Practice Questions Flashcards
Which of the following are “major causes” of fire? Indicate all that apply.
A. Arson
B. Misuse of Ignition Sources
C. Accident
D. Malfunction
A, B, D
Under your basic fire insurance policy’s extensions of coverage, the necessary removal of property is covered for how many days?
7 Days
Coverage is extended to 30 days in more “high-end” policies.
Your client, Bob, bought the most basic fire policy available on the market for his ice cream shop. They had been in their commercial unit for a long time when they bought a new fridge. They plugged it into the wall socket and a power surge destroyed the fridge and caused a fire that consumed his ice cream cones but didn’t damage anything else. Which of the following would be insured?
A. Fridge only
B. Ice cream cones only
C. Fridge and the ice cream cones
D. None of the above property
B.
Damage to electrical devices due to artificial electricity are excluded in the fire policy. However, resultant damage would still be covered.
A building with a lack of habitual human presence is known as…
A. A Vacant Building
B. An Unoccupied Building
Unoccupied building
Vacant means there are no normal occupants as they have left with no intention to return.
Under the named perils coverage form, there is explosion coverage. Which of the following is NOT excluded under THAT definition of explosion?
A. Explosions caused by gas turbines
B. Explosions caused by tanks subject to > 15 PSI of pressure
C. Explosion caused by gas escaping into open air
D. Explosion caused by a fire box.
C - Explosion caused by gas escaping into open air
Under broad form, injury to pets are excluded under all circumstances. True or false?
False - Damage to your pets are covered if the loss was caused by a named peril or by theft.
One of the advantages of broad form coverage is that it insures explosions caused by domestic boilers < 24 inches in diameter. True or false?
True
Rate credits are given if you are the sole occupant of your building. True or false?
True
Briefly explain some of the advantages and disadvantages of using a package policy.
Your answer is correct if it includes these points:
Advantages:
- Simple application form
- Price for package policies are often determined on the spot (fast quote turnaround times are important for your sales people).
- Adequate protection for most businesses
- Broad enough to cover most exposures (a package policy typically comes with property, business interruption, liability & crime insurance as a bundle).
Disadvantages:
- One size doesn’t fit all. Some business have special exposures that would require the use of a manuscript or custom solution.
- There is no standard package between insurance companies. One company’s barbershop package policy might be different from another’s which means you need to know multiple packages and can’t simply replace 1 package with another.
Which of the following does not need to appear on the declarations page of a commercial property policy?
A. Loss Payable or Loss Payees
B. Policy Period
C. Description of the Property Insured
D. A line indicating the existence of other insurance policies.
D - A line indicating the existence of other insurance policies.
Your client Bob has a building worth $250,000 that he has insured for $100,000. He has a loss valued at $200,000 and a mortgage of $75,000 on the policy. How much would Bob receive in indemnity?
A. $250,000
B. $100,000
C. $200,000
D. $25,000
D. $25,000
According to the indemnity agreement, he would get the lesser of the loss amount, limit of insurance and insurable interest. The loss amount is $200,000, the limit of insurance is $100,000 and his insurable interest is only $25,000 (<- because the bank owns $75,000 worth of the property). The bank get their $75,000 and Bob gets the rest.
The insured has purchased an equipment breakdown policy with an added business interruption - gross profits form. The business interruption is costing him $10,000 per month. It look 6 months to rebuild everything and an additional 3 months to get back to the same level of earnings as before. How much would this insured get in indemnity from the insurer?
A. $10,000
B. $60,000
C. $90,000
D. $30,000
C. $90,000
The gross profits form pays business interruption costs until the insured’s income is restored to pre-loss levels
When it comes to the by-laws endorsement, which of the following statements is not true.
A. This endorsement removes the exclusion for additional costs required to comply with new bylaws when rebuilding the building after an insured peril
B. Additional costs due to by-laws and zoning changes are covered
C. The by-law endorsement is recommended for insureds who own older buildings
D. All of the above are true.
B. Additional costs due to by-laws and zoning changes are covered
Zoning changes are excluded
Your client has purchased a Broad Form commercial property policy, which of the following losses would be covered?
A. The insured runs an insurance office with a small 20 inch household boiler inside the unit to supply his and the neighbouring office with some hot water. This boiler one day ruptures due to overpressure and floods the insured’s office
B. The insured, Bob, lends some tools to his customer, Paul, to use while Bob is repairing the tools Paul brought in. While at Paul’s house, the tools are stolen out of his garage.
C. The insured has plants growing outside his building that are damaged when he accidentally crashes his car into the building
D.
