4 - E Commercial Package Policies

At the very LEAST, a commercial package policy will contain _____ coverage sections. A. Two B. Three C. Five D. Four

A. Two

What are other types of businesses eligible for BOP?

-Specialty contractor (annual payroll no more than $300K; annual sales no more than $3M; no work on bldgs over 3 stories) -Motel (max 3 floors; no bar / cocktail lounge; not seasonal; not closed more than 30 days per year) -Apartment & Condo (no more than 25K sq. ft. for incidental occupancy; incidental occupancy by contractors not exceeding 7,500 sq. ft. or 15%) -Office Bldg (less than 100K sq. ft.; no higher than 6 stories; tenants occupy no more than 25K sq. ft.; contractors occupy no more than 7,500 sq. ft. or 15% of total sq. ft.)

What types of businesses are eligible for BOP?

-Wholesaler (retail sales account for 25% or less or gross income; 25% or less of floor space is available to general public) -Processing and Servicing (sales under $3M; no more than 25% of sales occur off-premises) -Limited Cooking (7,500 sq. ft. or fewer; max seating 75 for limited cooking and 150 for fast food; no liquor sales; beer and wine sales no more than 25% of annual income) -Convenience Store (gasoline sales < 75% of annual income; on auto repair, car wash, propane or kerosene sales) -Self-Storage (maximum of 2 stories; no storage of pollutants, waste, chemicals or industrial materials)

In a BOP, newly acquired properties coverage provides _____ of insurance for new buildings under construction or newly acquired business properties located off the insured premises. A. 30 days B. 60 days C. 14 days D. 4 days

A. 30 days

Which of the following is TRUE concerning a business owners policy? A. A business owners policy offers liability protection B. Business owners policies are popular among large corporate vendors C. Bars and taverns are eligible for business owners policies D. A business owners policy is a good option for large multi-national corporations

A. A business owners policy offers liability protection

Stand owns ABC Mattress Supply. During a storm, lightning strikes a large tree, causing it to fall through the front of his building, resulting in $23,000 in damages. Which coverage in a BOP would pay for the extraction of the tree from Stan's store? A. Debris removal coverage B. Business interruption coverage C. Liability coverage D. Extra expense coverage

A. Debris removal coverage

All of the following may be considered beneficial characteristics of a commercial package policy, except: A. It is a single policy that covers personal and business needs B. It has a common declarations page an a common conditions page C. It reduces premiums D. It eliminates coverage gaps

A. It is a single policy that covers personal and business needs

Which of the following is NOT one of the requirements that a "fast food restaurant" business must meet in order to qualify for a BOP? A. Liquor must not account for more than 25% of total annual sales B. The restaurant must maintain appropriate fire extinguishing equipment C. The restaurant must not exceed 7,500 square feet D. The restaurant may not seat more than 150 people

A. Liquor must not account for more than 25% of total annual sales

The BOP offers liability coverage on a / an _____ basis. A. Occurrence B. Statutory C. Claims-made D. Regressive

A. Occurrence

Which of the following is NOT an example of property eligible for coverage under the outdoor property coverage extension in a BOP? A. Patio furniture B. Trees C. Detached signs D. Fences

A. Patio furniture

James works for a contracting company that has a business owners policy in place. One day, James brings his laptop to work and leaves it in the manager's office while he heads out to a jobsite. While he is gone, a fire breaks out and destroys the office, with James' laptop inside. Which coverage extension could cover the loss of James' laptop? A. Personal effects and property of others B. Electronic data C. Computer operation interruptions D. Personal property off-premises

A. Personal effects and property of others

The purpose of the increased cost of construction coverage in a BOP is to provide coverage for: A. The cost of bringing property up to code after a covered loss B. Damage to the insured's building while under construction C. The cost of keeping the business running while the covered property is being repaired after a covered loss D. Lost business income while the company's building is under construction after a covered loss

A. The cost of bringing property up to code after a covered loss

Which characteristic would prohibit a convenience store / gas station from purchasing a BOP? A. The operation of a car wash B. The use of microwave ovens C. Gasoline accounts for over 50% of sales D. Over 4,000 square feet of retail space

A. The operation of a car wash

Which of the following is NOT a feature of a typical business owners policy? A. Usually actual cost valuation B. Liability protection for lawsuits from accidents or products C. Extra expense coverage D. Built-in inflation protection

A. Usually actual cost valuation (A BOP will usually include replacement cost coverage, not ACV)

What requirements must wholesalers and distributors meet in order to be eligible for a BOP? A. 25% or less floor space is available to the general public, and less than 50% of gross income may come from retail sales B. 25% or less of floor space is available to the general public, and less than 25% of gross income may come from retail sales C. More than 10% of the floor space must be devoted to product storage, and less than 20% of expenditures may involve food service D. Less than 20% of annual expenditures may involved food service, and less than 10% of building area may be open to the public

B. 25% or less of floor space is available to the general public, and less than 25% of gross income may come from retail sales

Which of the following statements regarding commercial package policies (CPP) is TRUE? A. A CPP is an example of a monoline policy B. A CPP is an elective-based policy C. A CPP requires a separate declarations page for each coverage D. Workers' compensation insurance is automatically included with a CPP

B. A CPP is an elective-based policy

In a BOP, the purpose of supplementary payments in conjunction with liability coverage is to: A. Cover the cost of additional damage that was discovered after the settlement was paid B. Cover costs associated with defending and investigating a claim against the insured C. Make incidental payments to an injured claimant before the final settlement amount is reached D. Cover a claimant's lost wages after suffering an injury caused by the insured

