What Do You Know About Commercial Property Insurance? Trivia Quiz

1. After suffering a loss, one of the main reasons businesses may not re-open their doors, or re-open and then be forced to close is.....

No business income coverage

Management inadequacy

Loss of customers

They are arsonists and now in prison

No business income coverage refers to the lack of insurance coverage that compensates businesses for lost income in the event of a closure or interruption caused by a covered loss, such as a fire or natural disaster. Without this coverage, businesses may struggle to recover financially after a loss, leading to their inability to re-open or their eventual closure. This lack of financial support can make it difficult for businesses to cover expenses and maintain operations, ultimately leading to their demise.

Explanation

No business income coverage refers to the lack of insurance coverage that compensates businesses for lost income in the event of a closure or interruption caused by a covered loss, such as a fire or natural disaster. Without this coverage, businesses may struggle to recover financially after a loss, leading to their inability to re-open or their eventual closure. This lack of financial support can make it difficult for businesses to cover expenses and maintain operations, ultimately leading to their demise.

2. In order to ensure a building at replacement cost on a CPP, you must be within 80% of the actual replacement cost?

True

False

The CPP system defaults the coinsurance requirement to 80% - so as long as you are within 80% of the true replacement cost, no coinsurance penalty will be assessed.

Explanation

The CPP system defaults the coinsurance requirement to 80% - so as long as you are within 80% of the true replacement cost, no coinsurance penalty will be assessed.

3. In order to be eligible for coverage with Farm Bureau, any habitational risk must have hard wired smoke detectors.

True

False

Any dwelling, apartment, or the likes must be equipped with hard wired smoke detectors. This assists in life safety.

Explanation

Any dwelling, apartment, or the likes must be equipped with hard wired smoke detectors. This assists in life safety.

4. If an applicant wants only property coverage - you should quote this under a CPP rather than BOP.

True

False

If an applicant wants to pick and choose their coverage - CPP is the way to go. Remember - a BOP is a packaged policy consisting of liability AND property, no choice on one or the other.

Explanation

If an applicant wants to pick and choose their coverage - CPP is the way to go. Remember - a BOP is a packaged policy consisting of liability AND property, no choice on one or the other.

5. One of the main differences in covering business income on a CPP rather than on a BOP is...

Fewer covered causes of loss

There is no difference

More covered causes of loss

You must add and enter a limit on the CPP where as the BOP is built in

In a CPP (Commercial Package Policy), the coverage for business income requires the addition and entry of a limit. This means that the policyholder needs to specify the amount of coverage they want for their business income. On the other hand, in a BOP (Business Owners Policy), the coverage for business income is already built into the policy, and there is no need to add or enter a separate limit. Therefore, the main difference between covering business income on a CPP and a BOP is that the CPP requires the policyholder to add and enter a limit, while the BOP already includes the coverage.

Explanation

In a CPP (Commercial Package Policy), the coverage for business income requires the addition and entry of a limit. This means that the policyholder needs to specify the amount of coverage they want for their business income. On the other hand, in a BOP (Business Owners Policy), the coverage for business income is already built into the policy, and there is no need to add or enter a separate limit. Therefore, the main difference between covering business income on a CPP and a BOP is that the CPP requires the policyholder to add and enter a limit, while the BOP already includes the coverage.

6. In order to qualify for the CPP Enhancement coverage you must have Commercial Auto & Commercial Fire on the policy.

True

False

In order to qualify for the CPP Enhancement Endorsement, an applicant must have General Liability & Commercial Fire on the policy.

Explanation

In order to qualify for the CPP Enhancement Endorsement, an applicant must have General Liability & Commercial Fire on the policy.

