Chapter 7

Question 1

M wants the cheapest Building and Personal Property policy to cover the peril of volcanic lava crushing his building. You would recommend:

Select one:

a. Comprehensive
b. Special
c. Basic
d. Broad

Answer 1

Plain old Basic covers volcanic damage from dust, lava, and blast. That would be the cheapest choice.

The correct answer is: Basic

Question 2

All of the following are covered by a Building and Personal Property policy EXCEPT

Select one:

a. fish and animals kept for the insured’s enjoyment
b. the insured’s improvements and betterments
c. personal property owned by the insured
d. fish and animals held for sale

Answer 2

The correct answer is: fish and animals kept for the insured’s enjoyment

Question 3

If a fire causes $100,000 damage and the debris removal expense is $14,000, a Building and Personal Property policy will pay how much (assuming it has adequate limits of coverage)?

Select one:

a. $14,000
b. $100,000
c. $114,000
d. $135,000

Answer 3

The policy will pay the loss of $100,000 plus up to an additional 25% for debris removal (plus $10,000). So, the policy could have paid a maximum of $135,000, but, because the loss was $114,000, it will pay only the $114,000. You might wonder what happened to the deductible. For the sake of simplicity, forget about deductibles unless they are specifically mentioned in the question.

The correct answer is: $114,000

Question 4

After 60 days, a property with no people and no significant amount of personal property is considered to be:

Select one:

a. vacant
b. unoccupied

Answer 4

The correct answer is: vacant

Question 5

The definition of vacancy is:

Select one:

a. 21 days
b. 30 days
c. 60 days
d. 90 days

Answer 5

The correct answer is: 60 days

Question 6

Vacant means:

Select one:

a. contents but no people
b. no people and no contents

Answer 6

The correct answer is: no people and no contents

Question 7

The Building and Personal Property policy may be used to cover each of the following EXCEPT?

Select one:

a. property of others
b. tenant’s improvements and betterments
c. building additions
d. property damage liability

Answer 7

The correct answer is: property damage liability

Question 8

The owner of a business carelessly left the rear door unlocked over the weekend, resulting in merchandise being stolen. Under a Building and Personal Property policy – Special, this loss:

Select one:

a. will not be covered
b. will be covered as a theft loss

Answer 8

My personal inclination is to somehow punish this store owner by denying coverage for the store owner’s negligence. But, wait a minute! That is exactly why the store owner wants a property policy - to cover the owner’s mistakes. A perfect store owner wouldn’t need insurance. So, the negligence of the store owner is irrelevant - we will pay the claim.

The correct answer is: will be covered as a theft loss

Question 9

The Insured removes her belongings from her insured commercial building to a storage facility. At the end of two months, the Insured’s commercial building is an example of:

Select one:

a. vacancy
b. abandonment

Answer 9

The correct answer is: vacancy

Question 10

The Building and Personal Property policy deductible does not apply to:

Select one:

a. Trees
b. Fire Department Service Charge
c. Newly Acquired or Constructed Property
d. Removal/Preservation of Property

Answer 10

The correct answer is: Fire Department Service Charge

Question 11

The Building and Personal Property policy covers:

Select one:

a. inventory
b. liability protection
c. sidewalks
d. lawns

Answer 11

The correct answer is: inventory

Question 12

The First Named Insured may cancel the Building and Personal Property policy:

Select one:

a. at any time in writing
b. only by giving 10 days advance written notice

Answer 12

The correct answer is: at any time in writing

Question 13

Which is a coverage extension?

Select one:

a. fire extinguishers
b. vans
c. lawns and crops
d. newly acquired property

Answer 13

The correct answer is: newly acquired property

Question 14

A building with no occupants or contents is:

Select one:

a. unoccupied
b. vacant

Answer 14

The correct answer is: vacant

Question 15

To cover fluctuating inventory, a business should utilize a:

Select one:

a. blanket policy
b. reporting form

Answer 15

The correct answer is: reporting form

Question 16

A Building and Personal Property policy usually provides coverage based on which basis?

Select one:

a. Replacement Cost
b. Actual Cash Value

Answer 16

The correct answer is: Actual Cash Value

Question 17

Joe has a building covered by a Building and Personal Property policy. What must he do to cover a new lawnmower used to service the premises?

Select one:

a. nothing
b. list the items on an endorsement

Answer 17

Personal property is always covered on an “unscheduled” basis. The Insured doesn’t list the items in the policy but would list them in a proof of loss form. The only policies that require personal property to be listed in the policy (scheduled) are the Inland Marine policies, such as the Scheduled Personal Property Endorsement - and we will study those later.

The correct answer is: nothing

Question 18

The Building and Personal Property policy covers outdoor furniture located within a maximum of:

Select one:

a. 50 feet
b. 100 feet
c. 250 feet
d. 500 feet

Answer 18

The correct answer is: 100 feet

Question 19

The Building and Personal Property policy covers:

Select one:

a. autos held for resale
b. pets
c. money, stocks and bonds
d. outdoor furniture

Answer 19

The correct answer is: outdoor furniture

Question 20

A Building and Personal Property policy provides how much automatic coverage for Personal Property of Others under its coverage extension?

