BOP Insurance
Under a BOP, coverage is extended for business personal property while away from the premises in the amount of:
Answer: $10,000 Explanation: A BOP provides an extension of coverage to apply to business personal property, other than money and securities, off premises up to $10,000. This extension is in addition to limits.
The client has a boiler and machinery policy written with a policy limit of $100,000. If damage to covered equipment is caused by water, how much will the policy pay?
Answer: $25,000 Explanation: There is a special limit of liability on a boiler and machinery policy when the covered equipment is damaged by water. The most the insurer will pay for direct damage as a direct result of a breakdown of covered equipment due to water damage is $25,000.
The standard deductible on a BOP is:
Answer: $500 Explanation: Although the standard deductible on a BOP is $500, insureds may choose deductibles of either $250, $1,000 or $2,500. The higher the deductible, the lower the premium.
For nonpayment, insurers canceling commercial policies must give _____ days advance notice:
Answer: 10 days Explanation: Cancellation or non-renewal of a commercial policy by an insurer requires advance written notice. Cancellation for nonpayment of premium requires 10 days' advance notice.
Business personal property coverage under the BOP includes property of the insured located within _____ feet of the building described in the declarations.
Answer: 100 Explanation: Business personal property located in or on the buildings at the described premises or in the open (or in a vehicle) within 100 feet of the described premises is covered by a BOP.
All are true about a BOP EXCEPT:
Answer: 100% coinsurance is required True: Vandalism is not covered after 60 days vacancy,Liability coverage is excess over any other insurance that applies,Advance notice must be sent on cancellation or non-renewal Explanation: The BOP does contain replacement cost coverage, but with an 80% coinsurance requirement. The policy contains an automatic inflation guard feature, so coinsurance penalties are rare.
On the BOP, there is no coverage for theft or vandalism if the building has been vacant for more than _____ days.
Answer: 60 days Explanation: There is no coverage for either theft or vandalism on a BOP if the building has been vacant for 60 consecutive days prior to the loss. Although the BOP covers theft, it does not cover theft of money.
The commercial building and personal property coverage form provides for several extensions of coverage, but only if:
Answer: A 80% or more coinsurance percentage is shown in the declarations Explanation: Although the coinsurance requirement is always 80% on HO policies that cover dwellings, on commercial property insurance the insured may select a coinsurance requirement ranging from as low as 50% to as high as 100%. The higher the coinsurance requirement selected, the lower the rates. If an insured elects to carry at least 80% coinsurance, they automatically receive five extensions of coverage at no charge.
Which of the following is eligible to receive BOP payments for medical expenses in the event of injury at the insured's premises?
Answer: A customer who attended a promotional dinner party Explanation: Medical coverage on a BOP is very similar to medical on other liability policies. Coverage is to others, but injury to employees is excluded since that is covered by workers' compensation.
On a CPP, the common policy declarations states all EXCEPT:
Answer: A list of all covered cause of loss The ones that are true: A schedule of coverage parts and premiums for each, The policy period, The named insured and type of business Explanation: In the property section of a CPP, the covered perils would be stated in the cause of loss form the insured elected to purchase (basic, broad or special).
Under the liability section of a BOP, fire legal liability is subject to:
Answer: A per fire limit Explanation: The most a BOP will pay for damages due to property damage to premises rented to you arising out of any one fire is the fire legal liability limit shown in the declarations. Let's explain this better. The liability portion of a CGL (which is included in the BOP) has an exclusion for property of others while in your care, custody or control. So, if your business rents an office and you negligently cause fire damage to that office, there is no coverage for the damage you did. Landlords know this, and will ask tenants to buy a coverage called fire legal liability. This can be added to a CGL to provide coverage for your legal liability in this situation.
Which of the following small businesses would be eligible for a BOP?
Answer: A retail store Explanation: A retail store, like a small drug store, would be eligible for a BOP. Remember, the BOP is a package policy for small business, combining commercial property coverages and the CGL. However, only certain types of businesses are eligible: service and processing, mercantile (retail), small office buildings, small apartment houses, limited cooking or fast food restaurants and convenience stores with gas pumps.
BOPs are designed for small to medium-sized businesses. Which of the following would be eligible for a BOP?
Answer: A small retail store Explanation: Small to medium-sized retail stores, such as a drug store, are eligible for a BOP. Also eligible are service type businesses, small office buildings, and small apartment houses. Auto dealers, banks, credit unions, movie theaters, public schools, large apartment complexes and manufacturing businesses are not eligible.
