AINS 23 - Segment A
Which one of the following statements is correct regarding the Additional Covered Property endorsement to the Building and Personal Property Coverage Form, also referred to as the BPP? Select one: A. Almost all types of property that are excluded in the BPP can be insured. B. For the most part, requests to add excluded items pose underwriting challenges for insurers. C. The current edition of the endorsement provides a limited list of the types of property that can be added under the endorsement. D. The endorsement provides coverage for the increased cost to repair or rebuild property resulting from the enforcement of a building, zoning, or land use law.
A. Almost all types of property that are excluded in the BPP can be insured.
Which one of the following is the coinsurance basis under a Business Income Coverage Form (BIC)? Select one: A. The projected net income and all operating expenses except for certain deductible items B. The same as the property covered C. The replacement cost of the building D. The actual cash value of the building
A. The projected net income and all operating expenses except for certain deductible items
Worldwide Warehousing has a Building and Personal Property Coverage Form (BPP) with a $1,000,000 limit on a building and a $5,000 deductible. The warehouse suffers a $1,010,000 fire loss. Which one of the following amounts will Worldwide's insurer pay? Select one: A. $ 995,000 B. $1,000,000 C. $1,005,000 D. $1,010,000
B. $1,000,000
A building and its contents are insured under Building and Personal Property Coverage Form (BPP) 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? Select one: A. $175,000 B. $195,000 C. $200,000 D. $300,000
B. $195,000
Jones Retail has a Business Income (and Extra Expense) Coverage Form with a $100,000 limit and a 50 percent coinsurance clause. At the time of a $40,000 covered business income loss, Jones estimates its net income plus all operating expenses (minus certain deductible items) for the one-year policy period to be $400,000. How much will the insurer pay? Select one: A. $10,000 B. $20,000 C. $30,000 D. $40,000
B. $20,000
If an insured fast food franchise cannot list all of its locations on the commercial property declarations page, which one of the following options would be most appropriate? Select one: A. Attach an additional commercial property coverage form to the policy. B. Add supplemental declarations on a separate page. C. Cover all remaining locations not listed on the first declarations page under a second insurance policy. D. Add a notation on the declarations page that states "Plus all other locations owned by the named insured."
B. Add supplemental declarations on a separate page.
Which one of the following is a required component of the commercial property coverage part that specifies the perils covered? Select one: A. Commercial property coverage form B. Causes of loss form C. Perils specified form D. Commercial Property Conditions
B. Causes of loss form
A Commercial Package Policy (CPP) premium may be modified by a package modification factor. This factor Select one: A. Is the same for insurers in all states. B. Is a discount justified by the greater efficiency in providing a package policy. C. Is based on the amount of coverage. D. Provides a charge for coverage extensions.
B. Is a discount justified by the greater efficiency in providing a package policy.
For business income coverage, the period of restoration is the period of time that begins 72 hours after the Select one: A. Claim for damage has been submitted to the insurer. B. Time the physical loss occurs. C. Claims representative has completed a claim report. D. Extent of loss has been estimated by the insured.
B. Time the physical loss occurs.
There must be at least how many coverage parts in an ISO Commercial Package Policy (CPP)? Select one: A. One B. Two C. Three D. Four
B. Two
Peter has a Commercial Package Policy (CPP) that has a Building and Personal Property Coverage Form (BPP) with a Causes of Loss - Broad Form covering his building with a $750,000 limit. A tropical storm struck the area near Peter's building and the strong winds tore most of the shingles from the building's roof and shattered multiple windows with flying debris. An outside fixture also sustained heavy damage due to the wind. The total amount of damages was $40,000 for the windows and shingles; and $10,000 for the outside fixture. How much will Peter's insurer pay for damage to his outside fixture? Select one: A. The loss is not covered. B. $5,000 C. $10,000 D. $20,000
C. $10,000
Which one of the following best describes a package modification factor? Select one: A. Any condition or situation that presents a possibility of loss, regardless of whether loss actually occurs B. The price per exposure unit for insurance coverage C. A factor that is applied to the regular policy premiums for certain coverage parts of a CPP, resulting in premium discounts for those coverage parts D. A factor that is applied to the regular policy premiums for certain coverage parts of a CPP, to account for territorial differences
C. A factor that is applied to the regular policy premiums for certain coverage parts of a CPP, resulting in premium discounts for those coverage parts
Which one of the following coverages of the Business Income Coverage Form (BIC) is subject to its own limit of insurance? Select one: A. Civil Authority B. Extended Business Income C. Interruption of Computer Operations D. Alterations and New Building
C. Interruption of Computer Operations
In the ISO Business Income Coverage forms (BIC), which one of the following is defined as the slowdown or cessation of business activities or, in the case of rental value coverage, means that a part of the premises is rendered untenantable (unfit for occupancy)? Select one: A. Premises B. Period of restoration C. Suspension D. Operations
C. Suspension
Omega Holdings owns a building with an actual cash value of $200,000. The property is insured under a Building and Personal Property Coverage Form (BPP) with a building limit of $140,000, an 80 percent coinsurance clause, and a $1,000 deductible. The policy includes a Causes of Loss—Broad Form covering the building. The building suffers $80,000 in fire damage. Which one of the following amounts will Omega's insurer pay? Select one: A. $69,000 B. $70,000 C. $79,000 D. $80,000
A. $69,000
Which one of the following statements is correct with respect to the condition Duties in the Event of Loss or Damage of the Building and Personal Property Coverage Form (BPP)? Select one: A. If the insured fails to perform any of them, the insurer may not have to pay for the loss. B. To prevent insurance fraud, the insurer is obliged to notify the police of all losses reported. C. The insured is required to give the insurer notice of the loss, including a description of the property damaged, within 24 hours. D. The claims adjuster is required to take all reasonable steps to protect the property from further loss, prepare an inventory and set the damaged property aside.