7. In order for a restaurant that cooks with grease to be eligible for coverage with Farm Bureau which items below must be in place

Ansul Wet Fire Suppression System

Class K Fire Extinguisher

Hood and Duct Cleaning Service Contract

Located in a good neighborhood

To be eligible for coverage with Farm Bureau, a restaurant that cooks with grease must have an Ansul Wet Fire Suppression System, a Class K Fire Extinguisher, and a Hood and Duct Cleaning Service Contract. These items are necessary for ensuring fire safety in a restaurant that uses grease for cooking. The Ansul Wet Fire Suppression System is designed specifically to extinguish fires caused by cooking oils and greases. The Class K Fire Extinguisher is also specifically designed for use in kitchens and can effectively extinguish fires caused by cooking oils and greases. The Hood and Duct Cleaning Service Contract ensures that the ventilation system is regularly cleaned, reducing the risk of grease buildup and potential fire hazards.

Explanation

To be eligible for coverage with Farm Bureau, a restaurant that cooks with grease must have an Ansul Wet Fire Suppression System, a Class K Fire Extinguisher, and a Hood and Duct Cleaning Service Contract. These items are necessary for ensuring fire safety in a restaurant that uses grease for cooking. The Ansul Wet Fire Suppression System is designed specifically to extinguish fires caused by cooking oils and greases. The Class K Fire Extinguisher is also specifically designed for use in kitchens and can effectively extinguish fires caused by cooking oils and greases. The Hood and Duct Cleaning Service Contract ensures that the ventilation system is regularly cleaned, reducing the risk of grease buildup and potential fire hazards.

Submit

8. In order to insure a building at Replacement Cost on a BOP, you must be within 80% of the actual replacement cost?

True

False

In order to meet coinsurance requirements, you must insure the building to 100% value on the BOP.

Explanation

In order to meet coinsurance requirements, you must insure the building to 100% value on the BOP.

9. You have a client that has a brand new building - they want to insure it at $50,000, which is what they purchased it for. Your building valuation comes up at $500,000 to construct this building. You are quoting a BOP so you are required to put $500,000 on the building in order to properly insure. If you place $50,000 on the building and they suffer a $50,000 loss - based on coinsurance requirements, what amount would they be paid?

$0

$5,000

$25,000

$50,000

On a BOP - the coinsurance requirement is 100% - so you have to place $500,000 on the building. To determine the coinsurance penalty assessed (for not insuring to value) you would utilize the following formula - Did/Should x Loss -- $50,000 (Did)/$500,000 (Should) x $50,000 (loss) Loss Amount Paid = $5,000 Did = The amount the insured DID have the building insured for Should = The amount the insured SHOULD have had the building insured for This is why it is very important to ensure to value - and explanation of this to the client can help.

Explanation

On a BOP - the coinsurance requirement is 100% - so you have to place $500,000 on the building. To determine the coinsurance penalty assessed (for not insuring to value) you would utilize the following formula - Did/Should x Loss -- $50,000 (Did)/$500,000 (Should) x $50,000 (loss) Loss Amount Paid = $5,000 Did = The amount the insured DID have the building insured for Should = The amount the insured SHOULD have had the building insured for This is why it is very important to ensure to value - and explanation of this to the client can help.

10. If a business is located outside city limits, but within 5 miles of the responding fire department - the public protection class for the property will be...

The protection class for the city in which the mailing address is listed

Protection class 10

Protection class 9

We do not write property located outside of city limits

If a business is located outside city limits, but within 5 miles of the responding fire department, the public protection class for the property will be Protection class 9. This means that the property is considered to have a good level of fire protection due to its proximity to the fire department. The protection class is based on factors such as the availability of fire hydrants, water supply, and the fire department's response capabilities. In this case, even though the business is not located within the city limits, it still falls within the 5-mile radius of the fire department, which qualifies it for Protection class 9.

Explanation

If a business is located outside city limits, but within 5 miles of the responding fire department, the public protection class for the property will be Protection class 9. This means that the property is considered to have a good level of fire protection due to its proximity to the fire department. The protection class is based on factors such as the availability of fire hydrants, water supply, and the fire department's response capabilities. In this case, even though the business is not located within the city limits, it still falls within the 5-mile radius of the fire department, which qualifies it for Protection class 9.