CPCU 551 full practice exam

Cray sells consumer goods. Cray carries a Commercial Package Policy that includes Insurance Services Office's Commercial Crime Coverage Form (Loss Sustained) with the following insuring agreements: Employee Theft; Forgery or Alteration; Inside the Premises—Theft of Money and Securities; and Inside the Premises—Robbery or Safe Burglary of Other Property. The limit of i for each is $100,000 and the deductible per occurrence for each one of these insuring agreements is $1,000. The policy year is 20X1. During 20X1, Cray performed an inventory calculation and determined that the actual physical inventory on hand was $102,000 less than what the company's records indicated. Cray could not establish that it had sustained a loss without the inventory calculation. How much of this loss will be covered by the Employee Theft insuring agreement of the Commercial Crime Coverage part? A. $0 B. $99,000 C. $100,000 D. $102,000

a

Question 13 ID# 5941746Points: 1 Flag Question Question text Family Farm is insured under an ISO Causes of Loss Form—Farm Property that is written on a broad covered causes of loss basis. Which one of the following losses is covered? Select one: A. Collision damage to farm machinery B. Earthquake losses to silos C. Flood losses to dwellings D. Flood waters destroyed the hay on the property

a

Question 17 ID# 5868677Points: 1 Flag Question Question text Under the conditions of ISO Commercial Crime Coverage Form, which one of the following is a duty of the insured after discovering a loss or a situation that might result in a loss? Select one: A. Submit a detailed, sworn proof of loss within 120 days. B. File a proof of loss with the police within 10 days of the loss. C. Provide an examination under oath, whether or not the insurer requests it. D. Notify the insurer within 60 days.

a

Question 26 ID# 5841340Points: 1 Flag Question Question text A difference in conditions (DIC) policy Select one: A. Can have property valued at an amount that is mutually agreeable to the insurer and insured. B. Increases the insurers residual market share when they use an inland marine form. C. Commonly includes loss caused by steam boiler explosion or mechanical breakdown. D. Typically includes coverage for employee theft or dishonesty losses.

a

Question 28 ID# 5841652Points: 1 Flag Question Question text A retail store, owner of various commercial trucks, wants to send a small shipment of goods to their warehouse 40 miles away. They want to keep this process as uncomplicated as possible. Which one of the following methods of shipping would you suggest for the retailer? Select one: A. Ship the goods on their own truck to the warehouse. B. Hire a rail car to carry the goods to the warehouse. C. Ship the goods with a local trucking company to the warehouse. D. Hire an aircraft to transport the goods to the warehouse.

a

Question 29 ID# 5868244Points: 1 Flag Question Question text Which one of the following is true about the Business Income Agreed Value coverage option in a business income form? Select one: A. The coinsurance condition is suspended as long as the insured carries the amount of insurance that is agreed upon with the insurer. B. The agreed value is effective for a period of 36 months. C. The option eliminates the need for an insured to complete a report/worksheet for the insurer. D. The agreed value must be equal to at least the insured's net income for the next 12 months.

a

Question 30 ID# 5875176Points: 1 Flag Question Question text A commercial manufacturing operation with multiple locations may choose an output policy over a typical standard property policy because Select one: A. Personal property can be covered without listing the location. B. Liability coverage is included. C. Output policies are subject to lower deductibles for loses. D. Flood damage is a covered peril.

a

Question 37 ID# 5941431Points: 1 Flag Question Question text Which one of the following items, owned or installed by the insured, is covered under the Building and Personal Property Coverage Form (BPP) as business personal property? Select one: A. Building contents such as furniture B. Fixtures, including outdoor fixtures C. Completed additions to a building D. Permanently installed machinery and equipment

a

Question 8 ID# 5829408Points: 1 Flag Question Question text Which one of the following statements is correct with regard to the Building and Personal Property Coverage Form (BPP)? Select one: A. Insureds who have selected the replacement cost option may also elect to have the personal property of others valued at replacement cost. B. Under the extension of replacement cost to personal property of others, the amount of a loss is calculated according to a formula included in the additional coverage wording. C. Insureds cannot obtain any coverage under the BPP or its optional coverages for leased photocopiers, computers, phone systems, and other equipment. D. If an insured extends replacement cost to the personal property of others, the amount of a loss is calculated as the replacement cost of that property, even if that amount exceeds the applicable limit of insurance.