A water main from underneath the sidewalk bursts and causes the insured’s basement to flood with water
A. The insured runs an insurance office with a small 20 inch household boiler inside the unit to supply his and the neighbouring office with some hot water. This boiler one day ruptures due to overpressure and floods the insured’s office
Domestic-type boilers under 24 inches in diameter are covered by Broad Form but NOT Named Perils. For C, outside plants are excluded (aside for the coverage provided by the extensions - limited to $500 per plant & $5000 per occurrence). And for D, water mains beyond the bearing walls are excluded.
Your client, Veronica is Monica’s twin sister and has also purchased commercial property insurance with you on her building for $300,000. The building is valued at $500,000 with an 80% coinsurance clause. One night, her building catches fire. Unfortunately, the fire department was not able to get there in time and her factory burns to the ground - its a total loss. How much in indemnity would she receive from the insurance company for her loss?
Co-Insurance Penalty = Insurance You Did Buy / Insurance You Should have Bought * Loss amount
= ($300,000 / $500,000) * $500,000 = $300,000
The coinsurance clause doesn’t apply because it’s a total loss. She gets her limit $300,000 and that’s all. If coinsurance applied, she would get more than her limit of insurance (try the math out yourself).
Your client has purchased a Broad Form commercial property policy, which of the following losses would be covered?
A. The insured’s computers and business records are damaged in a flood after an uncharacteristically large rainstorm
B. An employee of the insured discovers some old water damage while cleaning out the basement. It appears water has been seeping through the cracks in the basement wall for quite some time now.
C. The insured is shipping his goods to Seattle, while travelling through BC, his shipment is damaged when an earthquake hits the city
D. An employee of the insured just finished up in the bathroom. As he flushes the toilet, it clogs and backs up into the washroom damaging the flooring.
C.
Flood losses are excluded. Continuous seepage of water is excluded. Earthquake damage is normally excluded unless his property was in transit at the time (which it was in this case). Sewer back-up is excluded.
There are some common exclusions that apply to property policies. Which of the following would be covered by an insurance company?
A. Losses caused by the application of heat
B. Losses to vacant or unoccupied property
C. The insured plugs in a new computer but it gets fried due to a power surge
D. The insured is a boat dealer and has some boats stored in his showroom
D.
Watercraft or amphibious vehicles held for sale is covered (think of it as stock).
The coverage section of the EDP policy that insures data processing systems is called…
A. Hardware
B. Media
C. Software
D. Extra Expenses
A. Hardware
You client rents a storefront to open an icecream store, he installs plumbing, a walk-in refrigerator and some other permanent fixtures. If they were damaged by an insured peril, which of the following categories of commercial property insurance would provide coverage?
A. Building
B. Stock
C. Equipment
D. Not Covered - the landlord would be responsible for insuring it.
C. Equipment
You might have thought that permanent fixtures are part of the building coverage. And you would be right. But in this case, the fixtures and upgrades were made by a tenant - the landlord who owns the building has no insurable interest in the property. It would be covered under Tenant Improvements (a part of Equipment). Secondly, a tenant’s commercial property insurance would not have a section for Building since they don’t own the building. Any damage to the building caused by the insured tenant could be covered under their commercial liability insurance though.
Equipment breakdown policies insure against 3 main costs. Which of the following is not one of them?
A. Loss to equipment caused by sudden & accidental breakdown
B. Loss of income resulting from damage to a piece of equipment
C. Resultant damage
D. Other people’s equipment if the insured is liable for it
B - Loss of income resulting from damage to a piece of equipment
Which of the following statements about the Verification of Values clause is not true?
A. The insurer can inspect the insured’s property at any reasonable time during the policy period and for up to 2 years after
B. Inspections help the insurer verify information, confirm that the property exists and that the values are accurate
C. One reason for this clause is to check compliance with coinsurance
D. One reason for this clause is to let the insurer check for concurrent insurance
A. The insurer can inspect the insured’s property at any reasonable time during the policy period and for up to 2 years after
NOT TRUE - They only have inspection rights for up to 1 year after the policy
Your client has purchased a Named Perils commercial property policy, which of the following losses would not be covered?
A. The insured has an explosion in his factory caused by electrical arcing
B. Water pressure builds up inside a sprinkler pipe causing it to burst and damage the insureds computers
C. It’s been a stressful few weeks and the insured’s employee tries to park his car at the office one morning but accidentally backs it into the the building damaging the glass window in front of the insured’s store
D. A heavy windstorm shatters the insured’s office window and damages the interior contents
C. It’s been a stressful few weeks and the insured’s employee tries to park his car at the office one morning but accidentally backs it into the the building damaging the glass window in front of the insured’s store
Vehicle impact is covered, but not when it’s done by an insured (i.e. his employee). The windstorm damage to the interior is covered because the windstorm opened a hole in the exterior first.
When it comes to subrogation, which of the following is not true?