Select one:

a. $500
b. $750
c. $1,000
d. $2,500

Answer 20

The correct answer is: $2,500

Question 21

Building materials used for repairs are not covered for:

Select one:

a. fire damage
b. theft
c. wind and hail damage
d. vandalism

Answer 21

Whether we are talking about a HO policy or a BPP, building materials are not covered for theft.
The correct answer is: theft

Question 22

Which section of a Special (Extended Coverage) form BPP contains information regarding whether a peril is covered?

Select one:

a. exclusions
b. definitions
c. insuring agreement
d. declarations

Answer 22

The correct answer is: exclusions

Question 23

If a business insured by a Building and Personal Property policy (BPP) acquires a new business, the new business is insured for a grace period of:

Select one:

a. 15 days
b. 30 days
c. 45 days
d. 60 days

Answer 23

The correct answer is: 30 days

Question 24

Under the Building and Personal Property policy, the mortgagee is entitled to

Select one:

a. Payment as per the mortgagee’s interest at the time of loss
b. 45 days notice of cancellation for nonpayment of premium

Answer 24

The correct answer is: Payment as per the mortgagee’s interest at the time of loss

Question 25

The Building and Personal Property policy (BPP) covers:

Select one:

a. retaining walls not attached to the building
b. automobiles
c. fences not attached to the building
d. a rowboat stored in the building

Answer 25

The correct answer is: a rowboat stored in the building

Question 26

A building valued at $100,000 has a policy with an 80% coinsurance clause. The minimum coverage needed to fully cover a $15,000 fire loss is:

Select one:

a. $15,000
b. $50,000
c. $100,000
d. $80,000

Answer 26

The correct answer is: $80,000

Question 27

Which of the following is an Additional Coverage under an unendorsed Commercial Property policy?

Select one:

a. building materials used to make repairs
b. paved surfaces
c. Fire Department Service Charges
d. Personal Effects and Property of Others

Answer 27

Our three Additional Coverages are: (1) Debris Removal, (2) Removal/Preservation of Property, and (3) Fire Department Service Charge. They is a key list for memorization!

The correct answer is: Fire Department Service Charges

Question 28

A Building and Personal Property policy covers:

Select one:

a. sidewalks
b. lawns
c. fire extinguishers
d. guard dogs

Answer 28

A BPP will cover injury to dogs only if they are boarded by the Insured or if the Insured runs a pet store. However, injury to the Insured’s animals is otherwise excluded. Be careful, because the liability policies will cover the situation where the Insured’s dog bites someone. But, the BPP is a property policy, not a liability policy.

The correct answer is: fire extinguishers

Question 29

Which of the following is designed to provide property coverage while a structure is under construction?

Select one:

a. Builders Risk
b. Temporary Insurance
c. Pre-Occupancy Insurance
d. Construction Coverage

Answer 29

The correct answer is: Builders Risk

Question 30

The Building and Personal Property policy (BPP) covers:

Select one:

a. automobiles
b. outdoor furniture
c. guard dogs
d. money

Answer 30

The correct answer is: outdoor furniture

Question 31

The Building and Personal Property policy covers each of the following EXCEPT:

Select one:

a. fire extinguishers
b. building materials used to make repairs
c. appliances furnished by the land lord in a tenant’s unit
d. a tenant’s furnishings

Answer 31

Tricky question! The BPP covers tenant’s improvements and betterments to the physical structure but doesn’t cover their furnishings (stuff). We will talk about coverage for the tenant’s furnishings later in Chapter 13.

The correct answer is: a tenant’s furnishings

Question 32

After a Building and Personal Property policy proof of loss is filed, the claim must be paid within:

Select one:

a. 10 days
b. 30 days
c. 60 days
d. 90 days

Answer 32

The correct answer is: 30 days

Question 33

Which of the following is designed to cover damage to a building under construction?

Select one:

a. Temporary Insurance
b. Construction Insurance
c. Builders Risk
d. Pre-Occupancy Insurance

Answer 33

The correct answer is: Builders Risk

Question 34

The Building and Personal Property policy’s Coverage Extensions provides coverage for Damage to Property of Others up to what amount?

Select one:

a. $750
b. $1,000
c. $2,500
d. $25,000

Answer 34

The correct answer is: $2,500

Question 35

The additional coverages under the Building and Personal Property policy include each of the following EXCEPT:

Select one:

a. Removal/Preservation of Property
b. Theft of Money
c. Debris Removal
d. Fire Department Service Charges

Answer 35

This question is a great example of why you need to memorize the 3 additional coverages - Debris Removal, Removal/Preservation of Property, and Fire Department Service Charge. Two key points to remember: (1) There is no deductible under the Fire Department Service Charge; and (2) Each of these adds to the policy’s limit of liability EXCEPT Removal/Preservation of Property.

The correct answer is: Theft of Money

Question 36

The owner of a new office building is unable to move in for 80 days. Which provision will restrict coverage?

Select one:

a. indemnity
b. abandonment
c. coinsurance
d. vacancy

Answer 36

The correct answer is: vacancy

Question 37

After a store has been vacant for 60 days, it will still be covered for:

Select one:

a. vehicular damage
b. vandalism
c. fire
d. glass breakage

Answer 37

The correct answer is: fire