CPCU 551 EXAM QUESTIONS AND
ANSWERS ALL CORRECT
What is the coverage territory for EBP? - Answer-US, Puerto Rico, Canada
To comply with regulations, equipment must sometimes be inspected. Who inspects it?
- Answer-the insurer!
What happens if the CPP insurer and the EBP insurer dispute coverage? - Answer-each
insurer will pay the entire amount of loss covered under its own policy plus half of the
amount in dispute.
Does a BOP include liability coverage? - Answer-Yes, in addition to property coverage,
and common conditions
What does BOP cover? (4) - Answer-buildings, personal property, business income and
extra expense
What are the parameters for a business to be eligible for BOP? - Answer-no more than
25k sq feet or $6 mil in annual gross sales at each location!
What types of businesses are ineligible for BOP? - Answer-auto, bars, manufacturing,
finance, general contractors.
do ISO BOPs provide named perils (basic form) or special-form coverage? - Answer-
both - primarily special form, but there's a named perils endorsement
how can small businesses eliminate the waiting period caused by a usual 72 hr wait
prior to start of period of restoration under BOP? - Answer-this can be eliminated by
endorsement. this condition doesn't bode well for small businesses.
what is BCF? - Answer-Business-owners coverage form (BOP)
What is included under building coverage under BOP that is not included under BPP? -
Answer-property in common areas and the landlord insured's personal property in
apartments and rooms furnished by the insured as landlord.
How does personal property of others coverage differ between BPP and and BOP? -
Answer-BPP only covers property of others that the insured has leased and is
,contactually obligated to insure, the BOP covered others' property under the SAME
LIMIT!
What's the difference in business income limits between BCF and Business income
coverage? - Answer-BOP has a one-year limit, not a dollar limit (ordinary payroll is only
covered for 60 days, however
Which has a higher limit for both electronic data and interruption of computer
operations, BPP or BOP? - Answer-BOP ($10K for both) compared to $2.5K for BPP
Which has higher limits for outdoor property, BPP or BOP? - Answer-BOP ($2.5K/$500
per item) compared to $1K/250 per item for BPP
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? - 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 - Answer-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? - 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? - Answer-The savings will be $5,250 −
$4,800 = $450
When (if) can an insurer examine their insured's books and records? - 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? - Answer-Only with the
insurer's written consent.
Can an insurer cancel a policy verbally?
How many days notice?
To whom is it communicated? - Answer-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? - Answer-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 - Answer-They require careful underwriting
Agreed Value optional coverage is often elected by risk averse firms in order to -
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 - 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 - 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? - 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 - 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) - 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? - Answer-Once per occurrence.
When analyzing what deductible amount to choose for its Building and Personal
Property Coverage Form (BPP), an insured should consider - Answer-If the items on the
BPP will be listed separately or on a blanket basis.
ANSWERS ALL CORRECT
What is the coverage territory for EBP? - Answer-US, Puerto Rico, Canada
To comply with regulations, equipment must sometimes be inspected. Who inspects it?
- Answer-the insurer!
What happens if the CPP insurer and the EBP insurer dispute coverage? - Answer-each
insurer will pay the entire amount of loss covered under its own policy plus half of the
amount in dispute.
Does a BOP include liability coverage? - Answer-Yes, in addition to property coverage,
and common conditions
What does BOP cover? (4) - Answer-buildings, personal property, business income and
extra expense
What are the parameters for a business to be eligible for BOP? - Answer-no more than
25k sq feet or $6 mil in annual gross sales at each location!
What types of businesses are ineligible for BOP? - Answer-auto, bars, manufacturing,
finance, general contractors.
do ISO BOPs provide named perils (basic form) or special-form coverage? - Answer-
both - primarily special form, but there's a named perils endorsement
how can small businesses eliminate the waiting period caused by a usual 72 hr wait
prior to start of period of restoration under BOP? - Answer-this can be eliminated by
endorsement. this condition doesn't bode well for small businesses.
what is BCF? - Answer-Business-owners coverage form (BOP)
What is included under building coverage under BOP that is not included under BPP? -
Answer-property in common areas and the landlord insured's personal property in
apartments and rooms furnished by the insured as landlord.
How does personal property of others coverage differ between BPP and and BOP? -
Answer-BPP only covers property of others that the insured has leased and is
,contactually obligated to insure, the BOP covered others' property under the SAME
LIMIT!
What's the difference in business income limits between BCF and Business income
coverage? - Answer-BOP has a one-year limit, not a dollar limit (ordinary payroll is only
covered for 60 days, however
Which has a higher limit for both electronic data and interruption of computer
operations, BPP or BOP? - Answer-BOP ($10K for both) compared to $2.5K for BPP
Which has higher limits for outdoor property, BPP or BOP? - Answer-BOP ($2.5K/$500
per item) compared to $1K/250 per item for BPP
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? - 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 - Answer-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? - 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? - Answer-The savings will be $5,250 −
$4,800 = $450
When (if) can an insurer examine their insured's books and records? - 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? - Answer-Only with the
insurer's written consent.
Can an insurer cancel a policy verbally?
How many days notice?
To whom is it communicated? - Answer-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? - Answer-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 - Answer-They require careful underwriting
Agreed Value optional coverage is often elected by risk averse firms in order to -
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 - 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 - 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? - 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 - 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) - 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? - Answer-Once per occurrence.
When analyzing what deductible amount to choose for its Building and Personal
Property Coverage Form (BPP), an insured should consider - Answer-If the items on the
BPP will be listed separately or on a blanket basis.
