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CPCU 551 Questions and Correct Answers
A building and its contents are insured under Building and PP
coverage form with the Agreed Value option in effect. The limit of
insurance is $1,000,000 with a $5,000 deductible. The agreed value
shown in the policy is $1,500,000. How much will the insurer pay
if the insured sustains a $300,000 loss by an insured peril? Ans:
The insurer will pay $195,000 = [($1,000,000/$1,500,000) x
$300,000] - $5,000
Adjacent properties can increase the probability of loss to the
insured's building and contents. When'd aging commercial
property exposures, the term used to refer to the hazard posed by
adjacent or surrounding properties is - Ans: External Exposure
Wholesale Merchandiser leases 5 warehouses, each in a different
city, to supply retail customers in each city with timely service.
The average value of the merch at each warehouse is $750,000.
Which blanket insurance limit would bear suit the insured's needs
while minimizing the cost of over-insuring? Ans: Blanket
$3,375,000 is best. (5 x $750,000) x 90% = $3,375,000
Music Store insures it's BPP, including merch, under a Business
Personal Property Coverage Form with the Value Reporting
Endorsement set up on a monthly reporting basis. The limit of
insurance is $750,000 and the deductible is $1,000. On October
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25, a fire destroyed all the merch and BPP. The resulting damages
totaled $700,000. The store's last report of values was $400,000
on September 30. It was determined that the actual values that
should have been reported on 9/30 were $500,000. Based on these
circumstances, how much will the store collect for a $700,000
loss? Ans: $559,000 = $400,000/$500,000 x $700,000 - $1,000
Which endorsement would be particularly useful to companies in
the clothing manufacturing business? Ans: The Manufacturer's
Consequential Loss Assumption endorsement modifies a
commercial property coverage form to cover the increased cost of
replacing damaged property with environmentally sound materials
or methods.
The Condominium Association Coverage Form is designed to
insure the building and BPP loss exposures of condominium
associations. In addition to the building and the association's BPP,
this coverage form also covers this major category of property:
Ans: Personal Property of Others
One purpose of the misc. real property coverage which can be
added to the Condominium Commercial Unit-Owner's Coverage
Form is to insure - Ans: Condominium property that the Named
Insured has a duty to insure, such as a storage building
© 2025 All rights reserved
CPCU 551 Questions and Correct Answers
A building and its contents are insured under Building and PP
coverage form with the Agreed Value option in effect. The limit of
insurance is $1,000,000 with a $5,000 deductible. The agreed value
shown in the policy is $1,500,000. How much will the insurer pay
if the insured sustains a $300,000 loss by an insured peril? Ans:
The insurer will pay $195,000 = [($1,000,000/$1,500,000) x
$300,000] - $5,000
Adjacent properties can increase the probability of loss to the
insured's building and contents. When'd aging commercial
property exposures, the term used to refer to the hazard posed by
adjacent or surrounding properties is - Ans: External Exposure
Wholesale Merchandiser leases 5 warehouses, each in a different
city, to supply retail customers in each city with timely service.
The average value of the merch at each warehouse is $750,000.
Which blanket insurance limit would bear suit the insured's needs
while minimizing the cost of over-insuring? Ans: Blanket
$3,375,000 is best. (5 x $750,000) x 90% = $3,375,000
Music Store insures it's BPP, including merch, under a Business
Personal Property Coverage Form with the Value Reporting
Endorsement set up on a monthly reporting basis. The limit of
insurance is $750,000 and the deductible is $1,000. On October
© 2025 All rights reserved
, 2 | Page
25, a fire destroyed all the merch and BPP. The resulting damages
totaled $700,000. The store's last report of values was $400,000
on September 30. It was determined that the actual values that
should have been reported on 9/30 were $500,000. Based on these
circumstances, how much will the store collect for a $700,000
loss? Ans: $559,000 = $400,000/$500,000 x $700,000 - $1,000
Which endorsement would be particularly useful to companies in
the clothing manufacturing business? Ans: The Manufacturer's
Consequential Loss Assumption endorsement modifies a
commercial property coverage form to cover the increased cost of
replacing damaged property with environmentally sound materials
or methods.
The Condominium Association Coverage Form is designed to
insure the building and BPP loss exposures of condominium
associations. In addition to the building and the association's BPP,
this coverage form also covers this major category of property:
Ans: Personal Property of Others
One purpose of the misc. real property coverage which can be
added to the Condominium Commercial Unit-Owner's Coverage
Form is to insure - Ans: Condominium property that the Named
Insured has a duty to insure, such as a storage building
© 2025 All rights reserved