On a BOP, hired and non-owned auto coverage applies when:
Answer: An employee damages property of others while operating a non-owned car Explanation: Although the liability section of a BOP (which is a CGL) does not provide auto liability for owned autos, the insured may be concerned about liability that may result when an employee drives a non-owned or hired car on company business. To solve this problem, they can add an endorsement known as hired and non-owned auto coverage.
Which of the following businesses is not eligible for a BOP?
Answer: Auto dealer Explanation: Only small, low risk businesses are eligible for a BOP. Auto dealers must buy garage liability instead. Banks, credit unions and manufacturing companies are not eligible either.
On a BOP, there is no coverage for:
Answer: Auto liability Explanation: The liability section of a BOP is a CGL. Bodily injury and property damage liability, personal injury liability (false arrest, libel, slander, false advertising, etc) and medical payments to others are all covered.
A farm insurance policy does not cover:
Answer: Autos operated on the highway Explanation: Farm policies do not cover autos. Farm pickups may be covered under a personal auto policy (PAP). Mobile agricultural machinery and livestock may be covered and so can crops in storage. However, growing crops are not covered, although special coverage may be arranged through some private carriers or the Federal Crop Insurance Corporation (FCIC) to cover natural disasters, such as a hailstorm.
When a policy is written for the named insured, the rates for a dwelling under construction are based upon:
Answer: Average value Explanation: If you take out a construction loan to build a new house, the bank will ask you to provide fire insurance with a policy limit based upon the completed value of the home. However, since the actual value increases gradually over time as the home is being built, the premium is based on the average value instead of the completed value.
Which business would not get a bailee's policy?
Answer: Bank Explanation: A bailee is a person you pay a fee to for storing or servicing your property. A bank is not considered a bailee.
A commercial property insurance that has a single limit of insurance for all property coverage at 3 different locations is known as:
Answer: Blanket coverage Explanation: Blanket coverage can be written as a single limit to apply to all types of property at a specific location, a single limit to apply to one type of property at multiple locations or as a single limit to apply to all types of property at multiple locations. Specific coverage provides a specific amount of insurance for specific types of property at specific locations. Valued or stated amount coverage is written on fine arts floaters to cover paintings, sculpture, etc.
Liability coverage on a BOP is most similar to that found on:
Answer: CGL Explanation: If you understand what the CGL covers then you also understand the liability coverages on a BOP since they are virtually the same.
Which coverage or coverages are mandatory under the commercial package policy?
Answer: Commercial property and liability Explanation: A CPP must have coverage for commercial property and commercial liability in order to be considered a package policy. Other coverages parts, such as business auto, crime, boiler and machinery, etc. are optional.
A CPP coverage part includes all of the following relating to a single line of insurance EXCEPT:
Answer: Common policy conditions Explanation: It is important to review how a CPP actually fits together. It requires a common declarations page, interline endorsements, one or more coverage parts and a common conditions page. For example, you have a CPP covering both property and liability but now you would like to add commercial crime coverage. You would not need to add the common conditions page again to the crime coverage part because it is already there. However, you would have to add the crime insurance declarations and conditions, required endorsements and the requested crime coverage form.
All of the following are cause of loss forms that may be added to a Commercial Building and Personal Property Coverage Form EXCEPT:
Answer: Comprehensive Explanation: A peril is defined as a cause of loss. On the Commercial Building and Personal Property Coverage Form, an insured may elect to add the basic, broad or special cause of loss form. Although there is an optional cause of loss form that covers earthquake, there is no comprehensive form.
The liability section of a BOP covers:
Answer: Contractual liability Explanation: The liability section of a BOP is a CGL. A CGL covers premises and operations liability, products and completed operations liability, contractual liability, the insured's liability resulting from the acts of independent contractors, personal injury liability and medical payments to others. Personal, auto and aviation liability are excluded on a CGL.
All of the following are true about the builders risk coverage form EXCEPT:
Answer: Coverage terminates upon completion of construction Explanation: Coverage terminates on a builder's risk form when the builder's interest in the property ceases, the property is accepted by the purchaser, 60 days after the building is occupied, or 90 days after construction is finished, whichever occurs first. True: There is no coinsurance requirement, The amount of risk increases as the building is completed, Trees, shrubs and plants are not covered
On a commercial building and personal property form, the insured receives certain extensions of coverage at no additional premium charge if 80% or more coinsurance is carried. Included in these extensions are all of the following EXCEPT:
Answer: Debris removal Explanation: Note the difference between additional coverages and extensions of coverage. Certain extensions are granted at no charge if the insured carries at least 80% coinsurance. However, debris removal is an additional coverage present in the policy regardless of the amount of coinsurance selected. Coverage for debris removal is limited to 25% of the amount the insurer paid for the direct loss incurred.
