Commercial Property Packages

An additional coverage on a Commercial Property form is for charges that a fire department might levy for its services. The maximum amount under this coverage is __________.

$1,000 Business Owners' and Commercial Property Policies have a maximum coverage for a Fire Department Service Charge of $1,000. Dwelling Property and Homeowner Policies have a maximum coverage for a Fire Department Service Charge of $500.

Nathan has a Business Income form attached to his Commercial Property coverage. He has a $400,000 policy limit with a 1/4 maximum monthly limit of indemnity. What is the most the insurer will pay for a covered loss of business income, per month?

$100,000 1/4 of $400,000 = $100,000

A new roof on a building will cost $25,000 to replace after it was destroyed in a windstorm. The original roof cost $15,000 10 years ago. The roof has depreciated $500 per year. What is the actual cash value of the roof?

$20,000 $25,000 (replacement cost) minus $5,000 (depreciation) ($500 X 10 years = $5,000) = $20,000 ACV.

Nick Riviera has two Commercial Property policies: $1,000,000 with insurance Company Awesome and $1,000,000 with insurance Company Best-In-Show. If a $50,000 covered loss occurs, how much will each insurer pay?

$25,000 Under the Pro Rata condition regarding over-insurance, each will pay 1/2 ($25,000) since each has 1/2 of the total coverage.

Matthew has a Business Income form attached to his Commercial Property coverage. He has a $400,000 policy limit with a 1/4 maximum monthly limit of indemnity. What is the most the insurer will pay for the following covered loss of business income: First month loss $50,000, second month loss $150,000, and third month loss $150,000?

$250,000 $50,000 for the first month, $100,00 for the second and $100,000 for the third equals a total of $250,000. $100,000 represents the maximum MONTHLY limit that would be paid for a covered loss.

Adrian has a Business Income form attached to his Commercial Property coverage. He has a $400,000 policy limit with a 1/4 maximum monthly limit of indemnity. What is the most the insurer will pay for a covered loss of business income, per occurrence?

$400,000 $400,000 is the maximum which would be paid for any one individual loss.

Flood wipes out a building and it is repaired, but full business income is not restored until 45 days after restoration. How many days are covered for loss of business income after restoration?

0 days The peril of Flood is excluded, so there is NO coverage at all.

Under the Commercial Property Coverage Part, Coverage B will cover business property on or within __________ of the described premises.

100 feet

According to typical policy provisions, if an insurance company decides not to renew a policy, it is required to give written notice of nonrenewal to the insured at least __________ days in advance.

30

Under the extra expense coverage form, full policy limits are available after __________ days.

60

Under the Nationwide Definition, which of the following would NOT be eligible for Marine insurance?

A Leased Building A leased building is insured by the owner of the building under a Commercial Property policy, NOT Marine.

A Commercial Property policy with a Special Form coverage (open perils) Includes theft coverage. Which of the following statements is correct regarding this coverage?

A computer taken by a burglar at the business location is covered. The computer taken by a burglar is the only thing that is covered in the question. Dishonest act of employees and loss of money and securities is covered under Crime Insurance.

Which one of the following businesses would you assume needs Inland Marine Bailees Customer coverage?

A dry cleaners, to cover the property of their customers. Bailees Customers Coverage is a Commercial Property Floater that provides coverage for bailees (the temporary holder of customers property) such as shoe repair shops, dry cleaners, and other businesses with a large amount of customers goods in their possession. Coverage is provided even if the insured is not negligent for the loss. Helps to retain the good will of a service type of business.

Fire damages a building and there is a heavy loss to the contents of the business owner and insured. What would be a way of showing insurable interest in lost property?

Account statement and mortgage records Even though this information is not covered in the study material, it is a type of question which may show up on your exam. Choose what you think is the best answer, or what makes sense to you.

All scheduled property other than fine arts is covered on a/an __________ basis. The policy will not pay more than the stated amount of insurance, or the amount for which the insured could be expected to repair or replace the property.

Actual Cash Value All scheduled property other than fine arts is covered on an Actual Cash Value (ACV) basis. The policy will not pay more than the stated amount of insurance, or the amount for which the insured could be expected to repair or replace the property.