A. The insurer has the right to recover from the at-fault party
B. The insurer cannot subrogate against the insured unless they violated a policy condition
C. Barring some exceptions, those who receive compensation from the insurance policy cannot be sued
D. The insurer cannot subrogate against anyone whom the insured has held harmless
D. The insurer cannot subrogate against anyone whom the insured has held harmless
The insured cannot waive the liability of another person. The insurer will still sue. For example, if your friend comes over and accidentally damages something. You cannot forgive your friend and claim it against your insurance company. Well, you can, but the insurer will sue your friend on your behalf to recoup their losses.
Under equipment, there is coverage for employee property. What is the limit on employee property insurance?
$250
Your client has purchased a Broad Form commercial property policy, which of the following losses would be covered?
A. Stock and money from the cash register has been stolen by an employee
B. The insured runs a costume rental business catering to the movie industry. She hands her clothes over to a drycleaner to clean after a shoot. She never gets her clothes back. It is later discovered after a police investigation that the drycleaner had stolen the clothes.
C. Some rats find their way into the insureds restaurant and eat all of his very expensive cheese. They also find their way into the wine cellar breaking and drinking quite a few bottles before leaving.
D. The insured purchases and moves into a newly constructed building. Because of the loose soil it was built on, it settles a bit causing the concrete on one side of the building to crack - necessitating $50,000 in repairs
B. Losses involving criminal acts by “insiders” is excluded - but bailees for hire are not considered insiders in this case.
Which of the following is not an example of something that the insurance company would consider when looking at the insureds exposure or location?
A. Distance from and occupancy & construction of nearby buildings
B. Characteristic of the neighbourhood
C. Both A & B
D. Business operations of the insured
D. - Business Operations of the insured.
When it comes to the Peak Season Endorsement, which of the following statements is not true?
A. You would recommend business with seasonal stock fluctuations use this
B. The client would track their monthly stock values on their own
C. This endorsement helps insureds save money by making sure they’re not paying a high premium for slow months
D. All of the above are true
D. all of the above
When would a broker recommend a glass rider to a commercial insurance client?
A. When the insured has large amounts of exterior glass
B. When the insured has extensive glass panelling in the interior of the building
C. When the insured has glass objects like tables or wall dividers
D. When the insured has lettering, stained glass or other special designs on the glass
D. When the insured has lettering, stained glass or other special designs on the glass
The sewer back-up endorsement removes some exclusions for the ordinary commercial property policies. Which of the following is not an exclusion that is removed by this endorsement?
A. Loss caused by water or sewage entering the building through a sewer
B. Loss caused by water or sewage entering the building through a sump pump
C. Loss to the locker room carpeting caused by water or sewage entering the building through a shower drain at the local gym
D. Loss caused by water or sewage entering the building by continuously seeping through walls in underground parts of the building
D.
The Water Damage endorsement is for “sudden” occurrences, seepage would not be considered sudden as it occurs slowly over time.
Some commercial property has a special basis of valuations. Which of the following types of property is covered for actual cash value and the cost of labour and materials used?
A. Sold stock
B. Property given to the insured for work, repairs, etc.
C. Business records
D. Tenant improvements
B - Property given to the insured for work/repairs etc.
Of the following types of construction, which of the following would be the least susceptible to fire losses?
A. Fire Resistive
B. Non-Combustible
C. Non-Combustible with Non-Masonry Walls
D. Masonry/Joist
A. - Fire Resistive
The Earthquake Endorsement is used to delete the earthquake exclusion from the primary policy. When it comes to this endorsement, which of the following is not true?
A. Coverage is on a per occurrence basis
B. Aftershocks are considered individual earthquakes and insured seperately
C. The deductible is usually the larger of some percentage of the limit or a fixed dollar figure
D. The earthquake endorsement excludes fire, explosion, theft & flood losses because they are insured elsewhere
B. Any aftershocks within 72 hours counts as 1 occurrence
The water escape endorsement covers direct damages due to freezing or escape of water from pipes but there are some exclusions. Which of the following would not be excluded?
A. Freezing in an unheated part of the building during the heating season
B. Back-up of water from a toilet or drain
C. Water come out of a trough or downspout
D. Water bursting from pipes supplying sprinkler systems
D - Water bursting from pipes supplying sprinkler systems
Commercial property insurance insures many types of property. Which of the following is not one of them?
A. Building
B. Stock
C. Equipment
D. Inventory
Inventory
If you picked inventory, that is correct - though similar to stock, it is not insured by commercial property insurance.
Some commercial property has a special basis of valuations. Which of the following types of property is covered for the blanks and the cost to recopy from an alternate source?
