Chapter 13 - Commercial Property Insurance

1. What is the per-year policy limit for coverage of electronic data under the Business and Personal Property coverage form?

$1,000

$2,500

$5,000

$7,500

B is correct. The Business and Personal Property coverage form will only pay up to $2,500 in any one policy year for losses to electronic data.

Explanation

B is correct. The Business and Personal Property coverage form will only pay up to $2,500 in any one policy year for losses to electronic data.

2. Which of the following is covered under the Builders Risk coverage form?

Building under construction

Foundation of the building under construction

All of the above

D is correct. The Builders Risk coverage form covers the building under construction and its foundation. Fixtures, machinery, equipment used to service the building, and the insured's building materials and supplies can be covered if they will become a permanent part of the building and are located within 100 feet of the building.

Explanation

D is correct. The Builders Risk coverage form covers the building under construction and its foundation. Fixtures, machinery, equipment used to service the building, and the insured's building materials and supplies can be covered if they will become a permanent part of the building and are located within 100 feet of the building.

3. Which Causes of Loss form provides open peril coverage?

Basic

Broad

Special

Both Basic and Broad

C is correct. The Basic and Broad Causes of Loss forms are named peril forms.

Explanation

C is correct. The Basic and Broad Causes of Loss forms are named peril forms.

4. The insured's business sustains $25,000 damage in a fire. The fire department that was called to the scene billed the insured $1,000. The business is insured under the Building and Personal Property coverage form for $500,000 with a $5,000 deductible. How much will the insurance company pay for this loss?

$21,000

$20,000

$24,000

$26,000

A is correct. Fire department service charges are paid in addition to the limit of insurance, with no deductible.

Explanation

A is correct. Fire department service charges are paid in addition to the limit of insurance, with no deductible.

5. What is the limit on Pollutant Cleanup and Removal coverage under the Business and Personal Property coverage form?

$10,000

$20,000

$25,000

$50,000

A is correct. The policy will pay up to $10,000 for pollutant cleanup and removal if the pollution was caused by a covered peril.

Explanation

A is correct. The policy will pay up to $10,000 for pollutant cleanup and removal if the pollution was caused by a covered peril.

6. Which of the following properties would not be excluded under the Building and Personal Property coverage form?

Lawn

Driveway

Private company jet

Animals held for sale

D is correct. The first three choices are excluded, but animals are not excluded if they are boarded or held for sale.

Explanation

D is correct. The first three choices are excluded, but animals are not excluded if they are boarded or held for sale.

7. When are losses under the Building and Personal Property coverage form paid at replacement or repair cost?

Always

Never

If the insured meets the coinsurance requirements and costs are $2,500 or less

Whenever the total amount of loss does not exceed 25% of the policy limit

C is correct. Most losses are paid at actual cash value. However, if the Coinsurance conditions are met and costs are $2,500 or less, the policy will pay the cost of building repair or replacement without taking depreciation into account.

Explanation

C is correct. Most losses are paid at actual cash value. However, if the Coinsurance conditions are met and costs are $2,500 or less, the policy will pay the cost of building repair or replacement without taking depreciation into account.

8. Which of the following perils are covered in the Causes of LossBasic form?

Collapse

Explosion

Volcanic eruption

Nuclear hazard

B is correct. Coverage for collapse is provided as an additional coverage in the Broad and Special Causes of Loss forms only. Volcanic eruption is covered under the Earthquake and Volcanic Eruption endorsement. (The other Causes of Loss forms cover volcanic action, which is not the same thing as volcanic eruption.) Loss arising out of a nuclear hazard is excluded under all Causes of Loss forms.

Explanation

B is correct. Coverage for collapse is provided as an additional coverage in the Broad and Special Causes of Loss forms only. Volcanic eruption is covered under the Earthquake and Volcanic Eruption endorsement. (The other Causes of Loss forms cover volcanic action, which is not the same thing as volcanic eruption.) Loss arising out of a nuclear hazard is excluded under all Causes of Loss forms.

9. Under the Earthquake and Volcanic Eruption endorsement, all earthquake shocks or volcanic eruptions that occur within a certain number of hours constitute a single earthquake or volcanic eruption. What is that time period?

40 hours

72 hours

168 hours

24 hours

C is correct. Under this endorsement, all earthquake shocks or volcanic eruptions that occur within any 168-hour period constitute a single earthquake or volcanic eruption.

Explanation

C is correct. Under this endorsement, all earthquake shocks or volcanic eruptions that occur within any 168-hour period constitute a single earthquake or volcanic eruption.

10. Loss caused by sprinkler leakage is covered under which Commercial Property Causes of Loss forms?

Basic

Broad

Special

All of the above

D is correct. All of the Causes of Loss forms cover sprinkler leakage.

Explanation

D is correct. All of the Causes of Loss forms cover sprinkler leakage.

11. Up to what percent of the amount paid for direct loss will the insurance company pay for debris removal expense under the Business and Personal Property coverage form?

5

10

20

25

D is correct. Under the Business and Personal Property coverage form, the insurance company will pay up to 25% of the amount paid for a direct loss for debris removal expense. An additional $10,000 of coverage is available if the debris removal expense exceeds the 25% limit or the total loss exceeds the policy limits.

Explanation

D is correct. Under the Business and Personal Property coverage form, the insurance company will pay up to 25% of the amount paid for a direct loss for debris removal expense. An additional $10,000 of coverage is available if the debris removal expense exceeds the 25% limit or the total loss exceeds the policy limits.

12. Which of the following losses would be excluded under the Building and Personal Property coverage form if the insured building had been vacant for more than 60 days before the loss occurred?

Attempted theft

Sprinkler leakage when the insured had protected the system against freezing

Vandalism

Glass breakage

A, C, and D are correct. Damage because of attempted theft, vandalism, or glass breakage is excluded after 60 days of vacancy. Damage in a vacant building because of sprinkler leakage is covered if the system was protected against freezing.

Explanation

A, C, and D are correct. Damage because of attempted theft, vandalism, or glass breakage is excluded after 60 days of vacancy. Damage in a vacant building because of sprinkler leakage is covered if the system was protected against freezing.

Submit

13. Which Commercial Property Causes of Loss forms cover collapse?

Basic

Broad

Special

All of the above

B and C are correct. Collapse is not covered under the Basic Causes of Loss form.

Explanation

B and C are correct. Collapse is not covered under the Basic Causes of Loss form.

Submit

14. Which of the following have special loss valuation requirements under the Building and Personal Property coverage form?

Buildings

Furniture and fixtures

Glass

Valuable papers and records

C and D are correct. Stock, glass, valuable papers and records, and tenants improvements and betterments all have special valuation requirements.

Explanation

C and D are correct. Stock, glass, valuable papers and records, and tenants improvements and betterments all have special valuation requirements.

Submit

15. Which of the following would be covered under the building coverage of the Building and Personal Property coverage form?

Inventory stored at the insured's warehouse

An addition to the insured's store on which construction has just begun

Fire extinguishers located in the insured's factory

Office furniture and supplies kept in the insured's building.

B and C are correct. Inventory, furniture, and supplies would be covered under business personal property coverage.

Explanation

B and C are correct. Inventory, furniture, and supplies would be covered under business personal property coverage.

Submit