a

uestion 16 ID# 5868683Points: 1 Flag Question Question text James is in the process of forming his own brokerage company which will include several employees. James will be best protected by purchasing which one of the following to cover the crime loss exposures of his company? Select one: A. Financial Institution Bond. B. Surety Bond. C. Commercial Crime Insurance. D. Fidelity Bond.

a

(MDC) is insured under a Business Income (and Extra Expense) Coverage Form with a $1 million Business Income limit of insurance for the cleaners location, subject to option (2) Business Income Other Than "Rental Value". None of the optional coverages of the Business Income (and Extra Expense) are in effect and no endorsements apply to MDC's Business Income (and Extra Expense) Coverage Form. The period began on July 1. On October 1, , access was denied to MDC for five weeks by civil authorities because of fire. The loss of business income that MDC sustained was $70,000, including a $5,000 loss for the first 72 hours. After the first 72 hours, MDC sustained $11,000 income loss in week 1, $12,000 income loss in week 2, $13,000 income loss in week 3, $14,000 income loss in week 4 and $15,000 income loss in week 5. How much business income loss would be covered? A. $36,000 B. $50,000 C. $65,000 D. $70,000

b

A store, which carries a $20,000 limit, discovered its window was damaged and the safe door was missing on Monday when an employee arrived at work. The storeowner immediately reported this incident to its insurance carrier. The theft consisted of precious metal and gemstones that totaled $19,000 in value. How much should the retail store's insurer pay for this loss? A. The insurer should pay nothing because precious metals are excluded from Inside the Premises—Robbery or Safe Burglary of Other Property coverage. B. The insurer should pay $5,000, the special limit for this type of property under Inside the Premises—Robbery or Safe Burglary of Other Property. C. The insurer should pay $19,000, since it is falls within the limit of liability under Inside the Premises—Safe Burglary of Other Property. D. The insurer should pay $20,000, the limit of liability under Inside the Premises—Safe Burglary of Other Proper

b

Question 18 ID# 5875781Points: 1 Flag Question Question text Inland marine policies contain many of the general characteristics common to most insurance policies. The characteristic that provides coverage for inland marine floaters is which one of the following? Select one: A. The conditions of the policy B. Coverage for property in transit C. The broad perils coverage D. The valuation provisions

b

Question 21 ID# 5941517Points: 1 Flag Question Question text Drake's Dry Cleaners damages $800 worth of linen tablecloths owned by Christopher's Cafe. When Christopher asks for reimbursement, Drake tells Christopher that according to language on the service slip, it is not liable for the damage. Christopher files a claim with its insurance company for the damaged tablecloths. 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 relieves bailees of liability to bailors for any damage to the property they hold. D. It allows bailees to limit their liability for others' property by using contractual provisions.

b

Question 22 ID# 5929945Points: 1 Flag Question Question text Each insured member of a pool contributes premium based on its loss exposures. In exchange, Select one: A. The pool implements various risk financing techniques. B. The pool pays for each insured's covered losses. C. The pool contributes capital. D. The pool forms a captive insurer.

b

Question 24 ID# 5876808Points: 1 Flag Question Question text A farmer is concerned about an unexpected production loss as compared to the farmer's actual production history if it is not the result of neglect, poor farming practices, or theft. In addition, the farmer owns a prize bull. Which of the following are two insurance policies that the farmer should purchase for these loss exposures? Select one: A. Standard farm policy and federal livestock insurance B. Multiple peril crop insurance and animal mortality insurance C. Crop hail insurance and feedlot Insurance D. Standard farm policy and crop hail insurance

b

Question 25 ID# 5840928Points: 1 Flag Question Question text In regard to condominium insurance requirements, the coverage Select one: A. The condominium association should carry is spelled out in a contract completely outside the condominium agreement. B. Needs of a condominium association are similar to the building insurance needs of a building owner or landlord. C. For the condominium unit owner's personal property and liability exposure is provided by the Condominium Association Coverage Form. D. Provided by the condominium commercial property forms is identical to that provided by the Building and Personal Property (BPP) Coverage Form.

