CPCU 551

Question 1

A policy that combines, in one form and associated endorsement, all or most of the commercial property coverages that the insured organization needs, and uses a flexible rating plan.

Answer 1

Output policy

Question 2

A package policy that combines most of the property and liability coverages needed by small and medium-size businesses.

Answer 2

Businessowners policy (BOP)

Question 3

Policy that covers two or more lines of business by combining ISO’s commercial lines coverage parts.

Answer 3

Commercial package policy (CPP)

Question 4

A fire that leaves its intended place, such as a spark that escapes a fireplace and sets the carpet on fire.

Answer 4

Hostile fire

Question 5

Property that has no physical form.

Answer 5

Intangible property

Question 6

All tangible or intangible property that is not real property.

Answer 6

Personal property

Question 7

Tangible property consisting of land, all structures permanently attached to the land, and whatever is growing on the land.

Answer 7

Real property (realty)

Question 8

A required component of the commercial property coverage part that contains conditions applicable to all commercial property coverage forms.

Answer 8

Commercial property conditions

Question 9

A required component of the commercial property coverage part that specifies perils covered.

Answer 9

Causes of loss form

Question 10

A commercial property coverage part component that can be any of several commercial property forms containing an insuring agreement and related provisions.

Answer 10

Commercial property coverage form

Question 11

A required commercial property coverage part component that provides basic information about the policyholder and the insurance provided.

Answer 11

Commercial property declarations page

Question 12

Factors that are applied to the regular policy premiums for certain coverage parts of a CPP that includes both property and liability coverages, resulting in premium discounts for those coverage parts.

Answer 12

Package modification factors

Question 13

Policy that covers only one line of business

Answer 13

Monoline policy

Question 14

Commercial package policy (CPP) coverage component that provides a broad range of coverages to ‘middle-market’ or larger firms to insure buildings and business personal property.

Answer 14

Commercial property coverage part

Question 15

A statement of facts about a loss for which the insured is making a claims.

Answer 15

Proof of loss

Question 16

Cost to replace property with new property of like and kind quality less depreciation.

Answer 16

Actual Cash Value (ACV)

Question 17

Optional coverage that suspends the coinsurance condition if the insured carries the amount of insurance agreed to by the insurer and the insured.

Answer 17

Agreed value optional coverage`

Question 18

Coverage for the effects of inflation that automatically increases the limit of insurance by the percentage of annual increase shown in the declarations.

Answer 18

Inflation Guard optional coverage

Question 19

Coverage for losses to most types of property on a replacement cost basis (with no deduction for depreciation or obsolescence) instead of on an actual cash value basis.

Answer 19

Replacement Cost optional coverage

Question 20

The process by which an insurer can, after it has paid a loss under the policy, recover the amount paid from any party (other than the insured) who caused the loss or is otherwise legally liable for the loss.

Answer 20

Subrogation

Question 21

A property outside the area owned or controlled by the insured that increases the probability of loss to the insured’s building and its contents.

Answer 21

External Exposure

Question 22

Insurance that covers each building for a specific limit of insurance and personal property at each building for a specific limit of insurance.

Answer 22

Specific insurance

Question 23

Insurance that covers either of the following with one limit of insurance; (1) one type of property in one or more seperatly rated buildings or (2) two or more types of property in one or more seperately rated buildings.

Answer 23

Blanket insurance

Question 24

Endorsement that covers the fluctuating values of business personal property by providing differing amounts of insurance for certain time periods during the policy period.

Answer 24

Peak Season Limit of Insurance Endorsement

Question 25

A commercial property form that bases the insured’s premium for business personal property on the values that the insured reports to the insurer periodically during the policy period.

Answer 25

Value Reporting Form

Question 26

A real estate development consisting of a group of units, in which the air apace within the boundaries of each unit is owned by the unit owner, and all remaining real and personal property is owned jointly by all the unit owners.

Answer 26

Condominium

Question 27

The portion of a condominium owned solely by a unit owner.

Answer 27

Condominium unit

Question 28

An entity composed of the unit owners in a condominium to manage the condominium and to own the common elements.