A coverage form is made up of __________.

All of these coverage conditions exclusions policy definitions the insuring agreement The coverage form generally contains the insuring agreement, coverage conditions, exclusions, and policy definitions.

Business Income Coverage:

All of these answers are correct. Is a time element coverage since time is a factor (element) in determining the extent of the loss. Means the income of the insured that would have been earned (had the loss not occurred), and continuing operating expenses, including payroll. Is an indirect loss or consequential loss coverage. The Business Income (indirect or consequential loss) form covers the income of the insured that would have been earned (had the loss not occurred), and continuing operating expenses, including payroll. Business income is a time element coverage since time is a factor (element) in determining the extent of the loss.

If a construction company has blanket coverage on all of their equipment while the equipment is off of the premises, the construction company probably has a Reporting Form contract. Which of the following is correct regarding a Reporting Form?

All of these are correct statements regarding Reporting Forms. Instead of a fixed premium, a reporting form requires an advance premium or deposit premium, and then a report must be submitted to the insurer on which the correct premium will be calculated. Instead of a fixed premium, a reporting form requires an advance premium or deposit premium, and then a report must be submitted to the insurer on which the correct premium will be calculated. The insurance company has the right to audit the reports given by the insured at any time to verify the figures. Reporting form contracts are issued when it is difficult to determine in advance the amount of coverage that needs to be purchased. Instead of a fixed premium, a reporting form requires an advance premium or deposit premium, and then a report must be submitted to the insurer on which the correct premium will be calculated. The insurance company has the right to audit the reports given by the insured at any time to verify the figures.

Within a Commercial Property Package policy, which of the following are a few items that can be found on a common Declarations Page?

All of these are correct. A list of the coverage parts purchased and the premiums for each part. The identity of the insurer and producer. A list of forms applicable to each coverage part. On the Declarations Page of a Commercial Property Package policy, you will find: (1) Policy number and policy period, (2) Identity of the insurer and producer, (3) Name and mailing address of the named insured, (4) Description of the covered business, (5) List of the coverage parts purchased and the premiums for each part, (6) Total of all combined premiums, (7) List of forms applicable to each coverage part, and (8) Countersignature and the date of the signature.

If a prospective insurance producer does NOT pass the state insurance exam on the first try, he/she should:

All of these are correct. Immediately re-schedule a second exam, allowing a day or two to re-study all of the material. Immediately re-take all of the online practice exams again to try and discover what was missed on the exam. Immediately re-read all of the study material again to try and discover what was missed on the exam. These are the recommendations of Slater Insurance School.

All of the following can be insured under a Marine contract, except:

All of these categories are eligible for marine coverage. Commercial and Personal Property floaters. Bridges, tunnels, oil pipelines, loading docks, and radio and TV towers. Shipments over land. The definition lists six categories of eligible marine risks: (1) Imports (Ocean Marine) (2) Exports (Ocean Marine) (3) Domestic Shipments (Inland Marine) (4) Instrumentalities of Transportation/Communication (5) Personal Property Floater Risks (Inland Marine)(6) Commercial Property Floater Risks (Inland Marine)

Identity Theft coverage can be added to

All of these policies allow the Identity Theft Endorsement a Condo or Unit Owners policy a Renters policy a Homeowners policy

What is a hazard?

An increase in the possibility that a loss might occur. A hazard is an increase in the possibility that a loss might occur. Examples include old wiring, dangerous animals and a damaged or worn roof.

Which of the following statements about the Building and Personal Property Coverage form is INCORRECT?

Any direct physical loss or damage to business property is covered. Losses must be caused by an insured peril. Do not forget that some perils are EXCLUDED from being coverage.

__________ is a Commercial Property Floater that provides coverage for bailees (the temporary holder of property) such as shoe repair shops, dry cleaners, and other businesses with a large amount of customer goods in their possession. Coverage is provided even if the insured is not negligent for the loss. Helps to retain the good will of a service type of business...

Bailees Customer Coverage

All of the following business personal property is excluded under the Commercial Property form, except:

Building material within 100 feet of the building.

The term that refers to money which is needed when a business is shut down is called __________.