Jeweler's block covers all EXCEPT:
Answer: Earrings owned by the insured while being worn by an employee Explanation: A jeweler's block policy is a type of inland marine coverage that covers the insured's merchandise held for sale and customer's property. Property in showcases on the jeweler's premises is covered but property worn by an employee is excluded.
An unendorsed BOP does not cover:
Answer: Employee dishonesty Explanation: Employee dishonesty (also known as a fidelity bond) is an optional coverage on a BOP. Although the BOP covers theft, it excludes theft by employees, so an insured may elect to add this coverage by endorsement, if needed.
Covered equipment on an equipment breakdown protection policy includes:
Answer: Equipment used in the transmission of energy Explanation: An equipment breakdown protection policy covers the sudden and accidental breakdown of covered equipment resulting in physical damage that necessitates repair or replacement. Not covered are vehicles, aircraft and below ground equipment that requires the excavation of materials to inspect or replace.
Farm policies do not cover:
Answer: Flood Explanation: Go with what you know. Flood insurance is sold by the federal government and is excluded by private insurers.
An optional commercial property coverage that automatically increases the limit of insurance by an annual percentage shown in the declarations is called:
Answer: Inflation guard coverage Explanation: The inflation guard endorsement keeps your policy limits up to date based upon the rate of inflation in your geographic area and helps avoid possible coinsurance penalty situations.
The BI and PD coverage on a farm liability policy provides coverage for:
Answer: Injury to a guest Explanation: BI and PD on a farm policy apply to others, assuming the farmer is negligent. Injury to the farmer or his family or employees is not covered. However, both personal liability and business liability relating to farming are covered. Pollution liability is excluded on virtually all policies.
All of the following are true regarding medical coverage on a BOP EXCEPT:
Answer: It covers injury to the named insured and employees Explanation: Like an HO, medical coverage on the liability section of a BOP is to others, not to the insured or to employees, who are required to be covered under workers' compensation.
All are true about an unendorsed BOP EXCEPT:
Answer: It is named perils Explanation: The BOP is all-risk.
All of the following are true about business income coverage EXCEPT:
Answer: It is written with a deductible Explanation: Business income insurance is purchased by businesses than must shut down if damage occurs due to a covered peril. It is considered to be an indirect or consequential type coverage. It pays the loss of business income, less any expenses that do not continue, during a period of restoration. Profits, if any, are included and payroll is also treated as a continuing expense. True: It is subject to coinsurance requirements as selected, It is indirect consequential coverage, Profits might be covered
An inland marine policy that covers the insured's merchandise held for sale, the insured's property off premises, customer's property in the custody of the insured and property being transported is a:
Answer: Jeweler's block policy Explanation: There are many types of inland marine insurance according to the nationwide definition. The jeweler's block coverage form covers the insured's merchandise held for sale, including loose gem stones, property which has been sold but not yet delivered and similar property of others in the care, custody or control of the insured. Property in transit and property in showcases on premises may also be covered. Excluded is property sold under a deferred sales agreement after it leaves the insured's premises and property of the insured while being worn by any employee, family members or friend.
A commercial property condition that automatically provides broader coverage when the insurer makes revisions to a current policy edition without charging an additional premium is the:
Answer: Liberalization clause Explanation: The liberalization clause allows the insurer to broaden coverage as long as there is no additional premium charge. Remember, the insurer may not change a policy mid-term without the consent of the insured, unless it for the better and it is free.
Valuable papers insurance covers all of the following EXCEPT:
Answer: Money and securities Explanation: Valuable papers insurance covers the cost of reconstructing data lost due to a covered peril. Money and securities are not covered. True: Manuscripts, maps and books
Which of the following would be eligible to be insured on a commercial inland marine floater?
Answer: Municipal bridge Explanation: The nationwide definition for items eligible to be insured on floaters includes both instrumentalities of transportation and exports. But, the question specifically asks for an inland marine floater. Exports are insured on ocean marine floaters. The answer is a municipal bridge can be insured on a commercial inland marine floater.