Answer 28

Condominium association

Question 29

Areas of a condominium that are jointly owned by all unit owners, including the land on which the buildings are located.

Answer 29

Common elements

Question 30

A document that describes what each condominium unit owner has purchased and clarifies the rights and responsibilities of the unit owner and the association.

Answer 30

Condominium association agreement

Question 31

A concept of condominium ownership in which the association has no ownership interest within the bare walls of each unit.

Answer 31

Bare-walls concept

Question 32

A concept of condominium ownership in which the association is considered to be the owner of all property contained in the unit as sold to the original purchaser or replacements of such property if the replacements are of like kind and quality.

Answer 32

Single-entity concept (original specifications coverage)

Question 33

A concept of condominium ownership that is similar to the single-entity concept except that the all-in concept includes improvements made by the unit owner, not just the original installations or replacements of like kind and quality.

Answer 33

All-in concept (additional installations coverage)

Question 34

A form of real property ownership in which the real property is owned by a corporation whose shareholders are the tenants of the property.

Answer 34

Cooperative corporation

Question 35

A real estate development in which each occupant has exclusive ownership of its own unit and the land that the structure occupies and a homeowners’ association composed of all the unit owners jointly owns the surrounding land and structures.

Answer 35

Planned development unit (homeowners association)

Question 36

Form that covers business personal property and building property exposures of commercial (nonresidential) condominium units.

Answer 36

Condominium commercial unit-owners coverage form

Question 37

Coverage for a commercial condominium unit-owner’s share of any assessment made by the association against all unit owners because of physical loss to condominium property caused by a covered cause of loss.

Answer 37

Loss assessment coverage

Question 38

Coverage for real property (such as a storage shed or garage building) that pertains only to the named insured’s condominium unit or real property that the named insured has a duty to insure according to the condominium association agreement.

Answer 38

Miscellaneous real property coverage

Question 39

A commercial property policy form for covering buildings and business personal property on restricted terms.

Answer 39

Standard Property Policy (SPP)

Question 40

A commercial property coverage form that provides legal liability coverage on buildings or personal property of others in the insured’s care, custody, or control.

Answer 40

Legal Liability Coverage Form

Question 41

A commercial property coverage form for insuring a tenant’s financial losses resulting from the cancellation of the tenant’s lease because of damage to the premise by a covered cause of loss.

Answer 41

Leasehold Interest Coverage Form

Question 42

A program allowing private insurers to write flood insurance under the National Flood Insurance Program (NFIP)

Answer 42

Write Your Own (WYO)

Question 43

Initial phase of community’s participation in the National Flood insurance Program in which property owners in flood areas can purchase limited amounts of insurance at subsidized rates.

Answer 43

Emergency Program

Question 44

Second phase of the National Flood Insurance Program in which the community agrees to adopt flood-control and land-use restrictions and in which property owners purchase higher amounts of flood insurance than under the emergency program.

Answer 44

Regular Program

Question 45

The version of the National Flood Insurance Program (NFIP) Standard Flood Insurance Policy that is used for insuring commercial building and contents.

Answer 45

General Property Form

Question 46

A version of the National Flood Insurance Program (NFIP) Standard Insurance Policy that is used for insuring residential condominium buildings, as well as contents that are owned either by the unit owners in common or by the condominium association solely.

Answer 46

Residential Condominium Building Association Policy (RCBAP)

Question 47

An insurance-to-value provision in many property insurance policies providing that if the property is underinsured, the amount that an insurer will pay for a covered loss is reduced.

Answer 47

Coinsurance

Question 48

National Flood Insurance Coverage that pays for compliance costs related to floodplain management for qualifying structures.

Answer 48

Increased Cost of Compliance (ICC)

Question 49

Policy that covers on an ‘all-risks’ basis to fill gaps in the insured’s commercial property coverage, especially gaps in flood and earthquake coverage.

Answer 49

Difference in Conditions (DIC) policy, or DIC insurance

Question 50

A large property whose construction meets high standards of risk mitigation and control characteristics and whose management maintains best practices loss control and risk mitigation techniques for the specific occupancy.

