual cash value
| | | | | | | | | | | |
(ACV) basis. The ACV of the property is $150,000 and his Commercial Insurance
| | | | | | | | | | | | |
Policy (CIP) has a 90 percent coinsurance clause.A fire caused $50,000 of damage to
| | | | | | | | | | | | | | |
the building structure. How much will Pete recoup under his insurance policy? -
| | | | | | | | | | | | |
CORRECT ANSWER $37,037
| | |
A manufacturing company has business personal property valued at $1,500,000.
| | | | | | | | |
The risk manager is considering insuring the business personal property with 80
| | | | | | | | | | | |
percent coinsurance at a $0.40 rate per $100 of coverage. The 100 percent rate is
| | | | | | | | | | | | | | |
$0.35 per $100 of coverage. if the business personal property is insured with an 80
| | | | | | | | | | | | | |
percent coinsurance, how much premium will be saved? - CORRECT ANSWER
| | | | | | | | | | |
The savings will be $5,250 − $4,800 = $450
| | | | | | | | |
When (if) can an insurer examine their insured's books and records? - CORRECT
| | | | | | | | | | | |
ANSWER Anytime during the policy period and up to 3 years after. The final
| | | | | | | | | | | | | |
,premium is established after the policy period expires. Premiums are estimated at its
| | | | | | | | | | | |
formation.
|
Can an insured transfer duties under common policy conditions? - CORRECT
| | | | | | | | | |
ANSWER Only with the insurer's written consent.
| | | | | | |
Can an insurer cancel a policy verbally? How
| | | | | | |
many days notice?
| | |
To whom is it communicated? - CORRECTANSWER No, it must be in writing. 10
| | | | | | | | | | | | | |
days notice for nonpayment. 30 days for all other reasons.
| | | | | | | | | |
To the First Named Insured.
| | | |
Who develops a standard form?
| | | |
Who does a non-standard form typically favor? - CORRECTANSWER The ISO,
| | | | | | | | | | |
ASIS, or other insurance advisory organization.
| | | | | |
Non-standard forms typically favor insureds. | | | |
Bridges, piers, wharves, and docks are initially excluded from the Building and
| | | | | | | | | | |
Personal Property Coverage Form primarily because - CORRECT ANSWER
| | | | | | | | |
They require careful underwriting
| | | |
Agreed Value optional coverage is often elected by risk averse firms in order to -
| | | | | | | | | | | | | |
CORRECT ANSWER Alleviate the risk of not complying with the Coinsurance
| | | | | | | | | | |
condition.
|
An insurance company recently leased a new office location in Dallas, Texas. On
| | | | | | | | | | | |
September 26, 2010, prior to occupying the building, the company spent $250,000 on
| | | | | | | | | | | | |
building improvements. The useful life of these improvements was 10 years. On
| | | | | | | | | | | |
September 26, 2011, the improvements were destroyed and replaced by the
| | | | | | | | | | |
,building owner at a cost of $300,000. Under the company's Building and Personal
| | | | | | | | | | | |
Property Coverage Form policy the amount reimbursable for this loss is -
| | | | | | | | | | | |
CORRECT ANSWER Under the company's Building and Personal Property | | | | | | | |
Coverage Form policy the amount reimbursable for this loss is $0. The building owner
| | | | | | | | | | | | | |
made the repairs, not the tenant.
| | | | | |
The maximum amount of coverage provided at each building under the Newly
| | | | | | | | | | |
Acquired or Constructed Property extension in the Building and Personal Property
| | | | | | | | | | |
Coverage Form is - CORRECT ANSWER (for up to 30 days) $250K of your
| | | | | | | | | | | | | |
building coverage and $100 of your contents coverage at any acquired location, but
| | | | | | | | | | | | |
we'll charge you for the coverage.
| | | | | |
How do you calculate the agreed value payment if the limit is less than the agreed
| | | | | | | | | | | | | | |
value? - CORRECT ANSWER = (limit/agreed value x loss)-deductible.
| | | | | | | | |
An insured chooses the "Agreed Value" option for its Building and Personal Property
| | | | | | | | | | | |
Coverage Form (BPP). The agreed value for the property is $100,000 and the limit of
| | | | | | | | | | | | | | |
insurance is $120,000 with a $5,000 deductible. The building is totally destroyed by a
| | | | | | | | | | | | | |
covered cause of loss. At the time of the loss, the value of the building was $130,000.
| | | | | | | | | | | | | | | | |
The insurer would pay - CORRECT ANSWER $120k.
| | | | | | | |
What is the agreed value payment if the limit of insurance is greater than or equal to
| | | | | | | | | | | | | | | |
the agreed value stated in the declarations? (BPP) - CORRECT ANSWER Losses
| | | | | | | | | | | |
will be paid in full up to the limit of insurance (each loss subject to deductible).
| | | | | | | | | | | | | | | |
How is the deductible applied in BPP? - CORRECTANSWER Once per
| | | | | | | | | | |
occurrence.
|
, When analyzing what deductible amount to choose for its Building and Personal
| | | | | | | | | | |
Property Coverage Form (BPP), an insured should consider - CORRECT
| | | | | | | | | |
ANSWER If the items on the BPP will be listed separately or on a blanket basis.
