chapter 2 commercial property insurance part 1 quiz

Under the building and personal property form, all of the following are included under the definitions of a building EXCEPT: pg 2.8

(a) underground pipes, flues and drains

Under a building and personal property coverage form, the insurer will not pay for a loss caused by vandalism if the building where the loss occurred pg 2.22

(b) has been vacant for more than 60 consecutive days

In commercial property insurance, all of the following are types of causes of loss form EXCEPT: pg 2.5

(c) Extended

All of the following are true about Blanket Insurance EXCEPT: pg 2.31

(c) It requires a specific endorsement

Contrast specific insurance with blanket insurance for building and personal property. pg 2.30-2.31

Blanket insurance covers either of the following with one limit of insurance: one type of property in one or more separately rated buildings or two or more types of property in one or more separately rated buildings, no special endorsement is required. Specific insurance covers each building for a specific limit on insurance and personal property at each building for a specific limit of insurance. Blanket insurance can provide better coverage than specific insurance because the full blanket limit can be applied to any one loss. Specific insurance is insurance that covers each building for a specific limit of insurance and personal property at each building for a specific limit of insurance. Blanket insurance is insurance that covers with one limit either two or more types of property (such as buildings and business personal property) or one or more types of property at more than one location.

Explain why most risk managers and consultants regard the combination of the agreed value option with blanket insurance as the preferred method to provide property insurance. pg 2.32-2.33

The agreed value clause avoids any coinsurance penalty, and if separate locations are involved that are not subject to the same loss, the danger of under-insurance is greatly reduced.

What is the formula for calculating the loss payment when the amount of insurance carried does not meet the coinsurance requirement? pg 2.24

The amount of insurance required is the ACV of the property immediately before the loss occurred multiplied by the coinsurance percentage. The deductible is subtracted after the coinsurance penalty has been calculated.

Explain the importance of the proper reporting of values on value reporting forms. pg 2.29

The insured is required to report any changes in value to the insurance, it can been done daily, weekly, quarterly, or yearly. And this is done because values fluctuate on daily basis. And the insurer needs to know the amount of value so the insured can be properly paid in case of a loss. up to the maximum amount limit of insurance. Proper reporting is important to avoid penalties to the insured for failure to comply with the reporting requirements. Separate rules apply when no report is made, when one or more reports are due after the initial report, and when the reports are inaccurate.

Define the functional replacement cost endorsement. pg 2.27

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 deductions for the depreciation or obsolescence. An endorsement that indicates the cost of replacing damaged property with similar property that performs the same function but might not be identical to the damaged property.

The insurer is not obligated to pay replacement cost until the property has been repaired or replaced and then only if the repair or replacement is completed in a reasonable time. pg 2.27

true