Answer 50

Highly protected risk (HPR)

Question 51

Two or more property policies arranged in levels of coverage; the policies in the second or higher levels provide coverage only when the loss exceeds the coverage afforded by the lower-level policies.

Answer 51

Layered Property Coverage

Question 52

The dollar amount above which the reinsurer responds to losses.

Answer 52

Attachment point

Question 53

Insurance that covers the reduction in an organization’s income when operations are interrupted by damage to property caused by covered peril.

Answer 53

Business income insurance

Question 54

The difference between revenues (such as money received for goods or services) and expenses (such as money paid for merchandise, rent, and insurance)

Answer 54

Net income

Question 55

Net income that results when revenues exceed expenses.

Answer 55

Profit

Question 56

Net income that results when expenses exceed revenues.

Answer 56

Net loss

Question 57

Expenses that continue to be incurred during business interruption.

Answer 57

Continuing Expenses

Question 58

Expenses that will not continue during a business interruption.

Answer 58

Non continuing expenses

Question 59

Expenses, in addition to ordinary expenses, that an organization incurs to mitigate the effects of a business interruption.

Answer 59

Extra Expenses

Question 60

The possibility of incurring business income loss because of physical loss occurring on the premises of an organization that the insured depends on for materials, products, or sales.

Answer 60

Dependent property exposure

Question 61

The sum of the insured’s estimated net income and operating expenses for the twelve months following policy inception, minus only those exposures listed in the business income worksheet.

Answer 61

Coinsurance basis

Question 62

A worksheet for calculating the amount of insurance necessary to comply with coinsurance condition of business income insurance forms, for reporting business income values to the insurer, or for providing underwriters with information they need to evaluate an organization’s business income loss exposure.

Answer 62

Business income worksheet

Question 63

The largest loss that an insured is likely to sustain.

Answer 63

Probable Maximum Loss (PML)

Question 64

Endorsement that limits coverage for payroll expenses to a specified number of days or excludes expenses altogether, allowing the insured to satisfy coinsurance requirement with a lower amount of insurance.

Answer 64

Payroll limitation or exclusion endorsement

Question 65

An endorsement that extends business income forms to cover payroll expenses for specified job classifications or employees regardless of whether such expenses are necessary to resume operations.

Answer 65

Discretionary Payroll Expense endorsement

Question 66

Endorsement that eliminates power, heat, and refrigeration expenses from coverage and from the coinsurance calculation, allowing the insured to satisfy the coinsurance requirement with a lower limit of insurance.

Answer 66

Power, Heat and refrigeration deduction endorsement

Question 67

An endorsement that modifies business income coverage forms to make them more appropriate for covering the business income loss exposures of schools.

Answer 67

Business Income Changes - Educational Institution endorsement

Question 68

An endorsement that covers loss of business income or extra expense at the insured premises caused by the interruption of utility services to or from the insured premises.

Answer 68

Utility Services - Time Element endorsement

Question 69

Endorsement that covers business income loss during the additional time required to comply with building ordinances or law.q

Answer 69

Ordinance or law - Increased Period of restoration endorsement

Question 70

Insurance that covers many different classes of property that typically involve an element of transportation.

Answer 70

Inland Marine Insurance

Question 71

Insurance that, in the US, includes both ocean and inland marine coverage and, in the rest of the world, is limited to insurance for vessels and cargo.

Answer 71

Marine Insurance

Question 72

Statement of types of property that may be insured on inland marine and ocean marine insurance forms.

Answer 72

Nationwide Marine Definition

Question 73

A policy designed to cover property that floats, or moves, from location to location `

Answer 73

Floater

Question 74

A valuation basis that values covered property at its invoice value, including freight.

Answer 74

Invoice value

Question 75

A method of valuing property in which the insurer and the insured agree, at the time the policy is written, on the maximum amount that will be paid in the event of a total loss.

Answer 75

Agreed Value Method

Question 76

The person or organization shipping goods. often the seller of the goods.

Answer 76

Shipper

Question 77

The person or organization that receives property being transported by a carrier.

Answer 77

Consignee

Question 78

Airlines, railroads, or trucking companies that furnish transportation to any member of the public seeking their offered services.