| | | | | | | | | | | | | | | |
ACV. 100K limit. 1K deductible. 110K loss. What is payment? - CORRECT
| | | | | | | | | | |
ANSWER 100K, since 110K-1K deductible exceeds the limit of insurance. NOT
| | | | | | | | | | |
99K!
|
If blanket insurance w/ a $100K deductible, what would the payment be if a fire loss
| | | | | | | | | | | | | | |
caused $800 to building and $400 to business personal property (if these items were
| | | | | | | | | | | | | |
scheduled separately). - CORRECT ANSWER Zero.
| | | | | |
If the improvements and betterments sustained a loss sometime during a business's
| | | | | | | | | | |
lease and if the building owner repairs the rental space, but the company (lessee)
| | | | | | | | | | | | | |
does not replace the improvements and betterments once the space is repaired, what
| | | | | | | | | | | | |
valuation method is used under the lessee's BPP policy? - CORRECT ANSWER
| | | | | | | | | | | |
Pro-rata based on the length of the lease, the time expired since the improvements
| | | | | | | | | | | | | |
and betterments were installed, and the original cost
| | | | | | | |
A building is insured for $200,000 under an agreed value policy. The policy has a
| | | | | | | | | | | | | |
$10,000 deductible and the agreed value of the building is $250,000. After suffering a
| | | | | | | | | | | | |
$43,000 loss, the insurer will pay (rounded to the nearest $100) - CORRECT
| | | | | | | | | | | | |
ANSWER 24,400
| |
The risk manager for a painting company has purchased an outdoor property
| | | | | | | | | | |
extension policy to cover their trees, shrubs and signs not attached to the building.
| | | | | | | | | | | | | |
Which of the following would not be considered a covered cause of loss? Civil
| | | | | | | | | | | | | |
Commotion, lightning, explosion, windstorm? - CORRECT ANSWER
| | | | | | |
Windstorm.
|
QUESTIONS AND ANSWERS (VERIFIED AND WELL DETAILED
ANSWERS) LATEST UPDATE 2025-2026
A building had been vacant for 60 days, and the insurer didn't know about it, when it
| | | | | | | | | | | | | | | |
sustained 100K, 5K, and 1K losses due to windstorm, theft, and sprinkler leakage,
| | | | | | | | | | | | |
respectively. What amount is covered under CPP? - CORRECT ANSWER 85K, 0,
| | | | | | | | | | | |
and 0. If a building is vacant for 60 or more consecutive days before the loss, they
| | | | | | | | | | | | | | | | |
won't pay for any loss caused by vandalism, sprinkler leakage, building glass
| | | | | | | | | | | |
breakage, water damage, theft, or attempted theft... otherwise you'll only get 85%
| | | | | | | | | | | |
Various building design features can help prevent the spread of a hostile fire. For
| | | | | | | | | | | | |
example, a solid piece of material that is inserted between wall studs to delay the flow
| | | | | | | | | | | | | | | |
of heat or fire through this open space is a - CORRECTANSWER Fire stop.
| | | | | | | | | | | | | | |
Pete insures his motorcycle rental property for $100,000 on an actual cash value
| | | | | | | | | | | |
(ACV) basis. The ACV of the property is $150,000 and his Commercial Insurance
| | | | | | | | | | | | |
Policy (CIP) has a 90 percent coinsurance clause.A fire caused $50,000 of damage to
| | | | | | | | | | | | | | |
the building structure. How much will Pete recoup under his insurance policy? -
| | | | | | | | | | | | |
CORRECT ANSWER $37,037
| | |
A manufacturing company has business personal property valued at $1,500,000.
| | | | | | | | |
The risk manager is considering insuring the business personal property with 80
| | | | | | | | | | | |
percent coinsurance at a $0.40 rate per $100 of coverage. The 100 percent rate is
| | | | | | | | | | | | | | |
$0.35 per $100 of coverage. if the business personal property is insured with an 80
| | | | | | | | | | | | | |
percent coinsurance, how much premium will be saved? - CORRECT ANSWER
| | | | | | | | | | |
The savings will be $5,250 − $4,800 = $450
| | | | | | | | |
When (if) can an insurer examine their insured's books and records? - CORRECT
| | | | | | | | | | | |
ANSWER Anytime during the policy period and up to 3 years after. The final
| | | | | | | | | | | | | |
,premium is established after the policy period expires. Premiums are estimated at its
| | | | | | | | | | | |
formation.
|
Can an insured transfer duties under common policy conditions? - CORRECT
| | | | | | | | | |
ANSWER Only with the insurer's written consent.
| | | | | | |
Can an insurer cancel a policy verbally? How
| | | | | | |
many days notice?
| | |
To whom is it communicated? - CORRECTANSWER No, it must be in writing. 10
| | | | | | | | | | | | | |
days notice for nonpayment. 30 days for all other reasons.
| | | | | | | | | |
To the First Named Insured.
| | | |
Who develops a standard form?
| | | |
Who does a non-standard form typically favor? - CORRECTANSWER The ISO,
| | | | | | | | | | |
ASIS, or other insurance advisory organization.