A. If the insured fails to perform any of them, the insurer may not have to pay for the loss.
The Causes of Loss—Special Form states that it covers "risks of direct physical loss." The loss or damage Select one: A. Must be accidental and unforeseen by the insured in order to be covered. B. Only has to be accidental to be covered. C. May be accidental but must have been foreseen by the insured in order to be covered. D. Only has to be unforeseen by the insured in order to be covered.
A. Must be accidental and unforeseen by the insured in order to be covered.
The commercial property policy Causes of Loss Form that provides coverage for "risks of direct physical loss," unless excluded or limited by the policy is called the Select one: A. Causes of Loss—All Risks Form. B. Causes of Loss—Special Form. C. Causes of Loss—Basic Form. D. Causes of Loss—Broad Form.
B. Causes of Loss—Special Form.
Which one of the following is the correct term for documents that are used to tailor commercial property coverage to meet the specialized needs of particular insureds or eliminate exposures that underwriters are not willing to insure? Select one: A. Optional exclusion forms B. Endorsements C. Supplemental declarations D. Commercial Property Conditions
B. Endorsements
Package modification factors for the Commercial Package Policy (CPP) often Select one: A. Specify the endorsements that modify coverage parts in the policy. B. Provide a premium discount for the insured. C. Specify that the policy can be changed only by a written endorsement. D. Provide a method for the insured to transfer rights and duties under the policy.
B. Provide a premium discount for the insured.
The loss determination section of a business income insurance policy states that the business income loss is determined by all of the following, EXCEPT: Select one: A. The net income of the business before the loss occurred B. The probable net income of the business if no loss had occurred C. The increase in business resulting from a catastrophe D. The operating expenses that must continue during the period of restoration to permit the insured to resume operations with the quality of service that existed prior to loss
C. The increase in business resulting from a catastrophe
Which one of the following statements is correct with respect to the Building and Personal Property Coverage Form (BPP) deductible? Select one: A. Under the ISO Commercial Lines Manual rules, the standard deductible must be at least $2,500. B. If an occurrence involves a loss that affects more than one category of covered property and a separate limit of insurance applies to each category, losses to all categories are totaled and the deductible applied to that total amount. C. The insurer is not obligated to pay anything to the insured unless the loss exceeds the deductible. D. If the Coinsurance condition or the Agreed Value optional coverage applies, the amount of the loss is first reduced by the deductible before applying any penalty imposed by those provisions.
C. The insurer is not obligated to pay anything to the insured unless the loss exceeds the deductible.
Which one of the following is the maximum National Flood Insurance Program (NFIP) limit per building for commercial properties? Select one: A. $25,000 B. $100,000 C. $250,000 D. $500,000
D. $500,000
An insured has a Business Income (and Extra Expense) Coverage Form (BIC) with an Extended Period of Indemnity coverage option for 180 days. Following a covered loss, the period of restoration is 120 days. It takes an additional 90 days for revenue to return to normal. Ignoring waiting periods, for what period would the BIC cover the business income loss? Select one: A. 90 days B. 120 days C. 180 days D. 210 days
D. 210 days
Which one of the following is a Common Policy Condition found in the ISO Commercial Package Policy (CPP)? Select one: A. Cancellation B. Subrogation C. Duties in the event of a loss D. Exclusions
A. Cancellation
A commercial package policy (CPP) component that covers buildings and business personal property is referred to as a Select one: A. Commercial property coverage part. B. Building and contents form. C. Building and Personal Property Coverage Form (BPP) endorsement. D. Commercial general policy.
A. Commercial property coverage part.
Which one of the following common policy conditions permits the insurer to verify property and business income values necessary for premium rating purposes? Select one: A. Examination of books and records B. Premiums C. Inspections and surveys D. Changes condition
A. Examination of books and records
Which one of the following statements is correct with respect to the Newly Acquired or Constructed Property extension of coverage of the Building and Personal Property Coverage Form (BPP)? Select one: A. It covers newly acquired buildings, provided the purpose of the newly acquired building is similar to the use of the building described in the declarations. B. It provides automatic coverage for a new building being constructed by or for the insured anywhere within the coverage territory. C. It specifically excludes coverage for a newly acquired or constructed building at any location if that building will be used as a warehouse. D. This extension applies to buildings only and does not provide any coverage for business personal property.
A. It covers newly acquired buildings, provided the purpose of the newly acquired building is similar to the use of the building described in the declarations.
To what extent are extra expenses covered under the ISO Business Income Coverage (without Extra Expense) Coverage Form? Select one: A. Only to the extent that they actually reduce the business income loss B. To the full extent of the expenses incurred by the insured C. On an actual cash value basis D. On a replacement cost basis as long as the coinsurance requirement is met
A. Only to the extent that they actually reduce the business income loss
Which one of the statements is correct with respect to the Building and Personal Property Coverage Form (BPP)? Select one: A. Some property, such as building foundations below the lowest basement floor, is excluded because it may not be subject to loss by the perils insured against. B. Any type of personal property can be insured under the BPP. C. The Covered Property section is the only section that must be read in order to determine whether a specific kind of property is insured. D. The BPP includes satisfactory coverage for physical damage to automobiles owned by the named insured.