Business Income

Which of the following coverages under a Commercial Property policy is an indirect loss coverage?

Business Income Business Income Coverage Form is a form added to the Commercial Property Coverage Part of a Commercial Package Policy that covers indirect losses. For example, it would cover the loss of income due to a suspension of the business operations of an insured following a direct covered loss to business property.

Which of the following is not one of the components of a Commercial Package policy?

Causes of Loss Forms Causes of Loss Forms are attached to each coverage Part which is insured.

A truck driver is involved in an accident when an auto runs a red light and hit the truck. Which insurance types protect the truck, the driver, and the merchandise in the truck.

Commercial auto on the truck, workers compensation for the driver, and inland marine for the merchandise in the truck.

This section contains the rights and obligations of both parties in the contract.

Conditions

A business wants to cover construction equipment left on a job site. You should recommend __________.

Contractors Equipment Coverage

__________ is a Commercial Property Floater that provides extensive coverage for heavy machinery, equipment, and tools, not available through commercial property or auto policies.

Contractors Equipment Floater Contractors Equipment Floater is a Commercial Property Floater that provides extensive coverage for heavy machinery, equipment and tools not available through commercial property or auto policies. Vehicles designed for use principally on public roads are not eligible for the coverage.

All of the following coverages can be added as a coverage part to a Commercial Package Policy, except __________.

Contractors equipment Contractors equipment coverage is endorsed on a Marine Part of the Commercial Package Policy.

An insured building has some damage following water leakage from ceiling sprinklers. Which of the following would probably not be covered?

Cost of the new plumbing for the sprinklers.

Mr. Grant owns a medium-sized office building and he leases offices to smaller businesses. Which property coverage would you recommend to cover potential losses?

Coverage A Coverage A= Building - for the owner Coverage B = Business Personal Property - for the renter Coverage C = Personal property of Others - for the renter of some types of businesses Coverage D = we made it up

Ms. Frank runs a large business out of an office building that she leases. Which property coverage would you recommend to cover potential losses?

Coverage B Coverage A - Building coverage, for the owner Coverage B - Business Personal Property, for the tenant Coverage C - Personal Property of Others Coverage D- doesn't exist

Commercial property insurance coverage for damage to the personal property of others is

Coverage C, an optional property coverage. Personal Property of Others, Coverage C, provides for payment for damage to property of others while the property in the care of the insured. This coverage must be applied for and is not included automatically under the Commercial Property form.

The Extra Expense coverage form provides payment for:

Coverage that will permit the insured to continue in business without interruption following a covered loss. The other answers are not covered under the Extra Expense form, but are covered under different forms. For example, property damage losses at a covered location are picked up under the Commercial Property Part. Payment for unforeseen expenses an insured may incur while the business is shut down is picked up under Business Income Form. Coverage for accounts receivable records is usually endorsed on Property policies.

Which of the following perils is covered under the Broad form Causes of Loss and not covered under the Basic form?

Damage caused by a Falling Object

After an explosion that damaged a chemistry lab on a college campus, all of the science classes had to be cancelled. The college lost fees for that academic area. What was the direct loss?

Damage from the explosion The explosion is the peril, damage from the explosion is the direct loss, loss on income is the indirect loss. Loss of income is only covered if 1) it was purchased and 2) the loss is due to a covered peril.

All of the following are advantages for purchasing the Commercial Package policy from one company instead of individual coverage with different companies, EXCEPT

Eliminates coverages. Obviously it does NOT eliminate coverages. The other three are correct statements.

Which coverage automatically adds $25,000 in extra expenses to assist with temporary repairs, expediting permanent repairs, and expediting permanent replacement of damaged property?

Equipment Breakdown

This is something listed in the policy and new purchases will be covered for a period of time.

Extensions An extension is something already listed in the policy but coverage will be extended or carried over to, for example, new equipment, a newly acquired location, etc. This does not always mean complete coverage for the amount of the loss sustained.

The term that refers to money an insured spends to avoid shutting down a business is __________.

Extra Expense

__________ are funds spent either to avoid shutting down or to minimize the time during which a business is shut down.

Extra expenses

Which of the following has the most responsibility under an insurance contract?

