Chapter 1

Question 1

3 types of buildings referred to as commercial risks

Answer 1

Non-mercantile
Mercantile
Manufacturing/industrial

Question 2

Name 3 institutional risks

Answer 2

Hospitals, nursing homes, municipal buildings

Question 3

3 classes of commercial property

Answer 3

Building
Equipment
Stock

Question 4

two options for what coverage can be provided on

Answer 4

Scheduled
All Property

Question 5

What does it mean when coverage is provided on an All property basis

Answer 5

Covered by a single limit of insurance

Question 6

Define Building

Answer 6

Fixed structures pertaining to the building(s) and located on the “premises”

Question 7

Define premises

Answer 7

The entire area within the property lines and area under adjoining sidewalks and driveways at the locations described on the declaration page an in or on vehicles within 100 meters (328 feet) of such locations

Question 8

5 aspects of building location

Answer 8

fixed structures pertaining to the building(s) and located on the “premises”

Additions and extensions communicating and in contact with the building(s)

Permanent fittings and fixtures attached to and forming part of the building(s)

Materials, equipment and supplies on the “premises” for maintenance of, and normal repairs and minor alterations to the “building” or for building services

Growing plants, trees, shrubs or flowers inside the “building” used for decorative purposes when the Insured is the owner of the “building”

Question 9

Define stock

Answer 9

merchandise of every description usual to the Insured’s business

packing, wrapping and advertising materials; and

similar property belonging to others which the Insured is under obligation to keep insured or for which he is legally liable

Question 10

The value of property belonging to others is insured within the values selected on stock subject to what conditions

Answer 10

The property lost or damaged must be similar to that insured by the policy

The Insured must have had an obligation to keep the property insured

The Insured must have been legally liable for it

Question 11

Define Equipment

Answer 11

Generally all contents usual to the Insured’s business, including furniture, furnishings, fittings, fixtures, machinery, tools, utensils and appliances other than “building” or “stock”

Similar property belonging to others which the Insured is under obligation to keep insured or for which he is legally liable

Tenants improvements

Question 12

3 ways property can be valued

Answer 12

Actual Cash Value
Replacement Value
Book Value

Question 13

Define Actual Cash Value

Answer 13

repair or replace lost or damaged property, less the application of any depreciation

Question 14

5 methods used to determine the ACV of the lost or damaged property

Answer 14

Formula/Cost Approach Method
Market Value/Direct Sales Approach
Income Approach
True Value to the Owner
Broad Evidence Rule

Question 15

Define Book Value

Answer 15

Price which was expended at the time of purchase and which has been reduced by depreciation or other write-offs

Question 16

Explain the difference between package and manuscript policies

Answer 16

Package policies combine under one form a variety of coverages, while manuscript policies are designed for risks having a specialized exposure for which no standard coverage form exists

Question 17

Why do subscription policies and policies for reinsurance operate in different ways?

Answer 17

Reinsurance involves ceding part of the risk it has assumed to one or more “other Insurers” while on a subscription policy, a group of Insurers agree to share in providing insurance coverage

Question 18

3 factors considered by the adjuster when determining the amount of indemnity to be provided by the policy

Answer 18

The value of the lost or damaged property as determined in Clause 15
The interest of the Insured in the property
The amount of insurance specified on the “Declaration Page” for the lost or damaged property

Question 19

Waiver of Co-insurance clause

Answer 19

Recognizes that many insured losses are small ones. For smaller valued losses, it makes sense for the Insurer to remove the obligation from the insured so that resources are not wasted trying to do an inventory of remaining values to prove co-insurance has been met

Question 20

What are the two types of exclusions

Answer 20

Property excluded
Perils excluded

Question 21

Why do exclusions exist

Answer 21

Exclude losses which are generally considered by Insurers to be commercially uninsurable

To exclude losses which have within them the potential to be catastrophic

To exclude losses for which more specialized policy forms have been developed

To exclude losses that are wholly or partially in the control of the Insured, or which can be expected

Losses not common to a large number of Insureds, but represent increased potential for loss which is deserving of an additional premium charged

To exclude losses where there the activity is illegal

Question 22

What constitutes a building in regards to insurance

Answer 22

Fixed structures
Additions and extensions in contact with the building
Permanent fittings and fixtures
Materials, equipment and supplies on the premises for maintenance of, and normal repairs and minor alterations to the building
Growing plants, trees, shrubs or flowers inside the building used for decorative purposes

Question 23

Explain reinstatement and reinstatement clause

Answer 23

“Loss under any item of this form shall not reduce the applicable amount of insurance

Provides that Insureds shall have as much insurance after a loss as they did before it

Question 24

Parts

Answer 24

In the case of loss of or damage to any part of the insured property whether scheduled or unscheduled, consisting, when complete for use, of several parts, the Insurer is not liable for more than the insured value of the parts lost or damaged, including the cost of installation