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CPCU 551 Questions and Correct Answers
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? Ans: 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 Ans: 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? Ans: $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
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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? Ans:
The savings will be $5,250 − $4,800 = $450
When (if) can an insurer examine their insured's books and
records? Ans: 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?
Ans: Only with the insurer's written consent.
Can an insurer cancel a policy verbally?
How many days notice?
To whom is it communicated? Ans: 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? Ans: The ISO,
ASIS, or other insurance advisory organization.
Non-standard forms typically favor insureds.
© 2025 All rights reserved
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Bridges, piers, wharves, and docks are initially excluded from the
Building and Personal Property Coverage Form primarily because
Ans: They require careful underwriting
Agreed Value optional coverage is often elected by risk averse
firms in order to Ans: 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 Ans: 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 Ans: (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.
© 2025 All rights reserved
, 4 | Page
How do you calculate the agreed value payment if the limit is less
than the agreed value? Ans: = (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 Ans: $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) Ans: Losses will be paid in full up to the limit
of insurance (each loss subject to deductible).
How is the deductible applied in BPP? Ans: Once per occurrence.
When analyzing what deductible amount to choose for its Building
and Personal Property Coverage Form (BPP), an insured should
consider Ans: 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? Ans:
100K, since 110K-1K deductible exceeds the limit of insurance.
NOT 99K!
© 2025 All rights reserved
CPCU 551 Questions and Correct Answers
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? Ans: 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 Ans: 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? Ans: $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
© 2025 All rights reserved
, 2 | Page
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? Ans:
The savings will be $5,250 − $4,800 = $450
When (if) can an insurer examine their insured's books and
records? Ans: 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?
Ans: Only with the insurer's written consent.
Can an insurer cancel a policy verbally?
How many days notice?
To whom is it communicated? Ans: 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? Ans: The ISO,
ASIS, or other insurance advisory organization.
Non-standard forms typically favor insureds.
© 2025 All rights reserved
, 3 | Page
Bridges, piers, wharves, and docks are initially excluded from the
Building and Personal Property Coverage Form primarily because
Ans: They require careful underwriting
Agreed Value optional coverage is often elected by risk averse
firms in order to Ans: 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 Ans: 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 Ans: (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.
© 2025 All rights reserved
, 4 | Page
How do you calculate the agreed value payment if the limit is less
than the agreed value? Ans: = (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 Ans: $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) Ans: Losses will be paid in full up to the limit
of insurance (each loss subject to deductible).
How is the deductible applied in BPP? Ans: Once per occurrence.
When analyzing what deductible amount to choose for its Building
and Personal Property Coverage Form (BPP), an insured should
consider Ans: 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? Ans:
100K, since 110K-1K deductible exceeds the limit of insurance.
NOT 99K!
© 2025 All rights reserved