First named insured

There is damage by wind to the building of an insured. However, the named insured and the insurance company cannot agree on an amount of indemnification. Which of the following is an INCORRECT statement regarding this disagreement?

If agreement is reached between two appraisers, the insurance company still has the right to adjust the settlement, even if the payment is lower to the insured. The Appraisal Provision states that if the insurer and the insured cannot agree on an indemnification amount, either party may request an appraisal: each party retains and pays for their own appraiser. If the appraisers do not agree, they select an Umpire and the cost is split between the insured and the insurer. When agreement is reached between any two, the matter is settled and cannot be altered by either party.

Which is the term that is most closely related to Subrogation?

Indemnification Subrogation is the legal process by which an insurance company seeks recovery of the amount paid to the insured from a third party who may have caused the loss.

All of the following are unique characteristics about a Bailees form (Inland Marine), except:

It covers the property losses of others, only where liability of the insured is proven. Bailee's customers' insurance provides coverage for the legal liability of damage or destruction of a bailor's property while under the care of a bailee. Think of it as "your stuff is protected as if I own it while it is in my care".

Bailees Customers coverage has unique characteristics and would include all of the following, except:

It is automatically included in Commercial Property policies. Bailees Customers coverage MUST BE ADDED through Inland Marine insurance. The other answers are correct statements.

This commercial property coverage form provides coverage for sums the insured is obligated to pay as a result of accidental damage from a covered cause of loss to property of others in the insured's care, custody, or control. It is called the __________

Legal Liability Form Legal Liability Form- This commercial property coverage form provides coverage for sums the insured is obligated to pay as a result of accidental damage from a covered cause of loss to property of others in the insured's care, custody, or control.

The primary purpose of the Business Income coverage form is to reimburse the insured for:

Loss of income resulting from property damage of the insured.

Which of the following situations will the insurance company recognize as binding?

Mrs. Krupp, the first named insured, requests that her policy be assigned to her brother, the new owner. The company notifies her in writing that this transfer is approved. The notification from the insurance company would constitute a binding transfer. Only the insurer has the right to assign or transfer the rights and duties under a Property and Casualty contract.

Under the Commercial Package policy, who may cancel the policy in writing and make changes to the policy with the consent of the insurer?

Named insured

To help identify the kinds of risks which are eligible for either Ocean or Inland Marine Insurance, the industry developed the __________.

Nationwide Definition To help identify the kinds of risks which are eligible for either Ocean or Inland Marine Insurance, the industry developed the nationwide definition. The definition lists six categories of eligible marine risks: 1. Imports (Ocean Marine), 2. Exports (Ocean Marine), 3. Domestic Shipments (Inland Marine), 4. Instrumentalities of Transportation/Communication, 5. Personal Property Floater Risks (Inland Marine), and 6. Commercial Property Floater Risks (Inland Marine).

The Boiler Coverage has a unique provision that suspends coverage if the__________ is found to be defective.

Object The Equipment Breakdown Insuring Agreement agrees to pay for direct damage to covered property caused by a covered cause of loss, meaning an accident to an object. An object is merely any equipment covered under the policy.

A business property is covered under the Commercial Property Special form if the loss:

Occurs due to the peril of theft.

Which of the following is NOT coverage available under the Inland Marine coverage?

Office property such as tables, computers, and chairs Office property such as, tables, computers and chairs are covered under Commercial Property not Marine insurance.

All of the following describe property that might be covered by Inland Marine Insurance, except:

Office property such as tables, computers, and chairs. Office property such as, tables, computers and chairs are covered under the Commercial Property coverage.

Which of the following coverages is NOT generally provided under a Commercial Package Policy?

Property coverage for a small business. A CPP is generally considered for use by large businesses.

Martina Ward has a valuable necklace insured for $10,000. It is listed and described in the Declarations. This is an example of what type of coverage?

Scheduled Scheduled coverage is specifically listed property in the Declarations and covered for a specific amount.

Commercial Property policies do not automatically cover spoilage of perishable stock. The __________ Coverage endorsement is attached to the commercial property policy that adds the peril of spoilage.