On a CPP, interline endorsements do all of the following EXCEPT:
Answer: Only apply to commercial liability coverage Explanation: Remember, the CPP can be made up of several coverage parts. Interline endorsements help tie the various parts together by coordinating coverage and eliminating duplicate language. True: Eliminate duplicate language, Minimize the number of endorsements needed on the policy, Could apply to more than 1 coverage part
All of the following are common conditions in a CPP EXCEPT:
Answer: Only the first named insured may cancel the policy Explanation: Either the insured or the insurer can cancel a policy. If the insurer cancels, they must give the first named insured advance notice as required by law and refund the unearned premium on a pro-rata basis. If the insured cancels, refunds are calculated on a short rate basis. True: Insurers must give 10 days' advance notice when canceling for nonpayment of premium, The insurer may inspect the insured's books and records up to 3 years after expiration, Buildings are considered vacant unless 31% or more of the rental units or floor area are occupied
The liability section of a BOP includes all of the following EXCEPT:
Answer: Pollution liability Explanation: Pollution liability is excluded by virtually all liability policies, but coverage can be added by endorsement for an additional premium charge. However, a BOP will pay up to $10,000 for the expense of extracting pollutants at the described premises if the release of pollutants was caused by a covered loss. This is a property coverage, not a liability coverage.
On a BOP, coverage for business personal property is written on what basis?
Answer: Replacement cost Explanation: Coverage for business personal property on a BOP is replacement cost.
An automobile dealer with cars in inventory that have fluctuating values needs a:
Answer: Reporting Form Explanation: Reporting forms are used by insureds who have fluctuating inventories. The policy limit is written to cover the maximum loss the insured may suffer during the year, but the insured only pays a premium on what he or she actually has, as reflected on a monthly reporting form sent to the insurer.
Which commercial cause of loss form covers theft of business personal property?
Answer: Special Explanation: Go with what you know. The special form is all-risk and theft is not excluded.
The basis for all commercial property insurance sold in this state is the:
Answer: Standard fire policy Explanation: The basis for all property (fire) insurance sold in this state is the 165 line standard fire policy. Its language is incorporated into dwelling property policies, HO policies and commercial property policies. First sold in the state of New York in 1943, the standard fire policy is never sold all by itself. Certain endorsements must always be added, such as the extended coverage endorsement.
On the commercial building and personal property form, all are true about the deductible EXCEPT:
Answer: The deductible applies per occurrence and per building, if more than 1 building is covered on the policy Explanation: If you had blanket coverage covering multiple buildings at one location, only one deductible would apply per occurrence no matter how many buildings were damaged.
Each of the following is true about farm coverages EXCEPT:
Answer: The principal residence may be covered by farm or homeowners insurance Explanation: If you have a farm policy, there would be no need for an HO, since the farm policy covers your personal residence along with your farm buildings. True: Farm coverage may be written as a monoline policy, or as part of a package, Property and liability coverages may be included, Livestock may be insured
On an equipment breakdown protection policy, expediting expenses covers all EXCEPT:
Answer: The reasonable costs of permanent replacement Explanation: On an equipment breakdown protection policy, when covered property is damaged, expediting expenses, which are defined as the reasonable extra costs to make temporary repairs, or to expedite permanent repairs or replacement are covered. This coverage is not in addition to limits. Permanent replacement is covered, but not as an expediting expense.
All of the following are true regarding expediting expenses coverage on an equipment breakdown protection policy EXCEPT:
Answer: There is no deductible Explanation: On an equipment breakdown protection policy, the insured must select a deductible based upon dollars, time, percentage of loss or on business income insurance, a multiple of daily value deductible. True: Property damage to the property of others may be covered, Coverage may be suspended by the insurer, Breakdown of covered equipment is a covered peril
Insureds often add the optional commercial glass coverage form to their CPP for all of the following reasons EXCEPT:
Answer: This optional endorsement is provided at no extra premium charge True: The basic cause of loss form does not cover glass windows, The broad cause of loss form limits glass coverage to $100 per pane and $500 per occurrence, The special cause of loss form contains the same limits as broad form Explanation: Commercial glass coverage may be added for an additional premium.
A commercial floater will provide coverage:
Answer: U.S., Canada and Puerto Rico Explanation: A commercial floater will provide coverage in the U.S., Canada and Puerto Rico. The policy territory is spelled out in the policy.
Which coverage may not be added to a commercial package policy?
Answer: Workers' compensation Explanation: Workers' compensation is a standalone coverage and cannot be added to a CPP.
On an ocean marine policy, the peril of voluntarily throwing cargo overboard to save the ship is known as:
Answer: jettison Explanation: Ocean marine insurance covers perils of the sea, such as collision, sinking or capsizing and perils on the sea, such as fire, pirates, jettison, and barratry. Jettison means the voluntary throwing overboard of property in order to save the ship. Barratry means wrongful acts committed intentionally by the captain or crew without the knowledge of the ship's owner.
A party who has temporary control of your property in storage or for repair is known as a:
Explanation: A bailee is someone you pay to repair, service or store your property, such as a parking lot. Under the Doctrine of Bailment, a bailee is responsible for your goods while it is in their care, custody or control. Since your policy will not cover a bailee, they need to buy special commercial insurance to cover this risk exposure.
