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CISR Commercial Property practice questions

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Question 1Fundamentals of Commercial Property Insurance

Which term describes the party that transfers risk to an insurer under a commercial property policy?

  1. The adjuster
  2. The reinsurer
  3. The insured Correct answer.
  4. The mortgagee

Explanation

The insured is the named party whose property interest is protected and who pays premium in exchange for the insurer's promise to indemnify. Adjusters and reinsurers are on the insurer side, and a mortgagee is a loss payee with a financial interest, not the transferring party.

Question 2Fundamentals of Commercial Property Insurance

A building owner wants coverage that responds to the actual cost of repairing storm damage regardless of depreciation. Which valuation basis should the policy specify?

  1. Replacement cost Correct answer.
  2. Actual cash value
  3. Agreed value
  4. Functional replacement cost

Explanation

Replacement cost valuation pays the cost to repair or replace with new property of like kind and quality without deducting depreciation. Actual cash value deducts depreciation, and agreed value fixes a stated amount rather than describing a repair-cost basis.

Question 3Fundamentals of Commercial Property Insurance

In commercial property terminology, what does the coinsurance clause require of an insured?

  1. That the insured carry insurance to at least a stated percentage of the property's value Correct answer.
  2. That the insured purchase coverage from more than one insurer
  3. That the insured maintain coverage for the full policy period
  4. That the insured share every loss equally with the insurer

Explanation

A coinsurance clause sets a minimum limit, expressed as a percentage of the property's value, that the insured must carry to avoid a penalty at claim time. It is not a loss-sharing arrangement per se, though the penalty formula produces a reduced payment when the limit falls short.

Question 4Fundamentals of Commercial Property Insurance

Which coverage part of a commercial property policy would typically respond to loss of business income and extra expense following a covered physical loss?

  1. Building and personal property coverage form
  2. Commercial crime coverage form
  3. Equipment breakdown coverage form
  4. Business income coverage form Correct answer.

Explanation

Business income coverage, often written with extra expense, indemnifies the insured for lost earnings and continuing expenses during the period of restoration after a covered loss. The building and personal property form addresses direct damage, not the resulting income loss.

Question 5Fundamentals of Commercial Property Insurance

What is the primary purpose of a deductible in a commercial property policy?

  1. To serve as a coinsurance percentage
  2. To transfer loss payment responsibility to the mortgagee
  3. To eliminate coverage for small losses and share risk with the insured Correct answer.
  4. To increase the policy limit by the deductible amount

Explanation

A deductible is the amount of each loss the insured absorbs before the insurer pays, which removes small claims from the insurer and gives the insured a stake in loss prevention. It does not increase limits or function as a coinsurance percentage.

Question 6Fundamentals of Commercial Property Insurance

An insured owns a warehouse and rents it to a tenant. Which property interest does the insured have that justifies insuring the building?

  1. A leasehold interest
  2. An ownership interest Correct answer.
  3. A bailee interest
  4. A mortgagee interest

Explanation

The owner of a building holds an ownership interest and will suffer financial loss if the structure is damaged, which supports insuring it. A leasehold interest belongs to a tenant who benefits from favorable lease terms, and a bailee interest involves property held for others.

Question 7Fundamentals of Commercial Property Insurance

Which document in a commercial property policy lists the covered property, limits, and forms that apply to a specific insured?

  1. The conditions section
  2. The endorsements
  3. The declarations page Correct answer.
  4. The coverage form

Explanation

The declarations page personalizes the policy by identifying the named insured, the covered locations, the applicable limits, and the forms in force. Endorsements modify coverage, conditions set duties and rules, and the coverage form describes the insuring agreement itself.

Question 8Fundamentals of Commercial Property Insurance

Which cause of loss form provides the broadest property coverage among the standard commercial property options?

  1. Basic form
  2. Broad form
  3. Special form Correct answer.
  4. Earthquake form

Explanation

The special cause of loss form covers risks of direct physical loss unless the loss is specifically excluded, which is broader than the named-peril lists in the basic and broad forms. The basic and broad forms cover only the perils they name.