Answer 78

Common carries

Question 79

Carries that furnish transportation services to shippers with whom they have contracts

Answer 79

Contract carries

Question 80

A natural and unavoidable catastrophe that interrupts the expected course of events.

Answer 80

Act of God

Question 81

A quality of a condition within a particular type of property that tends to make the property destroy itself.

Answer 81

Inherent vice

Question 82

A document acknoledging receipt of goods from the shipper, given by the carrier, which includes the terms of the contract of carriage for the goods.

Answer 82

Bill of lading

Question 83

A travel contract in which transportation is temporarily hired for a specific trip.

Answer 83

Charter

Question 84

Policy that covers all shipments made or received by the insured throughout a one-year policy period.

Answer 84

Annual transit policy

Question 85

Policy that covers all shipments made or received by the insured during the policy’s term; comparable to an inland marine annual trip transit policy, but without a set policy expiration date.

Answer 85

Open cargo policy

Question 86

In ocean marine policies, the party named as the insured.

Answer 86

Assured

Question 87

Partial loss that must, according to maritime law, be shared by all parties to a voyage (cargo owners and vessel owner).

Answer 87

General average

Question 88

Clause that covers the cost of reasonable measures that the insured is required to take to protect property from damage at the time of loss.

Answer 88

Sue and labor clause

Question 89

Clause in open cargo policies that covers the insured cargo during the ordinary course of transit (including land transit) form the time the cargo leaves the point of shipment until it is delivered to its final destination.

Answer 89

Warehouse-to-warehouse coverage

Question 90

A warranty that excludes loss caused by war, privacy, virtually any lawful or unlawful taking of the vessel, a nuclear weapon, a min, or a torpedo.

Answer 90

Free of capture and seizure (FC&S) warrenty

Question 91

A warranty that excludes loss caused by strikes, labor disturbances, riots, vandalism, sabotage, or malicious acts.

Answer 91

Strikes, riots, and civil commotion (SR&CC) warrenty

Question 92

A clause that excludes coverage for loss caused by delay, such as loss of market, spoilage, and business interruption.

Answer 92

Delay clause

Question 93

A clause that adds coverage to an ocean marine cargo policy for loss resulting from bursting , breakage of shafts, latent defects of vessels, or faults or errors in the navigation or management of the vessels

Answer 93

Inchmaree clause

Question 94

An exceptive warranty that excludes particular average unless the loss is actually caused by the stranding, sinking, or burning of the vessel or its collision with another vessel.

Answer 94

FPA/AC (free of particular average/American conditions) warranty

Question 95

Partial loss that is borne by only one party to voyage (such as a cargo owner)

Answer 95

Particular average

Question 96

A clause in open cargo policies that doubles the policy limit when, for reasons beyond the control of the assured, shipments accumulate at some point in transit.

Answer 96

Accumulation clause

Question 97

Policy that covers a particular shipment of goods specified in the policy.

Answer 97

Trip transit policy

Question 98

Form that covers a financial institution against loss of securities and other negotiable instruments while in transit through specified types mail.

Answer 98

Mail coverage form

Question 99

Inland marine policy that provides broad coverage on parcel post shipments.

Answer 99

Parcel post policy

Question 100

Policy that covers a trucker’s liability for damage to cargo of others being transported by the trucker.

Answer 100

Motor truck cargo liability policy

Question 101

A type of motor truck cargo policy that covers any type of organization (not just a trucking company) for damage to its own cargo while being transported on its own truck.

Answer 101

Owner’s goods on owners’ trucks policy

Question 102

An endorsement that insurers must attach to motor truck cargo liability policies of interstate carries stating that the insurer will pay cargo claims for which the insured is liable, up to the limits required by the US department of transportation, even if such claims are not covered under the policy.

Answer 102

BMC 32 - An endorsement for Motor Common Carrier Policies of Insurance for Cargo Liability

Question 103

A category of inland marine policies covering various types of equipment, wherever it may be located in the policy period.