b

Question 34 ID# 5874741Points: 1 Flag Question Question text The Condominium Association Coverage Form is designed to insure the building and business personal property loss exposures of condominium associations. In addition to the building and the association's business personal property, this coverage form also covers which one of the following major categories of property? Select one: A. Outdoor property of others B. Personal property of others C. Appliances contained within individual units D. Fixtures, improvements, and alterations owned by the unit owner

b

Question 41 ID# 5900967Points: 1 Flag Question Question text Which one of the following is one of the seven insuring agreements of the Commercial Crime Coverage Form? Select one: A. Theft of merchandise while the business is closed B. Theft committed by an employee C. Theft of property left in the insured parking lot D. Disappearance of supplies from insured premises

b

Question 42 ID# 5926943Points: 1 Flag Question Question text Which one of the following is true regarding the Employee Theft-Name or Position Schedule endorsement? Select one: A. This endorsement adds coverage to what is provided by the Employee Theft insuring agreement. B. This endorsement replaces the regular policy definition of employee with one that applies on either a name-schedule or position-schedule basis. C. This endorsement limits the organization to scheduling only one employee for whom coverage is provided. D. When written on a position-schedule basis, employee theft is restricted to covering theft by employees whose names are listed.

b

Question 5 ID# 5874037Points: 1 Flag Question Question text Wholesale Merchandiser leases five warehouses, each in a different city, to supply retail customers in each city with timely service. The average value of the merchandise at each warehouse is $750,000. Which one of the following blanket insurance limits would best suit this insured's needs while minimizing the cost of over-insuring? Select one: A. Blanket $3,750,000 limit B. Blanket $3,375,000 limit C. Blanket $4,500,000 limit D. Blanket $5,000,000 limit

b

Question 7 ID# 5828907Points: 1 Flag Question Question text Which one of the following is typically covered by an unendorsed builder's risk policy? Select one: A. Failure to complete on time due to a strike B. Building materials and supplies C. Loss caused by governmental seizure D. Overruns in the cost of construction

b

Question 9 ID# 5869858Points: 1 Flag Question Question text 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. Operations B. Suspension C. Period of restoration D. Premises

b

Question 11 ID# 5941481Points: 1 Flag Question Question text Bartram Industries requested that the Functional Personal Property Valuation (Other Than Stock) endorsement be added to its Building and Personal Property Coverage Form. The Functional Personal Property Valuation endorsement is available for providing functional valuation on Select one: A. Stock that has been finished including the profit and business income. B. The goods held for sale by a non-manufacturer. C. Older machinery and computer systems. D. Outbuildings and sheds on the insured's premises.

c

Question 14 ID# 5930630Points: 1 Flag Question Question text Which one of the following is a risk financing goal? Select one: A. Paying for negative financial consequences of an error B. Maintaining an appropriate level of credit C. Managing uncertainty of loss outcomes D. Complying with corporate policies and procedures

c

Question 15 ID# 5874865Points: 1 Flag Question Question text The NFIP General Property Form covers direct physical loss caused by "flood" at the premises listed in the declarations form. This policy excludes which one of the following? Select one: A. Landslide soil mass moving by liquidity B. Loss from mudflow as a result of erosion C. Loss by flood to contents stored in a basement D. Loss caused by rain or snow resulting in a flood

c

Question 38 ID# 5841766Points: 1 Flag Question Question text 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. Weakening of part of the insured's building so that the building is in danger of falling down B. Cracking or bulging of part of the insured's building C. The abrupt falling down of part of the insured's building D. Settling of a building

c

Question 39 ID# 5949590Points: 1 Flag Question Question text During a long period of business interruption, payroll expenses Select one: A. Remain steady. B. Increase. C. May or may not continue depending on various factors. D. Tend to increase and decrease on a monthly basis.

c

Question 40 ID# 5841784Points: 1 Flag Question Question text Which one of the following statements is correct with respect to retention's ability to meet risk financing goals? Select one: A. Retention is the most effective way to meet the risk financing goal of paying losses. B. Retention generally reduces the level of liquidity needed. C. Retention enables an organization to manage its cost of risk. D. Retention exposes an organization to less variability in cash flows than transfer.