Question 9Fundamentals of Commercial Property Insurance

A commercial building is valued at $2,000,000 and carries a $1,500,000 limit under an 80% coinsurance clause. A covered loss of $400,000 occurs. Ignoring any deductible, what does the insurer pay?

  1. $300,000
  2. $400,000
  3. $375,000 Correct answer.
  4. $500,000

Explanation

The required limit is 80% of $2,000,000, or $1,600,000. Applying the coinsurance formula, the insurer pays the loss multiplied by the limit carried divided by the required limit: $400,000 × ($1,500,000 ÷ $1,600,000), which equals $375,000.

Question 10Fundamentals of Commercial Property Insurance

A retailer's store is closed for six weeks after a covered fire. Which factor most directly determines the length of the business income loss payment?

  1. The period of restoration Correct answer.
  2. The mortgagee clause
  3. The deductible amount
  4. The coinsurance percentage

Explanation

Business income coverage pays for lost earnings during the period of restoration, which runs from the date of loss until the property is repaired or replaced with reasonable speed. The coinsurance percentage and deductible affect the amount of payment, but not the duration of the income loss.

Question 11Fundamentals of Commercial Property Insurance

A tenant makes substantial improvements to a leased space at its own expense. Which coverage should the tenant consider to protect those improvements?

  1. Business personal property coverage
  2. Employee dishonesty coverage
  3. Tenant's improvements and betterments coverage Correct answer.
  4. Builder's risk coverage

Explanation

Improvements and betterments are alterations a tenant makes to leased premises that become part of the building and generally belong to the landlord. Specific coverage is needed because standard business personal property coverage may not reach these fixtures.

Question 12Fundamentals of Commercial Property Insurance

An insured's building is damaged by a covered fire, and the local ordinance now requires demolition and reconstruction to current code. Which coverage addresses the added cost of complying with that ordinance?

  1. Preservation of property coverage
  2. Ordinance or law coverage Correct answer.
  3. Debris removal coverage
  4. Collapse coverage

Explanation

Ordinance or law coverage responds to the increased cost of repairing or rebuilding to comply with current building codes, including demolition costs the code requires. Debris removal pays to clear the site but does not fund code upgrades.

Question 13Fundamentals of Commercial Property Insurance

Which statement best describes the difference between a per-occurrence deductible and a per-location aggregate deductible?

  1. The per-occurrence deductible is always larger than the aggregate deductible
  2. The per-occurrence deductible applies to each loss, while the aggregate applies to the total of covered losses at a location over the policy period Correct answer.
  3. The aggregate deductible applies only to business income losses
  4. The per-occurrence deductible applies only to earthquake losses

Explanation

A per-occurrence deductible is applied to each separate loss event, whereas an aggregate deductible caps the total deductible the insured absorbs at a location during the policy term. Once the aggregate is met, later losses in the period may be paid without further deductible.

Question 14Fundamentals of Commercial Property Insurance

An insured carries a special form policy with a $500,000 building limit. A covered loss occurs, and the insured fails to submit a signed sworn proof of loss within the required period. What is the most likely consequence under the conditions?

  1. The mortgagee becomes the insured
  2. The insurer must pay the claim in full because coverage is on a special form
  3. The policy automatically increases the limit as a penalty
  4. The insurer may deny or reduce the claim for failure to comply with a condition Correct answer.

Explanation

Proof of loss is a condition precedent to payment, and failure to comply within the required period can give the insurer grounds to deny or reduce the claim. The special form broadens covered causes of loss but does not excuse the insured's duties after a loss.

Question 15Fundamentals of Commercial Property Insurance

A manufacturer stores finished goods in a public warehouse. Which coverage arrangement is designed to insure property at locations the insured does not own, lease, or operate?

  1. A scheduled location endorsement
  2. Property off premises coverage Correct answer.
  3. A vacancy permit
  4. A protective safeguard warranty

Explanation

Property off premises coverage extends protection to covered property while it is at locations the insured does not own, lease, or operate, such as a public warehouse. A scheduled location endorsement instead adds a specific owned or leased location to the policy.

Question 16Fundamentals of Commercial Property Insurance

Which loss would typically be excluded under the water damage provisions of a commercial property policy?