A. Some property, such as building foundations below the lowest basement floor, is excluded because it may not be subject to loss by the perils insured against.
"Merchandise held in storage or for sale, raw materials and in-process or finished goods, including supplies used in their packing or shipping" is the Building and Personal Property Coverage Form's (BPP) definition for which one of the following? Select one: A. Stock B. Contents C. Business personal property D. Inventory
A. Stock
The cancellation provisions in the ISO Common Policy Conditions form are nearly always Select one: A. Superseded by state law. B. Enforced only when the insurer is an admitted carrier. C. Enforced over individual state laws. D. Subject to the Rights and Duties Under This Policy clause.
A. Superseded by state law.
Which one of the following statements is correct with respect to the Commercial Property Conditions? Select one: A. They apply to all coverage forms included in a commercial property coverage part, unless a coverage form contains a condition to the contrary. B. They are printed in bold type on the commercial property declarations page. C. They are an optional component of the commercial property coverage part, used at the underwriter's discretion. D. They provide definitions for words and phrases used in the policy to which they are attached.
A. They apply to all coverage forms included in a commercial property coverage part, unless a coverage form contains a condition to the contrary.
A description of the property insured, a list of mortgagees, and the applicable coinsurance percentage(s) are shown on which one of the following documents? Select one: A. Commercial Property Conditions B. Commercial property declarations C. Commercial property coverage forms D. Causes of loss forms
B. Commercial property declarations
When an insured is choosing between replacement cost and actual cash value on a policy, the insured should Select one: A. Add actual cash value if it wants to waive the coinsurance condition. B. Determine if the policy limits is adequate for replacement cost. C. Evaluate the age of the building and, if it is over 50 years old, choose the replacement cost option. D. Choose replacement cost if it wants to include contents at the owner's residence.
B. Determine if the policy limits is adequate for replacement cost.
Which one of the following best describes the components of a coverage part for an ISO Commercial Package Policy (CPP)? Select one: A. One or more coverage forms, applicable endorsements, and the duties in the event of a loss B. One or more coverage forms, applicable conditions, and restatement of the common policy exclusions C. Declarations page, one or more coverage forms, and applicable endorsements D. Declarations page, restatement of the common policy exclusions, and the duties in the event of a loss
C. Declarations page, one or more coverage forms, and applicable endorsements
Cameron has a Commercial Package Policy (CPP) that has a Building and Personal Property Coverage Form (BPP) with a Causes of Loss - Broad Form covering his building with a $750,000 limit. A tropical storm struck Cameron's building and the strong winds tore most of the shingles from the building's roof and shattered multiple windows with flying debris. The total amount of damages was $20,000 for the windows and $20,000 for the shingles. How much will Cameron's insurer pay for damage to his windows and shingles? Select one: A. The damage is not covered B. $20,000 C. $39,000 D. $40,000
D. $40,000
In business income insurance, the expenses that an organization would not have incurred if the business interruption had not occurred are called Select one: A. Contingent expenses. B. Continuing expenses. C. Excludable expenses. D. Extra expenses.
D. Extra expenses.
An insured has a Business Income (with Extra Expense) Coverage Form with a Maximum Period of Indemnity coverage option. Following a covered loss and after the period of restoration begins, it takes 120 days to complete repairs and another 60 days for revenue to return to normal. How would the policy provide coverage for this loss of business income? Select one: A. The policy would provide coverage for 120 days and 15 additional days. B. The policy would provide coverage for the full 180 days to return to normal operations. C. The policy would provide coverage for 120 days and 30 additional days. D. The policy would provide coverage for 120 days.
D. The policy would provide coverage for 120 days.
Business income losses can be measured in terms of net income. Toy Company recently experienced $70,000 in expenses and $100,000 in revenue. What is Toy Company's net income? Select one: A. $ 30,000 B. $ 70,000 C. $100,000 D. $170,000
A. $ 30,000
Sizemore Industries has a Building and Personal Property Coverage Form (BPP) that covers four buildings at one location. Each building is insured for a separate limit of $150,000, and a $5,000 deductible applies. A windstorm causes $4,000 worth of damage to each of the buildings for a combined total of $16,000 of damage. How much will the insurer pay for Sizemore's losses to its buildings? Select one: A. $0 B. $11,000 C. $14,750 D. $16,000
A. $0
The cost to replace property with new property of like kind and quality less depreciation is referred to as the Select one: A. Actual cash value. B. Depreciated value. C. Selling price. D. Replacement cost.
A. Actual cash value.
Which one of the following most fully describes what must occur in order for business income insurance to apply? Select one: A. An interruption of operations caused by property damage from a covered peril to property at locations or situations described in the policy resulting in a loss of business income and/or extra expense. B. An interruption of operations caused by property damage from a covered peril to property at locations or situations described in the policy. C. Property damage from a covered peril to property at locations or situations described in the policy resulting in a loss of business income and/or extra expense. D. An interruption of operations caused by property damage resulting in a loss of business income and/or extra expense.