A. Other property
B. Stock
C. Drawings and manuscripts
D. Books sold at a book store
C. Drawings & Manuscripts
Business records like documents, accounting records, etc. are insured for blanks + cost to recopy
The insured has purchased an equipment breakdown policy with an added business interruption - gross earnings form. The business interruption is costing him $10,000 per month. It look 6 months to rebuild everything and an additional 3 months to get back to the same level of earnings as before. How much would this insured get in indemnity from the insurer?
A. $10,000
B. $60,000
C. $90,000
D. $30,000
B - $60,000
The gross earnings form only pays business interruption costs until the property has been restored. Profits form is the one that pays until his income reaches the same level as before.
When the insured opts for a Glass Rider, the broker must identify…
A. The type, number & size of the glass
B. The location of the glass
C. Description of the glass
D. All of the above
D. All of the above
A. The type, number & size of the glass
B. The location of the glass
C. Description of the glass
Your client is a dry cleaner and has purchased commercial property insurance. Because he carelessly forgot to turn off the steamer, the store is burnt to the ground. His customer’s clothes would be covered under which category?
A. Building
B. Stock
C. Equipment
D. Not Covered
B - the customer’s clothes are covered as they are in the care, custody, and control of the Insured.
The Inflation extension of coverage automatically bumps the building values up by the amount of inflation upon renewal. And losses that occur halfway through the policy are given last year’s inflation number.
False - The limits for mid-term losses get next year’s estimated inflation number
Which of the following is not a coverage provided by the Electronic Data Processing (EDP) Policy?
A. Losses due to mechanical breakdown
B. Losses due to electrical/magnetic damage
C. Losses due to change in temperature/humidity
D. Extra expenses losses due to programming error
D - Extra expenses losses due to programming error
Your client runs a hardware store online shipping hammers and other such items. With every order he ships, he puts flyers and coupons in advertising the next sale. If his flyers were damaged by an insured peril, they would be covered under…
A. Building
B. Stock
C. Equipment
D. Not Covered
B - Stock
If during an equipment inspection, the insurer identifies a dangerous condition with some equipment, they can suspend coverage until that equipment is repaired and certified as per regulations. True or False?
True
When the insured needs to leave a building vacant, they need to purchase a vacancy endorsement to ensure they have coverage. Which type of Vacancy Permit allows the insured to leave the building vacant for a certain period of time depending on the age of the building and the neighbourhood?
A. Vacancy Permit #1
B. Vacancy Permit #2
C. Vacancy Permit #3
D. Vacancy Permit #4
A - Vacancy Permit #1
Your client has purchased a Broad Form commercial property policy, which of the following losses would be covered?
A. Samples and a laptop given to a sales representative is stolen from his car while out on the road seeing clients
B. An antenna mounted to the outside of the insured’s building damaged by windstorm
C. A steam pipe carrying 20 PSI of pressure in the insured’s factory bursts causing $5000 in damage
D. The insured exports seafood. A shipment of BC clams on its way to France is lost when the container ship transporting it sinks
B. An antenna mounted to the outside of the insured’s building damaged by windstorm
Property in the custody of a sales rep is excluded without a special endorsement. Outside antennae, signs, clocks are excluded unless damaged by a Named Peril (but Windstorm is a Named Peril). Pipes/pressure devices carrying > 15 PSI of pressure are excluded. And D is an Ocean Marine loss which is excluded by Commercial Property policies.
Thinking about the premium adjustment clause, which of the following statements is not true?
A. The clause works by adjusting the limits of insurance to refund excess premiums caused by overinsurance
B. The insured would submit an application erring on the high side of fluctuating inventory and get money back if their average stock amounts didn’t hit that high limit
C. The maximum refund the insured can get is 75%
D. The insured can claim their premium refund by submitting an application verified by an accountant within 6 months of policy expiry
C. The maximum refund the insured can get is 75%
NOT TRUE - the maximum is 50%
Which method of valuing property requires the insured to first get an appraisal?
A. Actual Cash Value
B. Fair Market Value
C. Replacement Cost
D. Book Value
C - Replacement Cost
There are some common exclusions that apply to property policies. Which of the following would be covered by an insurance company?
A. The insured runs a hospital. A CT scanner breaks and causes a medium sized explosion inside the hospital.
B. Losses to money, bullion, securities, stamps, tickets or evidence of debt
C. Losses caused by radioactive contamination (i.e. in a hospital setting)
D. Extra costs required to rebuild the building due to the application of new by-laws
A. The insured runs a hospital. A CT scanner breaks and causes a medium sized explosion inside the hospital.
Nuclear incidents (radioactivity or radiation-related losses) are excluded, but resultant fire and explosion are covered.
Your client has purchased a Broad Form commercial property policy, which of the following losses would be covered?