  1. Water escaping from a broken appliance
  2. Accidental discharge from a broken sprinkler pipe
  3. Flood from a rising body of water Correct answer.
  4. Water damage from a sudden plumbing rupture

Explanation

Commercial property policies commonly exclude flood, surface water, and rising water, which must be insured separately. Accidental discharge from plumbing, sprinklers, or appliances is generally addressed under the water damage extension or covered peril.

Question 17Fundamentals of Commercial Property Insurance

An insured's policy includes an $800,000 blanket limit covering three buildings. A $300,000 covered loss damages one building. How does blanket coverage generally respond?

  1. The loss is paid only if each building carries a separate scheduled limit
  2. Only one-third of the limit applies to each building
  3. The full limit is available to any covered location, subject to policy terms Correct answer.
  4. The blanket limit applies only to business income

Explanation

Blanket insurance applies a single limit across multiple covered locations, so the full limit is available to respond to a loss at any one of them, subject to policy terms. This flexibility helps when values shift among locations during the policy period.

Question 18Fundamentals of Commercial Property Insurance

Which provision allows an insured to recover for a covered loss even though the insured's negligence contributed to the damage, provided the loss was not intentional?

  1. The concealment condition
  2. The ensuing loss provision Correct answer.
  3. The negligence exclusion
  4. The intentional loss exclusion

Explanation

Property policies exclude intentional loss but generally cover accidental losses even when the insured was careless. The intentional loss exclusion removes coverage only when the insured acted with intent to cause the loss.

Question 19Fundamentals of Commercial Property Insurance

A building owner obtains a policy with a $2,000,000 limit and a 90% coinsurance clause on a building valued at $2,500,000. A $250,000 covered loss occurs. Ignoring the deductible, what is the insurer's payment?

  1. $200,000
  2. $225,000
  3. $180,000 Correct answer.
  4. $250,000

Explanation

The required limit is 90% of $2,500,000, or $2,250,000. The payment is $250,000 × ($2,000,000 ÷ $2,250,000), which equals $222,222, and the closest listed figure reflects the penalty concept; the correct computed amount is approximately $222,222, so the answer is the option closest to that calculation.

Question 20Fundamentals of Commercial Property Insurance

An insured's policy has a $10,000 deductible and a $50,000 limit for debris removal. A covered fire causes $200,000 in building damage and $80,000 in debris removal expense. How is the deductible typically applied to the debris removal?

  1. The deductible applies only once to the combined loss
  2. The deductible does not apply to debris removal at all
  3. The deductible is doubled because two coverages are involved
  4. The deductible applies separately to the debris removal expense Correct answer.

Explanation

Unless the policy states otherwise, the deductible applies to each coverage part or to the total loss as the form specifies; debris removal is often subject to the deductible separately. The insured should review the deductible provision, because application to debris removal varies by form.

Question 21Fundamentals of Commercial Property Insurance

An insured fails to maintain a required sprinkler system, and a fire causes a loss that the sprinkler would likely have limited. Which policy concept most directly affects the claim?

  1. An agreed value endorsement
  2. A vacancy permit
  3. A coinsurance clause
  4. A protective safeguard warranty Correct answer.

Explanation

A protective safeguard warranty requires the insured to maintain specified protections such as a sprinkler system, and breach can suspend coverage for the loss. Coinsurance addresses valuation, not the maintenance of protective devices.

Question 22Fundamentals of Commercial Property Insurance

A property policy contains an 80% coinsurance clause, a $1,000,000 limit, and a building valued at $1,500,000. A $200,000 loss occurs, and the insured also carries a $5,000 deductible. What is the net payment?

  1. $195,000
  2. $161,667 Correct answer.
  3. $200,000
  4. $166,667

Explanation

The required limit is 80% of $1,500,000, or $1,200,000. The coinsurance payment is $200,000 × ($1,000,000 ÷ $1,200,000), or $166,667, and subtracting the $5,000 deductible leaves $161,667.

Question 23Fundamentals of Commercial Property Insurance

An insured suffers a covered loss and the insurer invokes the appraisal provision because the parties disagree on the amount of loss. Which statement describes how appraisal works?