A. An interruption of operations caused by property damage from a covered peril to property at locations or situations described in the policy resulting in a loss of business income and/or extra expense.
Which one of the following statements is correct with respect to the Causes of Loss-Basic Form? Select one: A. It excludes loss caused by earth movement, other than by sinkhole collapse. B. The Water exclusion contains an exception for damage due to the backing up of sewers, drains, or sumps. C. It excludes loss caused by power failure only if the damage causing such failure occurs on the described premises. D. The War and Military Action exclusion eliminates coverage for loss caused by acts of terrorism, such as the terrorist attacks of September 11, 2001.
A. It excludes loss caused by earth movement, other than by sinkhole collapse.
Which one of the following statements is correct with respect to the Non-Owned Detached Trailers coverage extension of the Building and Personal Property Coverage Form (BPP)? Select one: A. It permits the insured to extend "your business personal property" to include trailers leased to expand office space or to provide additional storage or work areas. B. The coverage applies while the trailer is attached to any motor vehicle or motorized conveyance, provided it is not in motion. C. Coverage is available only if the insured has no contractual responsibility for loss or damage to the trailer. D. The trailer can be used anywhere in the United States.
A. It permits the insured to extend "your business personal property" to include trailers leased to expand office space or to provide additional storage or work areas.
The limit of insurance applicable to commercial property coverage is an important component of the final premium because Select one: A. It represents the exposure against which the applicable rate is multiplied to calculate the premium. B. Loss costs vary inversely with the limit of insurance. C. As the limit increases the risk of a total loss decreases, which results in some discounting of the final premium. D. The rate changes when the amount of insurance is increased.
A. It represents the exposure against which the applicable rate is multiplied to calculate the premium.
Which one of the following statements is correct with respect to the Control of Property condition of the Commercial Property Conditions Form? Select one: A. It states that coverage under the policy will not be affected by acts or omissions of persons other than the insured, if the others are not acting under the direction or control of the insured. B. It states that a violation of a policy condition at one location will suspend coverage at all locations. C. It requires the insured to give the insurer access to the premises in order to make inspections and to review the insured's accounting and other records. D. It prohibits the insured from abandoning damaged property to the insurer.
A. It states that coverage under the policy will not be affected by acts or omissions of persons other than the insured, if the others are not acting under the direction or control of the insured.
Which one of the following statements is correct with respect to the Insurance Under Two or More Coverages condition of the Commercial Property Conditions Form? Select one: A. It states that the total payment under all applicable coverage parts is limited to the actual amount of the loss. B. It is necessary because some property might be covered under two or more commercial package policies. C. It states that duplication, or "stacking," of the all applicable limits is allowed in the case of a loss. D. It explains how to apportion the loss among multiple policies for the purpose of developing rates.
A. It states that the total payment under all applicable coverage parts is limited to the actual amount of the loss.
Which one of the following terms has a specific definition in the business income coverage form? Select one: A. Operations B. Liability C. Negligence D. Products
A. Operations
Under the Building and Personal Property Coverage Form (BPP), which one of the following extensions covers loss only by fire, lightning, explosion, riot or civil commotion, and aircraft? Select one: A. Outdoor Property B. Property Off-Premises C. Personal Effects and Property of Others D. Newly Acquired or Constructed Property
A. Outdoor Property
Harry's Holiday Shop has limited sales from January through September and increased sales from October through December. Based on that information, which one of the following endorsements to the Building and Personal Property Coverage Form might be appropriate? Select one: A. Peak Season Limit of Insurance B. Spoilage Coverage C. Value Reporting Form D. Ordinance or Law Coverage
A. Peak Season Limit of Insurance
Which one of the following statements is correct with respect to the Replacement Cost optional coverage of the Building and Personal Property Coverage Form (BPP)? Select one: A. The insurer is obligated to pay the cost to replace the damaged or destroyed property with new property of like kind and quality without any deduction for depreciation or obsolescence. B. If the insured elects to accept an ACV claim settlement, the insured is barred from later requesting payment of replacement cost. C. Insurers underwrite the coverage carefully because some items that can be difficult to value, such as manuscripts, works of art, antiques, and rare articles, are covered for replacement cost. D. The insurer is obligated to pay replacement cost regardless of whether or not the property has actually been repaired or replaced.
A. The insurer is obligated to pay the cost to replace the damaged or destroyed property with new property of like kind and quality without any deduction for depreciation or obsolescence.
Which one of the following statements is correct with respect to the Mortgageholder condition of the Building and Personal Property Coverage Form (BPP)? Select one: A. The insurer is sometimes obligated to make a loss payment to the mortgageholder even though it has denied coverage, for example, to an insured who has committed arson. B. If the insurer cancels or does not renew the policy it need not notify the mortgageholder. C. A loss payment check or draft is usually made payable to the insured who is then responsible for reimbursing the mortgageholder. D. A mortgageholder is prohibited from paying any premium due, submitting a proof of loss, or notifying the insurer of any change in ownership or occupancy.
A. The insurer is sometimes obligated to make a loss payment to the mortgageholder even though it has denied coverage, for example, to an insured who has committed arson.