Spoilage The Spoilage Coverage endorsement is attached to the commercial property policy that adds the peril of spoilage. Only perishable stock located at the premises described on the declarations is extended coverage in this endorsement; no other type of property is protected within its wording.

Which of the following perils is covered by the Broad and Special Causes of Loss forms?

Sudden and accidental rupture of a heating system. The other three losses are EXCLUDED on fire policies. Sudden and accidental rupture of a heating system is NOT covered under Basic Form policies.

All of the following are correct statements regarding Inland Marine floaters, except:

The Valuable Papers Floater coverage includes coverage for books, prescription records and money and securities. Valuable Papers coverage EXCLUDES coverage for money and securities. The other answers are all correct statements.

Extra Expense insurance covers which of the following?

The additional cost of continuing a business after a loss.

Which of the following statements is correct according to the Inspections and Surveys conditions?

The insurance company has the right to inspect the property and operations of the named insured at any time. The insurance company has the right to inspect the named insureds property and operations at any time. The insurance company is not required to conduct inspections and surveys, and inspections do not constitute a warranty by the insurer that all conditions are safe.

A business may add coverage for landscaping under the Commercial Property policy. Which of the following is CORRECT regarding this coverage?

The insurer will pay no more than $250 for any one tree, shrub, or plant. On a commercial policy, the insurer will pay not more than $250 for any one tree, shrub or plant, to a maximum of $1,000 or whatever your outdoor property limit is. The loss must be from an insured peril for coverage to apply.

Suppose Mr. X was properly insured under Building coverage when a furnace exploded as the result of a poorly tightened gas connection.

The peril was explosion. The peril was explosion; the hazard was a poorly tightened gas connection. This loss would be covered under property policy because Explosion is an insured peril.

Mel is injured when an old unserviced hot water heater explodes at a service station where he is getting gas for his car. Which of the following is an INCORRECT statement?

The property coverage of the service station will pay for the hot water heater. The policy will not pay for the hot water heater; it is a maintenance (wear and tear) problem and is excluded on property policies. The liability policy of the service station will pay for losses caused by the heater, but not the heater itself (in this case).

A business owner purchased a guard dog after he purchased a Building policy. He then receives a cancellation notice from his insurer. What would be the most common reason for this cancellation?

The risk has changed substantially since the policy was issued.

Which of the following is an INCORRECT statement regarding Equipment Breakdown Coverage?

The safety inspection of equipment causes an additional high premium for the insured. The safety inspection causes no additional premium for the insured.

Which of the following statements is true about Additional Coverages?

They are included at no extra cost.

As is true of the other additional coverages, the fire department service charge is payable only for covered property and for protection against __________.

a covered cause of loss

If the insured has jewelry that has value which far exceeds the limit of his homeowner policy, the insured should __________

add the Schedule Personal Endorsement/Personal Article Floater Schedule Personal Endorsement/Personal Article Floater- There is some personal property, such as jewelry or musical instruments, that has low coverage limits compared to what they may be worth, because most people don't have such property so they shouldn't have to pay the premium for it and because it is difficult to verify the value of such items. By adding this endorsement, an insured can properly cover his jewelry and other items for their full amount.

Suppose a hotel burns down. In the one year required to rebuild, the owner loses over $1,000,000 in room rentals. This loss of rents would be

an indirect, or consequential, loss resulting from the direct loss to the hotel by fire. This loss of rents would be an indirect, or consequential, loss resulting from the direct loss to the hotel by fire.

Peak Season coverage offers

automatic increases of the commercial inventory of the insured. The Peak Season endorsement offers more coverage on the insured inventory during peak seasons. For example, a Ski Outlet will have coverage automatically increased during the ski season, then coverage will be reduced during the off season.

Inland Marine insurance is commonly used to insure all of the following items, except __________.

automobiles

A __________ is a person or organization with temporary custody of property that belongs to someone else. Examples include shops that have property of insureds at their facilities for repairs, or people who have borrowed property of insureds with permission.

bailee

The causes of loss forms available are ____________________.

basic, broad, and special basic form named perils, broad form named perils, special form open perils a.k.a. all risk of direct physical loss

Suppose Mr. H and his cousin each own 50% of a $2,000,000 business complex that has no mortgage. The complex is insured under a $2,000,000 Building Property policy when it burns down. Mr. H would

be paid 50% of any covered loss. Under the rule of insurable Interest, since each own 50% of the building, each would be paid 50% of any loss.