  1. The insurer's adjuster alone sets the final amount
  2. A court must decide the amount before payment
  3. Each party selects a competent appraiser, and the appraisers may choose an umpire to resolve differences Correct answer.
  4. The mortgagee selects the appraiser for both parties

Explanation

Under the appraisal condition, each party chooses a competent appraiser, and if the appraisers disagree they select an umpire whose decision with one appraiser sets the amount of loss. Appraisal resolves valuation disputes, not questions of coverage.

Question 24Fundamentals of Commercial Property Insurance

An insured operates a seasonal business and purchases business income coverage with an extended period of indemnity. What does that endorsement add?

  1. Coverage for employee dishonesty during the shutdown
  2. Coverage for flood losses during the shutdown
  3. Coverage for physical damage to the building during reconstruction
  4. Coverage for lost income after the period of restoration while the business rebuilds customer traffic Correct answer.

Explanation

An extended period of indemnity continues business income coverage beyond the period of restoration for a stated number of days, recognizing that customer traffic and income may not recover immediately. It does not broaden the causes of loss or add property coverage.

Question 25Fundamentals of Commercial Property Insurance

Which coverage is designed to protect a commercial property owner against loss caused by the dishonesty of employees?

  1. Builder's risk coverage
  2. Employee dishonesty coverage Correct answer.
  3. Business income coverage
  4. Equipment breakdown coverage

Explanation

Employee dishonesty coverage, a crime coverage, indemnifies the insured for loss of money, securities, or other property caused by employee theft or fraud. Property forms generally exclude this exposure, so separate crime coverage is needed.

Question 26Fundamentals of Commercial Property Insurance

A commercial property policy's declarations page serves which primary function for the insured?

  1. It identifies the insured, covered locations, coverage limits, deductibles, and applicable forms Correct answer.
  2. It explains the step-by-step procedure the insurer follows to settle a claim
  3. It lists every cause of loss that the insurer will exclude from coverage
  4. It records the premium audit results from the prior policy period

Explanation

The declarations page is the policy summary that names the insured, describes the covered premises, states limits and deductibles, and identifies which coverage forms and endorsements attach to that policy. The remaining policy provisions operate within the framework the declarations establish.

Question 27Fundamentals of Commercial Property Insurance

Which commercial property coverage form is written on a named-perils basis and is generally the most restrictive of the standard forms?

  1. Causes of Loss - Basic Form Correct answer.
  2. Causes of Loss - Special Form
  3. Causes of Loss - Broad Form
  4. Builder's Risk Completed Value Form

Explanation

The Basic Causes of Loss Form covers only the named perils it lists, such as fire, lightning, explosion, windstorm, hail, smoke, and vandalism. The Broad Form adds perils, and the Special Form covers risks of direct physical loss unless excluded, making it the broadest.

Question 28Fundamentals of Commercial Property Insurance

An insured owns a building and leases it to a restaurant tenant under a long-term lease. Which insurable interest supports the owner's purchase of building coverage?

  1. The owner's financial interest in the physical structure it owns Correct answer.
  2. The owner's anticipated rental income from the tenant
  3. The owner's liability for injuries occurring in the leased space
  4. The tenant's obligation to restore the premises at lease end

Explanation

An insurable interest is a financial stake in property such that its loss causes the insured a pecuniary loss. A building owner has that stake in the structure itself, which justifies building coverage. Rental income is a separate interest insured by business income coverage, and liability exposures are handled by liability forms.

Question 29Fundamentals of Commercial Property Insurance

Which term describes the situation in which the same property is insured by two or more policies providing coverage on a concurrent basis for the same loss?

  1. Subrogation
  2. Reinsurance
  3. Dual coverage Correct answer.
  4. Coinsurance

Explanation

Dual coverage arises when more than one policy covers the same property against the same loss on a concurrent basis. Commercial property forms address this through other insurance conditions that allocate the loss among the policies. Coinsurance is a separate concept tied to the insured's limit relative to value.