Justin has a Commercial Package Policy (CPP) that has a Building and Personal Property Coverage Form (BPP) with a Causes of Loss—Broad Form covering his building with a $750,000 limit. A tropical storm struck Justin's building and the strong winds tore most of the shingles from the building's roof and shattered multiple windows on the 5th floor of the building. The rain from the storm caused water to enter Justin's building through the foundation, which caused significant damage to the first and second floors. Justin had equipment stored in closets on the first and second floors which were rendered inoperable due to the water damage. The total amount of damages was $40,000 for the windows and shingles; $110,000 for water damage to the first and second floors; $9,000 for the equipment on the second floor; and $7,000 for the equipment on the first floor. How much will Justin's insurer pay for damage to the first and second floors, including the equipment? Select one: A. The losses are not covered. B. $110,000 C. $126,000 D. $166,000
A. The losses are not covered.
Which one of the following statements is correct with respect to the Building and Personal Property Coverage Form (BPP)? Select one: A. No payments under coverage extensions are made if the limit of insurance in the declarations is paid in full. B. Due to coverage extensions, it is possible for the total payment for one loss to exceed the policy limit. C. The deductible is subtracted from the policy limit. D. The policy limit is the maximum the insurer will pay over any one year.
B. Due to coverage extensions, it is possible for the total payment for one loss to exceed the policy limit.
Which one of the following statements is correct with respect to the covered causes of loss under the Causes of Loss—Basic Form? Select one: A. Smoke covers damage by smoke from industrial operations or agricultural smudging. B. Explosion includes the explosion of gases or fuel in a furnace or flue. C. Lightning includes artificially generated electrical current. D. Vandalism includes loss by theft.
B. Explosion includes the explosion of gases or fuel in a furnace or flue.
The additional coverage of the Business Income Coverage Form (BIC) which extends the regular business income coverage to include business income losses that continue after the period of restoration ends is the Select one: A. Civil Authority. B. Extended Business Income. C. Expenses To Reduce Loss. D. Interruption of Computer Operations.
B. Extended Business Income.
In which one of the following additional coverages in a Business Income Coverage Form are losses covered that continue after the period of restoration ends? Select one: A. Civil Authority B. Extended business income C. Expenses to reduce loss D. Alterations and new buildings
B. Extended business income
Under which one of the following provisions of the Building and Personal Property Coverage Form (BPP) is the maximum payment $10,000 or five percent of the building limit, whichever is less? Select one: A. Outdoor Property coverage extension B. Increased Cost of Construction additional coverage C. Debris Removal additional coverage D. Pollutant Cleanup and Removal additional coverage
B. Increased Cost of Construction additional coverage
Which one of the following statements is the purpose of the No Benefit to Bailee condition of the Commercial Property Conditions Form? Select one: A. It relieves bailees of liability for damage if the damage is recoverable under insurance carried by the bailor. B. It reinforces the insurer's right of subrogation against the bailee. C. It allows bailees to limit their liability for others' property by using contractual provisions. D. It relieves bailees of liability to bailors for any damage to the property they hold.
B. It reinforces the insurer's right of subrogation against the bailee.
CD Services (CDS) provides e-commerce services to entities that are too small to maintain an e-commerce program of their own. CDS relies exclusively on personal computers to perform its activities. A fire destroys the building in which it operates, including all of the electronic data. CDS has an Insurance Services Office (ISO) Business Income (and Extra Expense) Coverage Form. Which one of the following explains how CDS's business income policy will apply to the loss from the interruption of computer operations? Select one: A. Limited to $100,000 for the loss of income and extra expense due to the Additional Limitation-Interruption of Computer Operations B. Limited to $2,500 for loss of income and extra expense due to the Interruption of Computer Operations additional coverage C. Covered for the full policy limit because CDS purchased extra expense coverage D. Covered for the full policy limit because the interruption was caused by a covered cause of loss
B. Limited to $2,500 for loss of income and extra expense due to the Interruption of Computer Operations additional coverage
Business income coverage is considered a time element coverage for which one of the following reasons? Select one: A. The average duration of losses is only a few weeks. B. Loss severity is dependent on the length of time needed to restore damaged property. C. Maximum length of coverage only lasts for a specific amount of time. D. Loss frequency is dependent on the length of time needed to restore damaged property.
B. Loss severity is dependent on the length of time needed to restore damaged property.
Which one of the following is an option in the business income coverage form that deletes the coinsurance clause while limiting loss payment to the lesser of (1) the amount of loss sustained during the 120 days following the beginning of the period of restoration or (2) the policy limit? Select one: A. Extended Period of Indemnity coverage option B. Maximum Period of Indemnity coverage option C. Business Income Agreed Value coverage option D. Monthly Limit of Indemnity coverage option
B. Maximum Period of Indemnity coverage option
The Alterations and New Buildings additional coverage to the Business Income Coverage Form (BIC) provides coverage for loss of income resulting from a delay in starting operations, if the delay results from damage at the described premises by a covered cause of loss to which one of the following? Select one: A. Computer operations B. New buildings under construction C. Electronic data D. Property at fairs or exhibitions
B. New buildings under construction
Which one of the following Additional Coverages is covered under the Causes of Loss—Special Form but not under the Causes of Loss—Broad Form? Select one: A. Falling Objects B. Property in Transit C. "Fungus", Wet Rot, Dry Rot and Bacteria D. Collapse
B. Property in Transit
Which one of the following statements is correct with respect to deductibles used in commercial property policies? Select one: A. Commercial property rates are developed with the assumption that the policy will be subject to a $5,000 deductible. B. Rates are reduced in return for the insured's acceptance of a higher deductible. C. Reducing a deductible from $500 to $250 represents too small a reduction in loss payments to generate any reduction in premiums. D. Because deductible amounts are generally small, they have no significant impact on loss costs and, therefore, do not affect property rates.