A. A sensor in your employee’s factory malfunctions causing a safety shutoff to fail and a machine to overheat and damage itself
B. The insured brings a very powerful magnet from his research laboratory over to his desk to work on it and accidentally wipes the data from the laptop he had stored underneath the desk
C. Barrels storing some chemicals at the insured’s factory get old and beings to allow some of the chemicals inside to leak out causing $5000 worth of damage to his stock
D. Water leaks from a sprinkler system causing mold to grow underneath the drywall
D. Water leaks from a sprinkler system causing mold to grow underneath the drywall
Fungi & spores are excluded unless they’re caused by an insured peril (in this case, leakage from fire protective equipment)
Even though the Equipment Breakdown policy provides coverage for these things, some items or losses may have sub-limits applied to them. Which of the following would not have a sub-limit applied to the loss amounts by the insurance company?
A. Loss of rent money and additional costs incurred to rent an alternate premises while the original is being rebuilt
B. Increased restoration costs due to the release of a toxic chemical caused by a breakdown in some chemical processing equipment
C. Fees paid to lawyers, accountants or engineers required to help the insured establish loss values
D. Costs incurred to notify victims and manage the situation in the event of a data breach
A. Loss of rent money and additional costs incurred to rent an alternate premises while the original is being rebuilt
Rental value coverage will require an add-on but once it is on, there is no sublimit
Any additional monies charged by the insurer to insure against additional perils is called…
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There is an option with accounts receivables endorsements called the reporting form option. Which of the following statements is not true?
A. This option is typically used by large corporations with fluctuations in its accounts receivables
B. The insured would choose a limit of insurance equal to his maximum exposure and report any amounts outstanding on a monthly basis. This is used to set his premium.
C. For the months that the insured has accounts receivables lower than the limit purchased, he gets to pay a smaller premium
D. All of the above are true
D - All of the above are true.
A. This option is typically used by large corporations with fluctuations in its accounts receivables
B. The insured would choose a limit of insurance equal to his maximum exposure and report any amounts outstanding on a monthly basis. This is used to set his premium.
C. For the months that the insured has accounts receivables lower than the limit purchased, he gets to pay a smaller premium
Buildings where the walls and structural members are made from non-combustible materials is called…
Non-combustible
Your commercial property policy, much like other property policies, come with extensions of coverage. Which of the following statements regarding extensions of coverage is not true?
A. The limit of insurance available to property moved to a temporary location for its own protection is the same as the limit for the primary location.
B. Coverage for building damage by theft or vandalism cannot be added onto a tenant’s Broad Form policy
C. Coverage for building damage by theft or vandalism usually has a $2500 limit
D. Growing outdoor plants are covered is damaged by named perils (excluding windstorm and theft) for up to $500 per plant and $5000 per occurrence
A - The limit of insurance available to property moved to a temporary location for its own protection is the same as the limit for the primary location.
The limit available at the temporary location is “shared” between the new and the old. Meaning the limit available at the new location is the remainder of what’s left after the main loss has been paid for.
If the insured has purchased the Replacement Cost Insurance, there is no requirement for them to repair or replace the property with due diligence and dispatch. True or False?
False
Some commercial property has a special basis of valuations. Which of the following types of property is covered for Actual Cash Value up to Replacement Cost?
A. Unsold Stock
B. Stock
C. Property Given to the Insured to Repair
D. Tenant Improvements
A - Unsold Stock
The biggest difference between Replacement Cost and Actual Cash Value is that…
A. Replacement cost coverage requires an appraisal
B. The insured must qualify for replacement cost coverage
C. Actual cash value factors in depreciation whereas replacement cost does not
D. Replacement cost coverage is more commonly used in commercial property insurance than actual cash value
C - Actual Cash Value factors in depreciation
There are other ways to calculate ACV but mainly it’s replacement cost minus depreciation
Which of the following does not need to appear on the declarations page of a commercial property policy?
A. Parties to the contract
B. Rates & premiums charged
C. The insured’s risk rating
D. Summary of coverage and limits
C - the Insured’s risk rating
Your client, Bobby has also purchased commercial property insurance with you on his building for $300,000. The building is valued at $500,000 with an 90% coinsurance clause. 6 months later, his building is damaged by an insured peril causing $100,000 worth of damage. How much in indemnity would he receive from the insurance company for his loss?
The coinsurance calculation applies. $300,000/$500,000 * $100,000 = $60,000
The coverage section of the EDP policy that insures costs required to continue the business when the premises is inaccessible or equipment is inoperable is called…
A. Hardware
B. Media
C. Software
D. Extra Expenses
D. Extra Expenses
This piece of paperwork adds additional coverage to your policy
Rider
*Endorsements only change the terms of your policy
The sign form (under extensions of coverage) insures damage caused by artificial electricity. True or False?
False
When scheduling a specific piece of glass in the glass rider, what sort of information does the broker need to identify? Indicate all that apply.