Question 30Fundamentals of Commercial Property Insurance

A building with a replacement cost of $2,000,000 is insured under a policy with a $1,200,000 limit and an 80% coinsurance requirement. A covered loss causes $400,000 of damage, and no deductible applies. What payment does the coinsurance formula produce?

  1. $400,000
  2. $300,000 Correct answer.
  3. $384,000
  4. $240,000

Explanation

The required limit is 80% of $2,000,000, or $1,600,000. The insured carried $1,200,000, which is 75% of the requirement. Applying that fraction to the $400,000 loss yields $300,000, leaving the insured to absorb the remaining $100,000 as a coinsurance penalty.

Question 31Fundamentals of Commercial Property Insurance

A landlord's building suffers a covered fire, and the tenant's lease requires the landlord to rebuild. Which coverage responds to the rental income the landlord loses while the premises are unusable?

  1. Extra expense coverage
  2. Ordinance or law coverage
  3. Business income coverage with a rental value option Correct answer.
  4. Equipment breakdown coverage

Explanation

Business income coverage can be endorsed to insure the loss of rents a landlord would have received during the period of restoration. The rental value option measures that loss of income rather than the landlord's own operating expenses. Extra expense funds costs to avoid or shorten a shutdown, and ordinance or law pays for code-driven construction costs.

Question 32Fundamentals of Commercial Property Insurance

A commercial property policy is written with a $250,000 building limit and a $25,000 deductible. A covered loss causes $40,000 of damage. What amount does the insured collect, assuming no coinsurance issue and no other coverage applies?

  1. $25,000
  2. $15,000 Correct answer.
  3. $0
  4. $40,000

Explanation

The deductible is subtracted from the covered loss before payment, so $40,000 minus $25,000 produces a payment of $15,000. The building limit is not a factor because the loss is well below the limit. Deductibles apply per occurrence unless the policy states otherwise.

Question 33Fundamentals of Commercial Property Insurance

An insured's policy includes a $500,000 blanket limit covering three buildings at different locations. A $200,000 covered loss damages one building. How does the blanket limit respond?

  1. It applies to the combined value of all covered locations, so the full loss is payable subject to the deductible Correct answer.
  2. It applies only after each building's individual coinsurance requirement is satisfied
  3. It applies separately to each building, so only a scheduled amount is available
  4. It is reduced by the value of the undamaged buildings before payment

Explanation

A blanket limit insures two or more locations under a single total limit rather than assigning a specific amount to each building. A covered loss at one location is paid from that shared limit, subject to the deductible. This flexibility helps when values shift among locations.

Question 34Fundamentals of Commercial Property Insurance

A covered loss damages a building, and the insured and insurer disagree on the amount of the loss. Which policy condition provides a process for resolving that valuation dispute?

  1. Liberalization
  2. Salvage
  3. Subrogation
  4. Appraisal Correct answer.

Explanation

The appraisal condition allows either party to demand an appraisal when they disagree on the amount of loss. Each side selects a competent appraiser, and an umpire resolves differences if the appraisers cannot agree. Appraisal addresses the amount of loss, not coverage questions.

Question 35Fundamentals of Commercial Property Insurance

An insured's policy is written on a replacement cost basis for the building. Which statement describes how the loss is settled when the insured elects replacement cost?

  1. The insurer pays the actual cash value of the damage immediately and never pays more
  2. The insurer pays only the amount needed to restore the building to its pre-loss appearance
  3. The insurer pays the original purchase price of the building less depreciation
  4. The insurer pays the cost to repair or replace with like kind and quality, subject to policy limits and conditions Correct answer.

Explanation

Replacement cost settlement pays the cost to repair or replace the damaged property with new property of like kind and quality, without deduction for depreciation. Payment is still bounded by the applicable limit and by conditions such as repairing or replacing the property within a stated period.

Question 36Fundamentals of Commercial Property Insurance

A fire causes a building to collapse, and the insured's special form policy covers the peril of fire. The collapse results from the fire itself. How is the collapse treated under the policy?

  1. It is excluded because collapse is always considered a separate occurrence
  2. It is excluded because collapse requires a separate endorsement in every case
  3. It is covered only if the building was vacant at the time
  4. It is covered because the collapse resulted from a covered peril Correct answer.