Answer 103

Equipment Floaters

Question 104

A policy that covers mobile equipment or tools while located anywhere in the coverage territory

Answer 104

Contractors equipment floater

Question 105

The cost to replace covered equipment with the latest comparable state of the art equipment available; can be used as a valuation basis in an EDP floater

Answer 105

Upgraded value

Question 106

Coverage, in an EDP equipment floater, for perils such as mechanical failure, electrical disturbance, and damage to electronic data when covered equipment breaks down.

Answer 106

Breakdown coverage

Question 107

Policy that covers a contractor’s interest in building supplies or fixtures that the contractor has been hired to install

Answer 107

Installation floater

Question 108

The party temporarily possessing the personal property in a bailment.

Answer 108

Bailee

Question 109

The owner of the personal property in a bailment.

Answer 109

Bailor

Question 110

Policy that covers warehouse operators against liability for damage to the property of others being stored in operator’s warehouses.

Answer 110

Warehouse operators legal liability policy

Question 111

A policy that covers damage to customer’s goods while in the possession of the insured, regardless of whether the insured is legally liable for damage.

Answer 111

Bailee’s customers policy

Question 112

A policy that covers the insured’s patterns and dies while located at the premises of others and also while in transit to and from those premises

Answer 112

Pattern and die floater

Question 113

A policy that covers the insured’s goods while being worked on at a subcontractor’s or processor’s premises and while in transit and from those premises

Answer 113

Processing floater

Question 114

A policy that covers the inventory and other property of any of the types of dealers that qualify for inland marine coverage (such as jewelers, equipment dealers, fine arts dealers, and furriers).

Answer 114

Dealers policy

Question 115

A dealers policy, particularly one written for a jeweler or furrier.

Answer 115

Block Policy

Question 116

Form that covers neon, fluorescent, automatic, or mechanical signs.

Answer 116

Signs Coverage Form

Question 117

Insurance that covers the sums the insured is unable to collect when records of accounts receivables are destroyed by a covered cause of loss.

Answer 117

Accounts receivable insurance

Question 118

Insurance that covers direct physical loss to valuable papers and records, such as architect’s blueprints and plans.

Answer 118

Valuable papers and records insurance

Question 119

A fired pressure vessel constructed of cast iron or steel in which water is heated to produce steam or hot water

Answer 119

Boiler

Question 120

A closed container that is heated by the direct fire of burning fuel and can withstand internal pressure.

Answer 120

Fired pressure vessel

Question 121

A closed vessel that can withstand internal pressure or vacuum but is not heated by the direct fire of burning fuel

Answer 121

Unfired pressure vessel

Question 122

Expenses incurred to speed up the repair or replacement of covered property

Answer 122

Expediting expenses

Question 123

Condition that allows the insurer to immediately suspend equipment breakdown insurance on an item of equipment that the insurer determines to be in dangerous condition.

Answer 123

Suspension condition

Question 124

Condition that addresses claim situations in which the insured’s equipment breakdown insurer and the insured’s commercial property insurer disagree on which insurer covers a loss; each insurer pays half the loss to quickly indemnify the insured; insurers then resolve their differences.

Answer 124

Joint or Disputed Loss Agreement

Question 125

A condition in equipment breakdown policies that provides that the insurer will perform required inspections of boilers and other equipment on the insured’s behalf

Answer 125

Jurisdictional inspections condition

Question 126

In general, the tendency for people with the greatest probability of loss to be the ones most likely to purchase insurance.

Answer 126

Adverse Selection

Question 127

A provision commonly included in BOP that addresses fluctuating personal property values by automatically increasing the amount of insurance.

Answer 127

Seasonal increase provision

Question 128

Insurance offered by private insurers that covers crops against loss caused by hail and often other perils.

Answer 128

Crop hail insurance

Question 129

Insurance offered by the federal government that covers unexpected crop production losses due to natural causes such as drought, excessive moisture, hail, windstorm, and flood.

Answer 129

Multiple Peril Crop Insurance (MPCI)

Question 130

Insurance that covers loss of valuable animals by (1) death resulting from accident, injury, sickness, or disease or (2) theft, subject to exclusions.

Answer 130

Animal morality insurance

Question 131

A specialized type of livestock coverage that covers animals while in the custody of a commercial feedlot operator

Answer 131

Feedlot insurance

Question 132

A policy that covers the crime loss exposures of financial institutions such as banks, savings, and loan institutions, and insurance companies.