A. Type, number and size of glass
B. Location
C. Description
A, B, & C (all)
The accounts receivable form insures records of debts owed that are damaged by magnetic or electric forces. True or false?
False
*Electronic and magnetic injury is excluded
Valuable papers coverage extends to cover valuable papers while off premises. True or false?
True
Under equipment breakdown insurance, hazardous substances are excluded from coverage. True or false?
False
*They will cover clean up costs
Who might have insurance interest in an instalment sales contract floater? The buyer or the seller?
Both the buyer and the seller
*As long as the buyer has not fully paid off the property, the seller still has some financial interest in the object.
Briefly explain the 2 coverage options available for the Installment Sales Contract Floater.
Installment sales basically work like a finance plan. The seller gives the buyer the goods up front and the buyer pays it off according to a payment plan. As the buyer makes more and more payments, he owns more and more of the property (like a mortgage).
Coverage can be single interest or dual interest. Single interest only covers the part of the property owned by the insured (the seller) whereas dual interest insures both the part of the property owned by the insured (the seller) and the buyer.
Providing dual interest coverage might be a good customer service thing that drives sales.
Of the 4 general things that can affect commercial property rates, which of the following would you take into account distance from a fire hall or hydrant?
A. Construction
B. Occupancy
C. Protection
D. Exposures/Location
C - Protection
Unlike homeowners insurance policies, fire department charges are not covered under commercial property insurance. True or False?
False
There are many ways someone can use to value property, valuing property based on its invoice cost minus depreciation is called…
A. Actual Cash Value
B. Fair Market Value
C. Replacement Cost
D. Book Value
D. Book Value
Premiums for commercial property insurance are largely based on certain characteristics of the building being insured. Which of the following best describes the criteria the insurer looks for?
A. Construction, Loss History, Claims Statistics
B. Construction, Protection, Location, Occupancy
C. Loss Experience Data & Loss History of the Applicant
D. Location & Class of Construction
B. Construction, Protection, Location, Occupancy
When the insured opts for a Glass Rider, which of the following losses would not be excluded?
A. Fire
B. Deliberate acts of violence
C. Damage to the glass during routine maintenance
D. Glass at vacant or unoccupied premises
C - Damage during routine maintenance
Under the definition of equipment, which of the following is not an item that is covered?
A. An dentist leases a printer for his office
B. An insurance office, wanting to ensure their policy documents are as presentable as possible, purchases a large-format commercial printer typically used in magazine printing
C. Cups and other cutlery brought from home by employees for their own personal use at the office
D. A commercial kitchen installed by a restaurant who just started their lease on a ground floor retail space
B - The magazine printer is not contents “usual” to the business. Most insurance brokerages will not have a printer like that.
Equipment breakdown policies provide good coverage, but there are some exclusions. Which of the following losses would not be excluded without the use of additional coverages?
A. A boiler on the insured’s property bursts and causes the unit to flood
B. Food in the walk-in freezer went bad after the refrigeration unit broke down
C. A computer virus causes some machinery in the insured’s factory to overheat and damage themselves irreperably
D. Turbines inside a combustion chamber, that haven’t been maintained according to the manufacturer’s recommendations, crack while in use
A. A boiler on the insured’s property bursts and causes the unit to flood
The water escape endorsement covers direct damages due to freezing or escape of water from pipes but there are some exclusions. Which of the following would not be excluded?
A. Freezing in an unheated part of the building during the heating season
B. Back-up of water from a toilet or drain
C. Water come out of a trough or downspout
D. Water bursting from pipes supplying sprinkler systems
D. Water bursting from pipes supplying sprinkler systems
Which of the following statements about package policies is not true?
A. The insured cannot add coverage to package policies. If the insured wants something different, he can opt to create a manucript policy with their broker
B. Package policies bundle commercial policies together for simplicity sake
C. Most packages include: property, business interruption, liability and crime insurance policies
D. Package policies can have rate credits or surcharges applied to them
A. The insured cannot add coverage to package policies. If the insured wants something different, he can opt to create a manucript policy with their broker
Your client runs a watch boutique but also sells some watches on behalf of clients on a consignment basis. Since he wants to expand his business, he begins to sell handbags. Unfortunately, he forgets to set the alarm one night at the store and he comes back the next day to find the handbags stolen. Which of the following statements most accurately describe your client’s coverage?
A. The handbags would be covered since it is customer property that he is responsible for
B. The handbags would be covered since he is in the business of selling luxury products
C. The handbags would be covered if he had notified the insurance company beforehand that he intends to expand his business to selling handbags
D. The handbags would be covered because they are similar to the property already insured by his policy, he is liable for it and he is obligated to insure it
C. The handbags would be covered if he had notified the insurance company beforehand that he intends to expand his business to selling handbags
If you picked D, you are close. But handbags are not “similar” to watches so the insured would need to notify the insurance company of his new business operations. Generally speaking, anytime an insured changes his business operations, even if it seems trivial, you should notify the insurer.