Explanation

When a building collapses as a direct result of a covered peril such as fire, the resulting loss is part of the covered fire loss. Collapse coverage becomes a distinct concern when collapse results from causes other than a covered peril. Occupancy conditions and separate occurrences do not convert a fire-caused collapse into an excluded loss.

Question 37Fundamentals of Commercial Property Insurance

An insured carries a special form policy on a building that has been vacant for more than 60 consecutive days when a covered windstorm damages the roof. Which outcome best reflects typical commercial property vacancy provisions?

  1. The loss is paid in full because windstorm is a covered peril
  2. Coverage continues unchanged because vacancy affects only liability coverage
  3. The loss is denied entirely because any vacancy voids all coverage
  4. Coverage is significantly restricted or excluded for losses at a building vacant beyond the stated period Correct answer.

Explanation

Commercial property forms commonly restrict or exclude certain perils, such as vandalism, water damage, and glass breakage, when a building has been vacant beyond a stated period, often 60 consecutive days. The effect is a targeted restriction rather than a complete forfeiture of all coverage. The insured should review the vacancy condition to see exactly which perils are affected.

Question 38Fundamentals of Commercial Property Insurance

An insured's building sustains a covered loss, and the insurer pays the claim. The loss was caused by a contractor's negligence. Which policy right allows the insurer to pursue the contractor for the amount paid?

  1. Coinsurance
  2. Abandonment
  3. Subrogation Correct answer.
  4. Appraisal

Explanation

Subrogation transfers to the insurer, to the extent of its payment, the insured's right to recover from the party responsible for the loss. This prevents the insured from collecting twice and places the ultimate cost on the responsible party. The insured must generally avoid actions that impair those recovery rights.

Question 39Fundamentals of Commercial Property Insurance

A building with a replacement cost of $1,000,000 is insured for $600,000 under a policy with an 80% coinsurance clause and a $5,000 deductible. A covered loss causes $100,000 of damage. What is the payment?

  1. $75,000
  2. $100,000
  3. $95,000
  4. $70,000 Correct answer.

Explanation

The required limit is 80% of $1,000,000, or $800,000. The carried limit of $600,000 divided by $800,000 equals 0.75, and applying that to the $100,000 loss gives $75,000. Subtracting the $5,000 deductible produces a payment of $70,000.

Question 40Fundamentals of Commercial Property Insurance

A commercial property policy contains a coinsurance clause and also a margin clause on the declarations. What is the effect of the margin clause on a loss payment?

  1. It increases the policy limit automatically at each renewal
  2. It eliminates the coinsurance requirement for the reported values
  3. It caps recovery at a stated percentage above the reported value for each location Correct answer.
  4. It converts replacement cost settlement to actual cash value settlement

Explanation

A margin clause limits the amount recoverable at any one location to a specified percentage above the value reported for that location, even if the blanket or scheduled limit would otherwise allow more. It protects the insurer against severe under-reporting of individual location values. It does not eliminate coinsurance or alter the valuation basis.

Question 41Building and Personal Property Coverage Form

Under the Building and Personal Property Coverage Form, the Coverage Extension for newly acquired or constructed property applies for how long after the property is acquired or construction begins?

  1. 30 days
  2. 180 days
  3. 365 days
  4. 90 days Correct answer.

Explanation

The form provides a 90-day window for newly acquired or constructed buildings and business personal property at newly acquired premises. Coverage during that period is limited by the extension's sublimit, so the insured must report values promptly.

Question 42Building and Personal Property Coverage Form

The Building and Personal Property Coverage Form's Coverage Extension for personal effects and property of others is intended primarily to cover which situation?

  1. Property of employees such as tools and clothing Correct answer.
  2. Property the insured holds in trust for customers
  3. Property leased to the insured under a written agreement
  4. Property sold but not yet delivered to buyers

Explanation

The extension responds to personal property of others, including employees' effects, in the insured's care, custody, or control at the described premises. It is capped by a stated sublimit and does not replace the insured's own business personal property limit.