B. Cover costs associated with defending and investigating a claim against the insured

All of the following are typically excluded from liability coverage in a BOP, except: A. Property damage to the insured's products B. Damage to premises rented by the insured C. Employee injuries D. Contractual liability

B. Damage to premises rented by the insured

Which of the following is a feature typically found in a business owners policy? A. Coverage for company-owned vehicles B. Inflation guard for buildings and structures C. Professional liability coverage D. Malpractice coverage

B. Inflation guard for buildings and structures

All of the following are covered under coverage A of a business owners policy, except: A. Flooring and floor coverings B. Leased business personal property that must be insured C. Owner's furniture in an apartment that is rented as furnished D. Building maintenance equipment, such as fire extinguishers

B. Leased business personal property that must be insured

Josephine has purchased a business owners policy. She insures both the real and personal property at 80% under the policy. Assuming no endorsements apply, the losses will be adjusted on a(n) _____ basis. A. Market value B. Replacement cost C. Actual cash value D. Functional replacement cost

B. Replacement cost

Coverage B of the BOP would provide indemnification for damages to all of the following except: A. Office furniture B. Windows C. Inventory D. An office copy machine

B. Windows

The BOP provides loss of income on an "actual loss" sustained basis for up to: A. 18 months B. 24 months C. 12 months D. 6 months

C. 12 months

Which of the following lines of coverage could be found in a commercial package policy? A. Workers' compensation insurance B. Disability insurance C. Business auto insurance D. Health insurance

C. Business auto insurance

Jane owns an aquarium supplies store and purchases a business owners policy to protect her assets. Which of the following protections can Jane expect from her standard BOP with no endorsements? A. Insurance for her company-owned vehicles B. Malpractice insurance C. Extra expense coverage D. Named peril coverage

C. Extra expense coverage

An equipment breakdown endorsement would indemnify the insured for losses related to: A. Hired autos B. Inoperable non-owned autos C. Malfunctioning refrigeration systems D. Stored inventory

C. Malfunctioning refrigeration systems (An equipment breakdown endorsement covers boilers, steamers, refrigeration systems, or any other type of mechanical or electrical machinery)

In a BOP, the general aggregate limit is: A. Twice the products-completed operations aggregate limit B. Equal to the claims-made limit C. Twice the per occurrence limit D. Twice the claims-made limit

C. Twice the per occurrence limit

What businesses cannot qualify from BOP?

Car dealerships, service stations, repair shops, parking lots, garages, amusement parks, bars, nightclubs, banks and similar financial institutions, manufacturing, processing, servicing businesses (except those eligible), condominium associations (except residential and office). Also, there is no coverage for household personal property with BOP.

What lines of coverage are included in a CPP?

Commercial Property, CGL, Employment-related liability, PL, Commercial crime and employee dishonesty, Commercial inland marine, Business Auto, Boiler and machinery, equipment breakdown

A processing and servicing company would qualify for a BOP only if they have less than _____ in annual revenues. A. $5 million B. $2 million C. $1 million D. $3 million

D. $3 million

The insured carries a BOP policy with protective systems such as a sprinkler system. If the system becomes inoperative, the insured must advise the insurance company of the problem within _____ if the system cannot be restored to working order. A. 60 days B. 30 hours C. 30 days D. 48 hours

D. 48 hours

When it comes to insuring office buildings, most BOP policies require a building to be _____ or fewer stories in height. A. 10 B. 2 C. 4 D. 6

D. 6

Which of the following coverages, when added to a BOP, would cause the premium to increase? A. Inflation guard B. Pollution cleanup C. Business income, extra expense D. Equipment breakdown

D. Equipment breakdown (This would cause premiums to go up. Inflation guard, business income, extra expense, and pollution cleanup are additional coverages that can be added at no extra cost).

All of the following are excluded from coverage under Coverages A and B in a BOP, except: D. It is added by endorsement and increases the premium B. Watercraft while in the water C. Vehicles and aircraft that must be registered D. Land, lawns, or crops

D. It is added by endorsement and increases the premium

Which of the following is not true about business income coverage, an additional coverage in a business owners policy? A. It provides up to 12 months of coverage B. It protects from loss of income caused by property damage C. It starts 72 hours after the damage occurred D. It is added by endorsement and increases the premium

D. It is added by endorsement and increases the premium

Which of the following statements about the accounts receivable coverage extension in a BOP is TRUE? A. It only provides coverage if the loss occurred on the insured premises B. It provides coverage for lost income resulting from having to write off accounts receivable due to non-payment by the insured's customers C. It provides coverage for the insured's lost business income resulting from a covered loss suffered by a major customer D. It provides coverage for money the insured expects to collect, but cannot because of damage to accounting records caused by a covered peril

D. It provides coverage for money the insured expects to collect, but cannot because of damage to accounting records caused by a covered peril

What might disqualify a restaurant from purchasing a BOP? A. The use of microwave ovens B. The restaurant occupies over 5,000 square feet C. The restaurant serves beer D. The restaurant serves liquor

D. The restaurant serves liquor

All of the following statements are true of the named peril endorsement in a BOP, except: A. The endorsement reduces policy coverage B. The endorsement reduces the premium C. Volcanic action is a covered peril D. Theft is a covered peril

D. Theft is a covered peril

Sam's Dry Cleaners' power shuts off due to a lightning strike at the supplying power station just down the street. For three days the business cannot operate due to the damage incurred at the power station. Which endorsement would cover Sam's Dry Cleaners for the loss of business? A. Equipment breakdown B. Protective safeguards C. Ordinance or law D. Utility services - time element

D. Utility services - time element

What lines of coverage are not included in a CPP?

Workers comp, health, life disability