Answer 132

Financial institution bonds

Question 133

A policy that enables a financial institution to cover loss of or damage to its costumers’ property in the insured’s safe-depository facilities and damage to the insured’s premises.

Answer 133

Combination Safe Depository Policy

Question 134

Insurance that protects a lending institution or mortgage servicing agency against losses arising out of the insured’s failure to maintain insurance protecting mortgage property, as well as other exposures connected with servicing mortgages.

Answer 134

Mortgage impairment insurance

Question 135

Insurance that protects a mortgage holder from loss if the borrower fails to repay the mortgage loan.

Answer 135

Mortgage guarantee insurance

Question 136

Insurance that protects against loss resulting from defects in a title to real property.

Answer 136

Title insurance

Question 137

A written contract that expresses one party’s promise to answer for another party’s failure to do something as promised.

Answer 137

Surety bond

Question 138

The party to a surety bond whose obligation or performance the surety guarantees.

Answer 138

Principal

Question 139

The party to a surety bond that receives the surety’s guarantee that the principal will fulfill an obligation or perform as promised.

Answer 139

Obligee

Question 140

The party (usually an insurer) to a surety bond that guarantees to the obligee that the principal will fulfill an obligation or perform as required by the underlying contract, permit, or law.

Answer 140

Surety

Question 141

The obligation of one entity to answer for the debt, default, or miscarriage of performance of duties.

Answer 141

Suretyship

Question 142

A surety bond guaranteeing the fulfillment of obligations under construction contracts or other types of contracts.

Answer 142

Contract bond

Question 143

A contract bond guaranteeing that a contractor bidding on a construction or supply contract will enter into the contract and will provide a performance bond if the bid is accepted.

Answer 143

Bid bond

Question 144

A contract bond guaranteeing that a contractor’s work will be completed according to plans and specifications.

Answer 144

Performance bond

Question 145

A contract bond guaranteeing that the project will be free of liens.

Answer 145

Payment bond

Question 146

A contract guaranteeing the work will be free from defects in materials and workmanship for a specified period after the project is completed.

Answer 146

Maintenance bond

Question 147

A contract bond guaranteeing a local government authority that a subdivision developer will complete the subdivision in accordance with approved proposals at the developer’s expense.

Answer 147

Subdivision bond

Question 148

A contract bond guaranteeing that a supplier will perform the designated supply contract according to specifications.

Answer 148

Supply contract bond

Question 149

Surety bonds that provide payment to the obligee (the state, city, or other public entity) for loss or damage resulting from violations of the duties and obligations imposed on the licensee or permit holder.

Answer 149

License and permit bonds

Question 150

A commercial surety bond guaranteeing that a public official will perform his or her duties faithfully and honestly.

Answer 150

Public official bond

Question 151

A classification of surety bonds guaranteeing that a person or a organization will faithfully perform certain duties prescribed by law or by a court or will demonstrate financial responsibility for the benefit of another until the final outcome of a court’s decision.

Answer 151

Court bonds

Question 152

A judicial bond guaranteeing that, if the court decides against a plaintiff who has requested attachment of the defendants property. the defendant will be paid any damages that result form the property attached.

Answer 152

Attachment bond

Question 153

A bond that guarantees that the insured will pat any damages and court costs if the court should decide in the claimant’ favor.

Answer 153

Release of attachment bond

Question 154

A judicial bond guaranteeing that a plaintiff who appeals an adverse decision to a higher court will pay all costs of the appeal

Answer 154

Appeal bond

Question 155

A judicial bond guaranteeing that a defendant who appeals an adverse decision to higher court will pay the entire judgement, plus court costs and interests, should the higher court sustain the initial judgement for the plaintiff.

Answer 155

Defendant’s appeal bond (supersedeas bond)

Question 156

A court bond guaranteeing that a person appointed by a court to administer the property or interest of others will faithfully performs his or her duties.

Answer 156

Fiduciary bond

Question 157

Any bond that does not fit well under the other primary categories of surety bonds formulated by the surety and Fidelity Association of America

Answer 157

Miscellaneous bonds