Your client has purchased a Broad Form commercial property policy, which of the following losses would be covered?
A. The insured comes into the office one morning to find that the toilets have overflowed and flooded the office
B. A power surge one day during work hours causes the computers to be damaged
C. The insured runs a watch boutique and some of them were damaged in a fire overnight
D. The insured runs a watch boutique and sells watches on a layaway basis from time to time. A customer’s watch was lost in a water damage incident that occurred in his home before he’s fully paid it off
C - The insured runs a watch boutique and some of them were damaged in a fire overnight
When it comes to the Replacement Cost Endorsement, which of the following statements is not true?
A. The insured must replace the property on the same site, or if that is not possible, an adjacent site
B. It requires the insurer to repair or replace the damaged property with due diligence and dispatch
C. The advantage of this over Actual Cash Value is that Replacement Cost has no penalty for depreciation
D. The insurer would pay the insured a lump sum of cash to use towards repairing/replacing the property
D. The insurer would pay the insured a lump sum of cash to use towards repairing/replacing the property
The insured would pay actual amounts spent after the replacement is made. Usually that means the insurer will pay ACV and the rest as needed afterwards
Which of the following situations would not result in denial of coverage?
A. An insured installs a fire protection system - a few months later, he notices some issues with the water supply but decides to ignore it. Soon after, his building burns down.
B. An insured installs a burglar alarm with monitoring service. A few months later, his restaurant business is not doing too well so he decides to cut costs and cancels his monitoring service. Soon after that, a cook forgets to turn off the stove overnight and the whole building burns down.
C. The insured has a locked vehicle warranty on his policy but forgets to lock his doors. As a result, the property was stolen from his vehicle.
D. The insured has a locked vehicle warranty on his policy but his property was stolen from his vehicle after keys were lifted from his pocket.
B. An insured installs a burglar alarm with monitoring service. A few months later, his restaurant business is not doing too well so he decides to cut costs and cancels his monitoring service. Soon after that, a cook forgets to turn off the stove overnight and the whole building burns down.
**A breach of conditions is OK if it was unrelated to the loss
When it comes to the Consequential Loss Assumption Endorsement, which of the following statements is not true?
A. It provides coverage against the spoilage of stock whenever refrigeration systems are damaged
B. This covers damage to stock due to breakdown of temperature control device
C. This covers damage to stock due to breakdown of humidity control device
D. All of the above are true
A. It provides coverage against the spoilage of stock whenever refrigeration systems are damaged
It only covers consequential loss if an insured peril damages cooling apparatus, supply pipes or connections to the cooling apparatus or devices that provide on-premises power
Your client has purchased commercial property insurance for his building. Coming into the office one day, he noticed that the outdoor lights in his office have been smashed - likely by some vandals. This would be covered under which category?
A. Building
B. Stock
C. Equipment
D. None of the Above
A - Building
**Permanently attached fixtures are part of the building
A minimum premium is sometimes used by the insurance company to…
A. Make sure they recoup the costs of underwriting and doing paperwork if the insured cancels the policy
B. To prevent brokerages from breaking up a risk amongst different insurers unnecessarily
C. To ensure the insurer earns a profit
D. To ensure that there is enough in commissions for the brokerage
A & B.
Make sure they recoup the costs of underwriting and doing paperwork if the insured cancels the policy
To prevent brokerages from breaking up a risk amongst different insurers unnecessarily
A sign form can be used to expand coverage for a business’ signage. Which of the following would not be excluded under the Sign Form?
A. A client’s sign in damaged by stones thrown by rioters
B. Other property damaged by fire when a power surge short circuits a sign and causes it to burst into flames
C. Lettering that melted off a sign after an uncharacteristically hot summer day
D. The plastic covering is damaged while being cleaned by a 3rd party cleaning company
B. Other property damaged by fire when a power surge short circuits a sign and causes it to burst into flames
**Damage by non-lightning electrical currents is not covered but resultant fire/explosion is
Your client, Monica, has purchased commercial property insurance with you for her factory. She insures the building and contents for $100,000 and $50,000 respectively. Her building deductible is $10,000 and contents deductible is $5000. One night, her factory catches fire. Unfortunately, the fire department was not able to get there in time and her factory burns to the ground - it’s a total loss. How much in indemnity would she receive from the insurance company for her loss?
A. $150,000
B. $135,000
C. $140,000
D. $145,000
C. $140,000
**if there are multiple deductibles involved, the highest one applies.
Your client has purchased commercial property insurance for his building. He comes into the office one day to see that the cleaning supplies in the janitors closet were stolen. This type of property would be covered by which category?