c

Question 44 ID# 5841314Points: 1 Flag Question Question text Earthquake insurance is Select one: A. Only provided in a sublimit form of coverage. B. Almost always purchased without reinsurance. C. Difficult to obtain in states affected by the Madrid fault. D. Unavailable in areas that have a low probability of severe damage.

c

Question 46 ID# 5876034Points: 1 Flag Question Question text While both annual transit and open cargo insurance are designed to address transportation exposures, open cargo differs in that it is designed to Select one: A. Cover property transported domestically. B. Also provide mail insurance. C. Cover overseas shipments. D. Provide open perils coverage.

c

Question 47 ID# 5941448Points: 1 Flag Question Question text Simon Industries is covered under a separate Equipment Breakdown Protection (EBP) Coverage Form. Which one of the following is a policy condition in Simon's EBP Coverage Form? Select one: A. The Percentage of Loss Deductible B. Other Exclusions C. The Joint or Disputed Loss Agreement D. Limits of Insurance

c

Question 49 ID# 5859541Points: 1 Flag Question Question text In determining an organization's estimated maximum loss (EML) of business income, what is the most likely starting point? Select one: A. Noncontinuing expenses B. Time required to restore property C. The coinsurance basis D. Extra expenses

c

Question 50 ID# 5829545Points: 1 Flag Question Question text A general exclusion of the ISO Commercial Crime Coverage Form applies to acts of employees. However, an exception is made for Select one: A. Acts of employees learned of by you prior to the policy period. B. Acts committed by the insured. C. Coverage provided by the Employee Theft insuring agreement. D. Unauthorized use or disclosure of confidential nonpublic information.

c

T&T experiences vandalism and burglary to its business office. Thomas, the owner of the business reports a claim to its insurer. Thomas is concerned that he may do something wrong during the claim process and he carefully reads the conditions of his Building and Personal Property Coverage Form (BPP). Which one of the following statements is correct with respect to the condition Duties in the Event of Loss or Damage of the (BPP)? A. To prevent insurance fraud, the insurer is obliged to notify the police of all losses reported. B. The insured is required to give the insurer notice of the loss, including a description of the property damaged, within 24 hours. C. If the insured fails to perform any of them, the insurer may not have to pay for the loss. 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.

c

(SFS) is insured under a Business Income (and Extra Expense) Coverage Form with a $1 million Business Income limit of insurance for the store location, subject to option (2) Business Income Other Than "Rental Value". None of the optional coverages of the Business Income (and Extra Expense) are in effect and no endorsements apply to SFS's Business Income (and Extra Expense) Coverage Form. The period began on February 1, 20X1. On February 1, 20X1, SFS suffered a partial physical fire loss and was closed for four months until the building could be repaired and the personal property replaced. During the four month interruption, SFS's actual revenue was reduced to nil and the expenses such as payroll, electricity and overtime labor totaled $200,000. SFS expected to gain $550,000 in revenue and have $300,000 in expenses. What is SFS's business income loss? Select one: A. $50,000 B. $250,000 C. $350,000 D. $450,000

d

Question 1 ID# 5856418Points: 1 Flag Question Question text One dimension of analyzing loss exposures is timing of losses. The timing of losses is significant because Select one: A. Funds to pay for losses must be readily available and paid in full for valid claims. B. Accurate reserves must be established. C. Compliancy requirements must be met. D. Money held in reserve to pay for a loss can earn interest until the actual payment is made.

d

Question 10 ID# 5941532Points: 1 Flag Question Question text One Common Policy Condition in the commercial package policy (CPP) is the Examination of Books and Records. The intent of this policy condition is to Select one: A. Prevent the insured from concealing hazardous conditions unacceptable to the insurer. B. Protect the right of the insured to inspect the insured's premises. C. Ensure that the premium charged by the insurer has state approval. D. Reserve the right of an insurer to inspect and audit the insured's books and records.

d

Question 12 ID# 5829381Points: 1 Flag Question Question text 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. The amount of insurance is equal to 25 percent of the amount of insurance on the building or $50,000, whichever is less. B. It does not apply if the replacement cost option has been selected. C. It includes coverage for the cost to demolish the undamaged portion of the structure and remove its debris. D. 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