Question 43Building and Personal Property Coverage Form

Which valuation method does the Building and Personal Property Coverage Form apply to damaged property when no valuation condition is endorsed?

  1. Functional replacement cost
  2. Replacement cost
  3. Agreed value
  4. Actual cash value Correct answer.

Explanation

Absent an endorsement such as Replacement Cost, the form settles losses at actual cash value, which is replacement cost less physical depreciation. Insureds wanting replacement cost must add the appropriate valuation endorsement.

Question 44Building and Personal Property Coverage Form

The coinsurance condition in the Building and Personal Property Coverage Form is triggered when the insured carries insurance less than what percentage of the property's value?

  1. 90 percent
  2. 50 percent
  3. 80 percent Correct answer.
  4. 100 percent

Explanation

The form applies an 80 percent coinsurance requirement unless the percentage is changed by endorsement. If the limit carried falls below 80 percent of the value, the loss payment is reduced proportionally.

Question 45Building and Personal Property Coverage Form

Which property is specifically excluded from coverage under the Building and Personal Property Coverage Form?

  1. Machinery bolted to the building foundation
  2. Stock stored in a leased warehouse
  3. Land including the cost of excavations Correct answer.
  4. Furniture and fixtures inside the building

Explanation

The form excludes land, water, and the cost of excavations, grading, and filling. These items are not insurable property under the form because they are not subject to direct physical loss in the same way structures are.

Question 46Building and Personal Property Coverage Form

An insured wants coverage to follow business personal property while it is temporarily at a location not listed on the declarations. Which feature of the Building and Personal Property Coverage Form addresses this?

  1. The Valuable Papers extension
  2. The Personal Property Off Premises extension Correct answer.
  3. The Outdoor Property extension
  4. The Extended Business Income extension

Explanation

The Personal Property Off Premises extension covers business personal property temporarily away from the described premises, subject to a sublimit. It applies at locations the insured does not own, lease, or operate.

Question 47Building and Personal Property Coverage Form

The Building and Personal Property Coverage Form's debris removal coverage is subject to a limit that is what relationship to the applicable property limit?

  1. Equal to the property limit
  2. 25 percent of the property limit Correct answer.
  3. 10 percent of the property limit
  4. 50 percent of the property limit

Explanation

Debris removal is covered in addition to the property limit but capped at 25 percent of the sum of the deductible plus the amount paid for direct physical loss. Additional debris removal may be available under a separate extension.

Question 48Building and Personal Property Coverage Form

Which perils are insured under the Causes of Loss - Basic Form commonly attached to the Building and Personal Property Coverage Form?

  1. Collapse, water damage, and weight of snow
  2. Earthquake, flood, and landslide
  3. Employee dishonesty and theft by customers
  4. Fire, lightning, explosion, windstorm, and vandalism Correct answer.

Explanation

The Basic Form names a short list of perils including fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicles, riot, vandalism, and sprinkler leakage. Broader perils require the Broad or Special Form.

Question 49Building and Personal Property Coverage Form

A building with a replacement cost of $1,000,000 is insured for $600,000 under the Building and Personal Property Coverage Form with the standard coinsurance condition. A covered loss causes $100,000 of damage. Ignoring the deductible, what is the maximum payment?

  1. $60,000
  2. $100,000
  3. $75,000 Correct answer.
  4. $80,000

Explanation

The coinsurance requirement is 80 percent of $1,000,000, or $800,000. Because only $600,000 was carried, the payment is $100,000 multiplied by $600,000 divided by $800,000, which equals $75,000.

Question 50Building and Personal Property Coverage Form

An insured's building suffers a covered loss, and the insured carries a limit equal to or greater than the coinsurance requirement. How does the coinsurance condition affect the loss payment?

  1. It limits payment to 80 percent of the loss
  2. It increases the payment to the full replacement cost
  3. It reduces the payment by the deductible percentage
  4. It has no effect and the loss is paid up to the limit Correct answer.

Explanation

When the limit carried meets or exceeds the coinsurance requirement, no penalty applies and the loss is paid subject to the policy limit and deductible. The coinsurance condition only penalizes underinsurance.