B. Rates are reduced in return for the insured's acceptance of a higher deductible.
Which one of the following optional coverages would obligate the insurer to pay for new property of like kind and quality, without any deduction for depreciation? Select one: A. Agreed Value B. Replacement Cost C. Functional Replacement Cost D. Actual Cash Value
B. Replacement Cost
Which one of the following statements is correct with respect to the Valuation condition of the Building and Personal Property Coverage Form (BPP)? Select one: A. Stock sold but not delivered is valued at replacement cost. B. Subject to certain exceptions, insured property is valued at its actual cash value (ACV). C. Improvements and betterments that are not replaced are covered for up to $2,500. D. The valuation condition cannot be modified.
B. Subject to certain exceptions, insured property is valued at its actual cash value (ACV).
Under which one of the following causes of loss forms is the burden of proof on the insurer to prove why coverage does not apply? Select one: A. The Causes of Loss—Basic Form B. The Causes of Loss—Special Form C. The Causes of Loss—Broad Form D. The Causes of Loss—All Risks Form
B. The Causes of Loss—Special Form
Business income insurance covers which one of the following types of losses that could result from a fire? Select one: A. The cost of fighting the fire B. The extra expenses for renting a temporary office C. The cost to replace destroyed inventory D. The cost of repairing a building
B. The extra expenses for renting a temporary office
Generally, more than one causes of loss form is used in a commercial property coverage part for which one of the following reasons? Select one: A. Business personal property, which is more subject to loss, is always insured on a more restricted basis than are buildings. B. The underwriter is reluctant to provide the broader coverages for certain types of property. C. Using multiple causes of loss forms in a single policy is standard industry practice. D. Most insureds would like to cover their personal effects for loss by theft.
B. The underwriter is reluctant to provide the broader coverages for certain types of property.
The owners of Uncle Reggie's Steakhouse are insured under a Building and Personal Property Coverage Form (BPP) that covers their building and business personal property for $350,000 and $100,000, respectively. The policy has a $2,500 deductible. A fire results in $350,000 worth of damage to the building and a $70,000 loss of business personal property. In what amounts should the policy provide coverage for this loss? Select one: A. $350,000 Building and $70,000 Property B. $374,500 Building and $67,500 Property C. $347,500 Building and $70,000 Property D. $350,000 Building and $65,000 Property
C. $347,500 Building and $70,000 Property
Agreed Value optional coverage is often elected by risk averse firms in order to Select one: A. Waive any insurance to value requirements in most commercial leases. B. Allow the firm to insure their building and contents for an amount greater than replacement cost. C. Alleviate the risk of not complying with the Coinsurance condition. D. Avoid the application of multiple deductibles in the event of several losses resulting from a single occurrence.
C. Alleviate the risk of not complying with the Coinsurance condition.
Ace Accounting has a Building and Personal Property Coverage Form (BPP) through Delta Insurance with a limit of $300,000 on business personal property. The insured's computer system is valued at $150,000 and it is insured for $100,000 under a separate electronic data processing (EDP) equipment policy issued by Omicron Insurance. The computer system is totally destroyed by fire, a cause of loss insured under both policies. Which one of the following correctly describes how the loss would be settled? Select one: A. The BPP policy is primary and would pay the full amount of the loss because it is within the BPP policy limits. B. Because Omicron and Delta both cover the equipment, each insurer would pay half of the loss, or $75,000. C. Because Omicron's policy more specifically describes the computer system, it must pay its limit before Delta pays anything; Delta would pay the remaining $50,000. D. The BPP specifically excludes property otherwise insured, so Omicron would pay $100,000 and the insured would have to pay the remaining $50,000 of the loss.
C. Because Omicron's policy more specifically describes the computer system, it must pay its limit before Delta pays anything; Delta would pay the remaining $50,000.
Adjacent properties can increase the probability of loss to the insured's building and contents. When rating commercial property exposures, the term used to refer to the hazard posed by adjacent or surrounding properties is Select one: A. Contiguous hazard. B. External rating factor. C. External exposure. D. Adjacent risk.
C. External exposure.
Which one of the following is correct with respect to how the covered causes of loss affect commercial property insurance premiums? Select one: A. The rate for the Causes Of Loss—Basic Form consists of a Group II rate for fire, lightning, explosion, vandalism, and sprinkler leakage. B. If the policy provides Special Form coverage, no additional rate is added to the Broad Form rates; instead a surcharge is added to the premium. C. If the policy provides Broad Form coverage, an additional rate is added to the Basic Form rates for the cost of covering the additional perils of the Broad Form. D. If the policy provides Broad Form coverage, a Group II rate is added for vandalism and sprinkler leakage.
C. If the policy provides Broad Form coverage, an additional rate is added to the Basic Form rates for the cost of covering the additional perils of the Broad Form.
Which one of the following best describes the Ordinance or Law Coverage endorsement to the Building and Personal Property Coverage Form's Coverage B? Select one: A. It covers damage to perishable stock resulting from power outages. B. It covers the value of the undamaged portion of a building that must be demolished. C. It covers the cost to demolish the undamaged portion of a building and remove its debris when demolition is required by the building code. D. It covers the cost to repair or rebuild the property resulting from the enforcement of a building, zoning, or land use law.