Question 19 ID# 5878032Points: 1 Flag Question Question text Which one of the following statements is true with regards to the Extra Expense Coverage Form? Select one: A. The form insures extra expense in addition to minimal coverage for loss of business income. B. The form offers 120 extra days of coverage as compared to the Business Income (and Extra Expense) Coverage Form. C. The form exclusively offers limits of loss payments in the form of a 40%-80%-100% combination. D. The form is intended to meet the goals of organizations that, when suffering a loss, must continue their operations at any cost.

d

Question 2 ID# 5926846Points: 1 Flag Question Question text A building with concrete exterior walls and wooden support beams is which one of the following types of construction as defined by Insurance Services Office, Inc. (ISO)? Select one: A. Combustible B. Noncombustible C. Wood frame D. Joisted masonry

d

Question 20 ID# 5941717Points: 1 Flag Question Question text A large retailer with 50 domestic locations has transit coverage through an annual transit policy. They have recently established a location just over the Mexican border and will need to cover this location's shipments both in and out of Mexico. Which one of the following describes a fact regarding the territory covered by the basic annual transit policy? Select one: A. Land, water and air shipments are covered in the continental United States and overseas locations. B. Shipments are covered in the United States, Hawaii, Puerto Rico, Canada and any overseas possessions. C. Land shipments are covered within the continental United States, Canada, and Mexico. D. Shipments are covered only within the continental United States and Canada.

d

Question 23 ID# 5941705Points: 1 Flag Question Question text Which one of the following additional coverages would best cover the insured's loss of business income that results when fire damage to another building makes it unsafe for customers to enter the insured's premises and access is prohibited by the fire department? Select one: A. Alterations and New Buildings B. Expenses to Reduce Loss C. Extended Business Income D. Civil Authority

d

Question 27 ID# 5870140Points: 1 Flag Question Question text Which one of the following statements is correct with respect to the businessowners policy (BOP)? Select one: A. Whether a building is frame, joisted masonry, or fire resistive is an underwriting consideration, not a rating factor. B. Business income coverage on BOP policies is most often separately rated. C. BOP policies are, with a few, limited exceptions, rated manually. D. The available limits for certain property such as money orders are often quite low with minimal or no options for higher limits.

d

Question 31 ID# 5841195Points: 1 Flag Question Question text Eligibility for the National Flood Insurance Program (NFIP) is limited. National flood insurance is available Select one: A. To all property owners who wish to build in flood prone areas. B. Only to owners of properties that hold mortgages from a regulated lending institution. C. In all communities that regulate new construction being built. D. Only to owners of properties in communities that have met requirements established by the NFIP.

d

Question 32 ID# 5870329Points: 1 Flag Question Question text A payment bond is a contract bond guaranteeing which one of the following? Select one: A. The obligee will receive payment for loss or damage resulting from violation of the duties imposed on the licensee. B. The work will be free from defects in materials and workmanship for a specified period after the project is completed. C. A person appointed by a court to administer the property of others will faithfully perform his or her duties. D. The project will be free of liens.

d

Question 33 ID# 5876485Points: 1 Flag Question Question text Under equipment breakdown coverage, which one of the following meets the definition of a "breakdown?" Select one: A. Failure of a safety device B. Malfunction because of improper calibration C. Damage to a vacuum tube D. Failure of vacuum equipment

d

Question 36 ID# 5900769Points: 1 Flag Question Question text Which one of the following statements best describes the Causes of Loss—Special Form? Select one: A. The placement of the "burden of proof" rests with the insured as opposed to the insurer. B. The Special Form contains exclusions that are covered in the Basic and Broad Forms for certain hard to insure perils. C. The Special Form is designed to cover any loss that would not be covered by the Basic and Broad Forms. D. The Special Form provides coverage for direct physical losses other than those that are specifically excluded.

d

Question 45 ID# 5829481Points: 1 Flag Question Question text 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. Excludable expenses. B. Continuing expenses. C. Contingent expenses. D. Extra expenses.

d

Question 48 ID# 5941434Points: 1 Flag Question Question text Lynch Accounting recently purchased a new computer system which controls the desktop computers, phone lines, fax lines, copiers/scanners and alarm systems. The city upgraded the electrical lines and an electrical overload damaged the computer's motherboard. Which one of the following policies would most fully respond to the loss? Select one: A. Commercial property B. General liability C. Extended warranty D. Equipment breakdown

d