A family restaurant was out of business for four months after it was damaged by a tornado. This situation involves __________.

business income

Coverage for loss of income due to a business shutdown following damage from a covered cause is covered by a/an __________.

business income coverage form

One of the apartment buildings an insured owns was destroyed by fire, and the insured can no longer collect rent from the tenants of that building. This situation involves __________.

business income coverage form

The commercial Package Policy is made up of which 4 components?

common declarations, common conditions, interline endorsements, two or more coverage parts Each section has its own conditions and exclusions. Be as specific as possible when choosing the best answer: common declarations, common conditions, interline endorsements, two or more coverage parts

Your insured has a covered fire loss. There is additional damage to the floors and furnishings caused by the water used to extinguish the fire. The water damage can be described as a/an __________.

direct loss

Which of the following is NOT a purpose of the Commercial Package Policy?

eliminate competition by taking all the business

Homeowners policies __________ identity theft.

exclude losses for By adding the Identity Theft endorsement coverage as an optional endorsement under a homeowners, renters, condominium/ unit owners, manufactured home, or farm and ranch policy, the insured will have expense reimbursement and personal help for the recovery process for losses due to Identity Theft.

Direct loss from a peril as either the immediate or proximate cause, frequently results in other losses such as loss of income or profit, or extra expenses that arise because of the property loss. Because these losses are a consequence of the direct loss itself, they are termed __________ losses.

indirect

The building that Mr. Hale owns and runs his business out of is damaged by fire. Mr. Hale will have to relocate his business for six months until the building is restored from the fire damage. The additional rent and extra expense for moving is described as a/an __________.

indirect loss

Which of the following is not covered by a jewelers block coverage form?

merchandise in transport by a security company

Indirect losses involve __________, whether from loss of income, loss of business, or extra expenses to operate a business elsewhere.

money

An insured cancels his Commercial Building insurance; however, the mortgage company is not notified by the insurer and a loss occurs from a covered peril. Indemnification would be due to the __________.

mortgage company Mortgage Clause (a.k.a. Mortgagee)- A provision attached to a fire policy or other direct damage insurance policy covering mortgaged property, stating that the loss will be payable to the mortgagee as his interest may appear and that the right of recovery by a mortgagee will not be refused by any act of negligence of the insured. A copy of any renewal, nonrenewal or cancellation notice sent to the named insured is required to be sent to the Mortgagee.

Loss __________, refers to money a business loses when damaged property is shut down and unable to generate income.

of business income

A __________ is a formal statement made by a policyowner to an insurer regarding a loss. It is intended to give information to the insurer to enable it to determine the extent of its liability.

proof-of-loss

The fact is that Marine coverage and Commercial Property coverage under the Commercial Package Policy all pay for __________.

property losses

It is an unfair practice in most States for any insurer to deny or terminate homeowners insurance for the reason that an insured is engaged in an incidental day care operation at the insured location. However, this rule does not prevent an insurer from excluding coverage for losses arising out of the operation of day care. An insured can add __________ endorsement to include coverage for losses arising out of the day care operation.

the Home Day Care

The policy consists of _______________________.

the declarations page and the coverage forms The contract is the application, the policy, and any riders and endorsements.

The basic concept of Equipment Breakdown coverage is

to prevent loss from explosions

The reason for a countersignature is ___________.

to verify that the producer is licensed in the state where the policy is issued This also gives the producer a chance to review the coverage and verify everything is as it was applied for.

A builders risk covers commercial buildings that are _______.

under construction A Business and Personal Property Coverage form will not cover buildings under construction due to the different risks they face. A Builders Risk Form policy may cover one building or many buildings on a blanket basis. Coverage begins when the construction is above the lowest basement level or ground level.

When Mrs. X and her art students leave her art studio each night, they take all of their art equipment and supplies with them leaving the studio completely empty. The studio is __________.

vacant