| | | | | |
Non-standard forms typically favor insureds. | | | |
Bridges, piers, wharves, and docks are initially excluded from the Building and
| | | | | | | | | | |
Personal Property Coverage Form primarily because - CORRECT ANSWER
| | | | | | | | |
They require careful underwriting
| | | |
Agreed Value optional coverage is often elected by risk averse firms in order to -
| | | | | | | | | | | | | |
CORRECT ANSWER Alleviate the risk of not complying with the Coinsurance
| | | | | | | | | | |
condition.
|
An insurance company recently leased a new office location in Dallas, Texas. On
| | | | | | | | | | | |
September 26, 2010, prior to occupying the building, the company spent $250,000 on
| | | | | | | | | | | | |
building improvements. The useful life of these improvements was 10 years. On
| | | | | | | | | | | |
September 26, 2011, the improvements were destroyed and replaced by the
| | | | | | | | | | |
,building owner at a cost of $300,000. Under the company's Building and Personal
| | | | | | | | | | | |
Property Coverage Form policy the amount reimbursable for this loss is -
| | | | | | | | | | | |
CORRECT ANSWER Under the company's Building and Personal Property | | | | | | | |
Coverage Form policy the amount reimbursable for this loss is $0. The building owner
| | | | | | | | | | | | | |
made the repairs, not the tenant.
| | | | | |
The maximum amount of coverage provided at each building under the Newly
| | | | | | | | | | |
Acquired or Constructed Property extension in the Building and Personal Property
| | | | | | | | | | |
Coverage Form is - CORRECT ANSWER (for up to 30 days) $250K of your
| | | | | | | | | | | | | |
building coverage and $100 of your contents coverage at any acquired location, but
| | | | | | | | | | | | |
we'll charge you for the coverage.
| | | | | |
How do you calculate the agreed value payment if the limit is less than the agreed
| | | | | | | | | | | | | | |
value? - CORRECT ANSWER = (limit/agreed value x loss)-deductible.
| | | | | | | | |
An insured chooses the "Agreed Value" option for its Building and Personal Property
| | | | | | | | | | | |
Coverage Form (BPP). The agreed value for the property is $100,000 and the limit of
| | | | | | | | | | | | | | |
insurance is $120,000 with a $5,000 deductible. The building is totally destroyed by a
| | | | | | | | | | | | | |
covered cause of loss. At the time of the loss, the value of the building was $130,000.
| | | | | | | | | | | | | | | | |
The insurer would pay - CORRECT ANSWER $120k.
| | | | | | | |
What is the agreed value payment if the limit of insurance is greater than or equal to
| | | | | | | | | | | | | | | |
the agreed value stated in the declarations? (BPP) - CORRECT ANSWER Losses
| | | | | | | | | | | |
will be paid in full up to the limit of insurance (each loss subject to deductible).
| | | | | | | | | | | | | | | |
How is the deductible applied in BPP? - CORRECTANSWER Once per
| | | | | | | | | | |
occurrence.
|
, When analyzing what deductible amount to choose for its Building and Personal
| | | | | | | | | | |
Property Coverage Form (BPP), an insured should consider - CORRECT
| | | | | | | | | |
ANSWER If the items on the BPP will be listed separately or on a blanket basis.
| | | | | | | | | | | | | | | |
ACV. 100K limit. 1K deductible. 110K loss. What is payment? - CORRECT
| | | | | | | | | | |
ANSWER 100K, since 110K-1K deductible exceeds the limit of insurance. NOT
| | | | | | | | | | |
99K!
|
If blanket insurance w/ a $100K deductible, what would the payment be if a fire loss
| | | | | | | | | | | | | | |
caused $800 to building and $400 to business personal property (if these items were
| | | | | | | | | | | | | |
scheduled separately). - CORRECT ANSWER Zero.
| | | | | |
If the improvements and betterments sustained a loss sometime during a business's
| | | | | | | | | | |
lease and if the building owner repairs the rental space, but the company (lessee)
| | | | | | | | | | | | | |
does not replace the improvements and betterments once the space is repaired, what
| | | | | | | | | | | | |
valuation method is used under the lessee's BPP policy? - CORRECT ANSWER
| | | | | | | | | | | |
Pro-rata based on the length of the lease, the time expired since the improvements
| | | | | | | | | | | | | |
and betterments were installed, and the original cost
| | | | | | | |
A building is insured for $200,000 under an agreed value policy. The policy has a
| | | | | | | | | | | | | |
$10,000 deductible and the agreed value of the building is $250,000. After suffering a
| | | | | | | | | | | | |
$43,000 loss, the insurer will pay (rounded to the nearest $100) - CORRECT
| | | | | | | | | | | | |
ANSWER 24,400
| |
The risk manager for a painting company has purchased an outdoor property
| | | | | | | | | | |
extension policy to cover their trees, shrubs and signs not attached to the building.
| | | | | | | | | | | | | |
Which of the following would not be considered a covered cause of loss? Civil
| | | | | | | | | | | | | |
Commotion, lightning, explosion, windstorm? - CORRECT ANSWER
| | | | | | |
Windstorm.
|