C. It covers the cost to demolish the undamaged portion of a building and remove its debris when demolition is required by the building code.
Which one of the following is correct with respect to the Increased Cost of Construction additional coverage of the Building and Personal Property Coverage Form (BPP)? Select one: A. It does not apply if the replacement cost option has been selected. B. The amount of insurance is equal to 25 percent of the amount of insurance on the building or $50,000, whichever is less. C. It provides a small amount of insurance to cover the increased cost to comply with ordinances or laws regulating the repair, rebuilding, or replacement of covered buildings. D. It includes coverage for the cost to demolish the undamaged portion of the structure and remove its debris.
C. It provides a small amount of insurance to cover the increased cost to comply with ordinances or laws regulating the repair, rebuilding, or replacement of covered buildings.
Which one of the following statements is correct with respect to the building coverage provided by the Building and Personal Property Coverage Form (BPP)? Select one: A. Outdoor fixtures are excluded from building coverage. B. The BPP covers all buildings located at the insured premises whether specifically listed and described in the declarations or not. C. Personal property owned by the insured and used to maintain or service the building or its premises is included in the BPP's definition of "building." D. Machinery and equipment, whether permanently installed or not, must be insured as business personal property.
C. Personal property owned by the insured and used to maintain or service the building or its premises is included in the BPP's definition of "building."
Which one of the following statements about commercial property coverage forms is correct? Select one: A. A commercial property coverage part cannot include more than one commercial property coverage form. B. Commercial Property Conditions specify the causes of loss for which the described property is covered. C. Specialized coverage forms exist for insuring buildings under construction, condominium association buildings, and the property of condominium commercial unit owners. D. Commercial property coverage forms cannot be used to insure the loss of business income.
C. Specialized coverage forms exist for insuring buildings under construction, condominium association buildings, and the property of condominium commercial unit owners.
Taunton Company (Taunton) has a Commercial Package Policy (CPP) that has a Building and Personal Property Coverage Form (BPP) with a Causes of Loss—Broad Form. Because the building is older and has unique architectural features, Taunton decided to insure the building on a replacement cost basis. There is a $2 million coverage limit on the building, with a 90 percent coinsurance clause and $2,000 deductible. The building was struck by lightning and a resulting fire caused substantial damage to the building. The cost to repair the damaged portion of the building with materials of like kind and quality was $500,000. At the time of the loss, the replacement cost value of the building was determined to be $2.2 million. How much would the insurer pay when the repairs are completed if the replacement cost option is activated? Select one: A. $0 B. $448,000 C. $450,000 D. $498,000
D. $498,000
Which one of the following is covered under the Building and Personal Property Coverage Form (BPP) as business personal property? Select one: A. Completed additions to a building B. Fixtures, including outdoor fixtures C. Permanently installed machinery and equipment D. Building contents such as furniture
D. Building contents such as furniture
Which one of the following contains an insuring agreement, delineation of the property covered and not covered, and additional coverages and coverage extensions? Select one: A. Supplemental declarations forms B. Causes of loss forms C. Commercial property declarations D. Commercial property coverage forms
D. Commercial property coverage forms
Which one of the following lists the covered causes of loss (basic, broad, or special); the deductible amount; and any optional coverages? Select one: A. Causes of loss forms B. Commercial property conditions C. Commercial property coverage forms D. Commercial property declarations
D. Commercial property declarations
Omicron Incorporated is insured under an ISO commercial property policy and an ISO equipment breakdown policy. Both policies include the Other Insurance provision. In the case of a loss for which both policies provide coverage under the same plan, terms, and conditions, which one of the following statements is correct? Select one: A. The ISO commercial property policy becomes primary and the equipment breakdown policy becomes excess. B. Omicron can collect the full amount of the loss under both policies. C. The policy that has been in force the longest becomes primary and the other policy becomes excess. D. Each policy pays in relation to all applicable policies.
D. Each policy pays in relation to all applicable policies.
In the business income coverage form, the period of restoration Select one: A. Includes additional time to repair the building to comply with building code or law. B. Includes additional time to assess the effects of pollutants. C. Begins immediately after the physical loss occurs with no waiting period. D. Ends when the property is or should have been restored.
D. Ends when the property is or should have been restored.
Which one of the following causes of loss is covered by the commercial property policy Causes of Loss—Broad Form but not the Basic Form? Select one: A. Windstorm or hail B. Lightning C. Aircraft or vehicles D. Falling objects
D. Falling objects
Which one of the following statements is correct regarding the Spoilage Coverage endorsement to the Building and Personal Property Coverage Form? Select one: A. The coverage is provided under a blanket limit. B. For coverage to apply to damage resulting from a power outage, the power outage must be caused by the insured. C. The coverage is subject to coinsurance. D. It covers damage to perishable stock resulting from on-premises breakdown, among other causes.
D. It covers damage to perishable stock resulting from on-premises breakdown, among other causes.
The Causes of Loss—Special Form is a commercial property form that covers causes of loss that are not specifically excluded. One reason to purchase this form is Select one: A. It has fewer exclusions and limitations than the other causes of loss forms. B. It is less expensive than the other policy causes of loss forms. C. It lists far more covered perils than the other commercial forms. D. It shifts the burden of proof to the insurer to prove a loss is excluded.