A. Building
B. Stock
C. Equipment
D. None of the Above
A. Building
Even though policies have many restrictions, there are some things that the insurer automatically allows. Which of the following is not automatically allowed be the insurer?
A. The insured is allowed to carry concurrent insurance
B. The insured is allowed to make any alterations, additions or repairs to the building they see fit
C. The insured is allowed to do work and store articles usual to the business and in normal quantities
D. The insured is allowed to make changes to the policy
D. The insured is allowed to make changes to the policy
The insured can request changes, but they cannot make changes. Any changes have to be approved by the insurer and signed off on their end before it becomes binding
Your client has purchased a Named Perils commercial property policy, which of the following losses would not be covered?
A. The insureds storefront and some of her stock is damaged when a motorist crashes his car into her store.
B. The insured has some portable propane tanks stored in a cage behind his restaurant which explodes
C. The insured’s restaurant has a furnace bolted into the ground. It suddenly starts billowing smoke and damages the wallpaper.
D. The hot water tank in the insured’s restaurant explodes due to overpressure
D. The hot water tank in the insured’s restaurant explodes due to overpressure
The insured purchased ACV coverage on a set of 5 matching chairs he’s selling in his furniture store. Factoring in depreciation and considering it’s fair market value, they are worth $1000. One chair was destroyed in a fire. How much is the set considered to be worth now that the set is no longer complete?
A. $0
B. $1,000
C. $800
D. $200
C - $800
The value of the damaged chair is $200, the remaining chairs are still considered to be worth $800. This is due to the application of the pair and set or parts rule.
You client Robert took out a 10 year lease to start his hair salon business. Business was going well so 2 years into the lease, Robert decided to spend $100,000 renovating the space to try to attract higher-end clientelle. Unfortunately, 3 years after, his salon was damaged by fire which caused $50,000 in damage to his renovations. Robert has been working so hard, he decided that this would be a good time to take a 2 week vacation before repairing the store and working again. How much would Robert receive in indemnity from the insurer?
A. $50,000
B. $40,000
C. $80,000
D. $25,000
D - $25,000
Since Robert did not repair/replace the property with due diligence and dispatch (he went on vacation), he get penalized. He would only get the loss amount x the % of lease remaining (the accident happened 5 years in so he has 50% remaining on a 10 year lease).
Which of the following statements are not true if an insured has property protection systems installed?
A. The insured is eligible for a discount
B. The insured must notify the insurer if he finds out that police services have been suspended
C. The insured will be held responsible for losses if the insurer discovers a problem with the alarm wiring after a loss has occurred
D. The insured must notify the insurer if monitoring or maintenance contracts have been cancelled
C. The insured will be held responsible for losses if the insurer discovers a problem with the alarm wiring after a loss has occurred
**The insured is only required to notify the insurer of any flaws or interruptions he knew about. If he didn’t know, or if he couldn’t reasonably know, he is excused.
Your commercial property policy, much like other property policies, comes with extensions of coverage. Which of the following statements regarding extensions of coverage is not true?
A. The limit of insurance available to property moved to a temporary location for its own protection is the same as the limit for the primary location.
B. Coverage for building damage by theft or vandalism cannot be added onto a tenant’s Broad Form policy
C. Coverage for building damage by theft or vandalism usually has a $2500 limit
D. Growing outdoor plants are covered is damaged by named perils (excluding windstorm and theft) for up to $500 per plant and $5000 per occurrence
A. The limit of insurance available to property moved to a temporary location for its own protection is the same as the limit for the primary location.
Equipment breakdown policies insure all types of equipment. Including equipment that is in storage. True or False?
False It only insures objects that are in use or connected & ready for use
Even though the Equipment Breakdown policy provides coverage for these things, some items or losses may have sub-limits applied to them. Which of the following would not have a sub-limit applied to the loss amounts by the insurance company?
A. Loss of rent money and additional costs incurred to rent an alternate premises while the original is being rebuilt
B. Increased restoration costs due to the release of a toxic chemical caused by a breakdown in some chemical processing equipment
C. Fees paid to lawyers, accountants or engineers required to help the insured establish loss values
D. Costs incurred to notify victims and manage the situation in the event of a data breach
A. Loss of rent money and additional costs incurred to rent an alternate premises while the original is being rebuilt
When it comes to valuable papers & records insurance, which of the following statements is not true?
A. Valuable papers and records does not include electronic records
B. This coverage insures the cost required to reproduce these documents
C. Coverage is available off-premises, but it’s limited
D. Coverage is available on premises and also while in transit
A. Valuable papers and records does not include electronic records
If during an equipment inspection, the insurer identifies a dangerous condition with some equipment, they can suspend coverage until that equipment is repaired and certified as per regulations. True or False?
True