D. It shifts the burden of proof to the insurer to prove a loss is excluded.
Which one of the following is included in the Cancellation condition of the Common Policy Conditions of an ISO Commercial Package Policy? Select one: A. The insurer must give thirty days notice for cancellation for any reason. B. Any insured can cancel the coverage by calling his/her agent. C. In most states, policy conditions about cancellation supersede state laws that would otherwise apply. D. Notice of cancellation for nonpayment of premium must be mailed or delivered to the insured at least ten days before the date of cancellation.
D. Notice of cancellation for nonpayment of premium must be mailed or delivered to the insured at least ten days before the date of cancellation.
The type of activities conducted inside a building, some of which are riskier than others, is referred to as the Select one: A. Utilization. B. Tenancy. C. Enterprise. D. Occupancy.
D. Occupancy.
The amount of a business income loss is determined on the basis of net income of the business before the loss occurred, operating expenses that must continue during the period of restoration to permit the insured to resume operations with the quality of service that existed prior to loss, other relevant sources of information and which one of the following? Select one: A. Net income that might have been earned as a result of an increase in business due to favorable business conditions caused by the effect of the covered cause of loss B. Net income from an increase in business resulting from a catastrophe C. Coinsurance percentage D. Probable net income of the business if no loss had occurred
D. Probable net income of the business if no loss had occurred
The Causes of Loss—Basic Form differs from the Causes of Loss—Broad Form in which one of the following ways? Select one: A. The Broad Form adds coverage for flooding, rainfall, sewer backup, and similar causes of water damage. B. The Broad Form specifically excludes rupture or bursting of water pipes and leakage of water or steam from any part of a system or appliance. C. The Broad Form covers "risks of direct physical loss" subject to the form's exclusions and limitations. D. The Broad Form provides coverage for loss caused by collapse of a building or personal property resulting from specified perils.
D. The Broad Form provides coverage for loss caused by collapse of a building or personal property resulting from specified perils.
The possibility of the insured incurring an uninsured extra expense loss other than the reduction in business income loss is greatly reduced by Select one: A. The Business Income (Without Extra Expense) Coverage Form. B. The Expenses To Reduce Loss additional coverage. C. The Extended Business Income (EBI) additional coverage. D. The Business Income (and Extra Expense) Coverage Form.
D. The Business Income (and Extra Expense) Coverage Form.
Which one of the following losses would be covered under the commercial property policy Causes of Loss—Broad Form additional coverage for Collapse? Select one: A. Settling of a building B. Weakening of part of the insured's building so that the building is in danger of falling down C. Cracking or bulging of part of the insured's building D. The abrupt falling down of part of the insured's building
D. The abrupt falling down of part of the insured's building
Which one of the following statements is correct with respect to the Concealment, Misrepresentation, or Fraud condition of the Commercial Property Conditions Form? Select one: A. Concealment involves an active misstatement of fact. B. Any misrepresentation, even if it is immaterial, voids coverage. C. A misrepresentation is a passive failure to disclose a material fact. D. The commercial property coverage part voids coverage if the insured conceals a material fact pertaining to the covered property.
D. The commercial property coverage part voids coverage if the insured conceals a material fact pertaining to the covered property.
Which one of the following is correct with respect to the Vacancy condition of the Building and Personal Property Coverage Form (BPP)? Select one: A. Buildings under construction or renovation are considered to be vacant. B. If the building has been vacant for more than ten consecutive days, the insurer will pay only for loss caused by vandalism. C. If the building has been vacant for more than one year, loss payments for all covered causes of loss are reduced by 50 percent. D. The conditions under which a building is considered to be vacant are different for a tenant than for an owner.
D. The conditions under which a building is considered to be vacant are different for a tenant than for an owner.
Which one of the following is correct with respect to the Inspections and Surveys common condition of the Insurance Services Office (ISO) Commercial Package Policy? Select one: A. The inspections must be made by the insurer's own personnel. B. The insurer must inform the insured of the results of such inspections. C. The insurer has an obligation to inspect the insured's premises and operations throughout the policy period. D. The insurer does not make safety inspections, and does not guarantee that conditions are safe or healthful.
D. The insurer does not make safety inspections, and does not guarantee that conditions are safe or healthful.
Under the Legal Action Against Us condition of the Commercial Property Conditions Form, if the insured wishes to bring legal action against the insurer, he or she must do so within which one of the following timeframes? Select one: A. Sixty days after the insurer denies coverage for a loss B. One year from the date on which the insured notifies the insurer of his or her intention to sue C. Three years after the insurer's action that has given rise to the suit D. Two years after the date on which the direct physical loss occurred
D. Two years after the date on which the direct physical loss occurred
Which one of the following is correct with respect to the Transfer of Rights of Recovery Against Others to Us condition of the Commercial Property Conditions Form? Select one: A. Waiver of recovery against any other party may be given by the insured before or after the loss, provided the waiver is made in writing. B. The insured is prohibited from waiving recovery against any other party. C. Any waiver given by the insured, either before or after the loss, impairs the insured's right to collect from the insurer for the loss. D. Waiver of recovery against any other party may be given by the insured, provided the waiver is made in writing before the loss occurs.
D. Waiver of recovery against any other party may be given by the insured, provided the waiver is made in writing before the loss occurs.
