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CPCU 551 Chpt 1

Intro to Commercial Property Insurance

QuestionAnswer
An insured who owns a large business is comparing the different types of commercial insurance policies. The insured would likely choose a Commercial Package Policy because it will provide The option to add lines of insurance for all coverages that are needed.
Which one of the following statements is true regarding the other insurance condition of the Commercial Property Policy (CPP) conditions? If all the terms, provisions, and conditions are the same on both policies, each insurer pays its share on a pro rata basis.
Various building design features can help prevent the spread of a hostile fire. For example, a solid piece of material that is inserted between wall studs to delay the flow of heat or fire through this open space is a Fire stop.
The inspections and surveys condition clarifies that the insurer does not make Safety inspections.
A technology firm recently built a new production facility with unique property loss exposures. Of the following possibilities, which one is most likely to address the firm's needs? A nonstandard form using provisions more favorable to the insured than standard forms
The risk mgr of a midsize mftg co would like several coverage enhancements and a seamless approach to ins for their Building and Business PP, Inland Marine and Crime ins. What type of policy format would best suit the risk manager's needs? Output policy
The policy valuation approach that determines the basis for using new property of like kind and quality and adjusts for depreciation to determine the amount to be paid at the time of a loss is called Actual cash value.
Risk control measures may take both a human behavior approach and An engineering approach
A Commercial Package Policy, whether monoline or multiline, includes which one of the following forms? Common Policy Conditions form
In evaluating the human behavior approach to risk control, a risk manager would generally conclude that By modifying people's behavior the frequency of unsafe acts will be reduced.
When used to address property loss exposures, risk control measures are designed to Address the links in the chain of events and the unrelated events that converge to cause a loss.
The cancellation provisions in the ISO Common Policy Conditions form are nearly always Superseded by state law.
Which one of the following risk control techniques involves providing a range of products and services used by a variety of customers? Diversification
An insured is reviewing the Commercial Package Policy (CPP) to determine which conditions apply to all coverage parts in the policy. One of those conditions states that The insurer has the right to do an on-site inspection of the insured's books and records.
Insd owns bldg formerly rented to a retail store. Store out of bus 4 mos ago, bldg vacant since. Bldg value $1.8mm The bldg insd on CPP for $1.6mm on a RC basis - 90 % coins. Oct a fire caused $500k damage. Ignoring ded, as a result of fire, the insd will Receive only a portion of the loss payment because the insured did not meet the coinsurance condition.
The inspections and surveys condition, a common policy condition attached to the ISO Commercial Package Policy, makes it clear that the insurer has the right to inspect the insured premises and May recommend changes.
Warehouse of insured is vacant, insd guessed 1 mos, but was vacant for several mos. Insd forgot to notify insr, after 3 mos of vacancy, the bldg sustained $20k loss due to fire. L8r, vandals caused $5k damage Ignoring any ded, how much would insd recover? $17,000 ($20,000 less 15%) for the fire loss; $0 (nil) for the vandalism loss
An insured owns a mortgaged building that is damaged by accidental fire and insured under a commercial property policy. According to the Insured's Duties in the Event of Loss, the insured must Sign a sworn proof of loss if requested by the insurer.
The affect of the control of property condition in a commercial property policy is best summarized as If the insured does not have control of the property, any act of neglect by others will not affect coverage.
One Common Policy Condition in the Commercial Package Policy (CPP) is the examination of books and records. The intent of this policy condition is to Reserve the right of an insurer to inspect and audit the insured's books and records.
A policy that covers two or more lines of business by combining ISO's Commercial Lines coverage parts is A commercial package policy.
When evaluating risk management techniques, loss reduction involves Reducing the overall severity of the losses that occur.
Risk mgr for group of convenience stores has begun 6 step risk mgmt process. He analyzed risk control techniques, their feasibility, identified a key loss expos as risk of armed robbery between 1AM & 3AM. Per risk mgmt process, which step is next? Select the appropriate risk management technique
Under an unendorsed BPP Coverage Form if the insd bldg in which the loss occurs has been vacant for 60 consecutive days before the loss, the insr will still be obligated to pay for which one of the following causes of loss? Fire damage
Pete ins his motorcycle rental property for $100k on an ACV basis. The ACV of the property is $150k and his Com Ins Policy (CIP) has a 9% coins clause. A fire caused $50k of damage to the bldg structure. How much will Pete recoup under his ins policy? Pete will recoup $37,037 under his insurance policy. [$100,000 / ($150,000 X .90)] X $50,000 = $37,037
A prop owner has a com prop ins policy with a 90% coins clause. The bldg is insd for $1mm. The bldg suffered $500k fire loss. During loss adjustment, determined RC of the bldg is $1.5mm. Total loss payment the prop owner receives, w/out regard to ded, is The total loss payment the property owner will receive, without regard to deductible, is $370,370.
The following statement is true regarding manuscript forms of insurance policies Manuscript forms usually offer more favorable terms for insureds than standard forms.
A mfg co has BPP valued @ $1.5mm The risk mgr is considering insing the BPP with 80% coins at a $0.40 rate/$100 of covg. The 100 % rate is $0.35/$100 of covg. if the BPP is insd with an 80 % coins, how much premium will be saved? The savings will be $5,250 − $4,800 = $450.
Replacement cost (RC) the cost to replace the property with new property, determined at the time and place of loss
Peril and Hazard Peril: cause of loss Hazard: condition that increases the frequency and/or severity of loss
Risk control measure approaches: 1. Engineering approach 2. Human behavior approach 1:Engineering approach: attacks hazards by reviewing and improving the design and location of prop and equip, to reduce the # of hazards 2:Human behavior approach: Attacks hazards by modifying people's behavior to reduce the frequency of unsafe acts
Specific types of risk control techniques A. Fire ; B. Burglary, Robbery and Employee theft ; C. Explosion ; D. Windstorm ; E. Flood ; F. Earthquake
Common Policy Conditions 1. Cancellation 2. Changes 3. Examination of Books and Records 4. Inspections and Surveys 5. Premiums 6. Transfer of Rights and Duties
Other Commercial Property Insurance Property Conditions 1. Valuation (ACV, RC, Selling Price) 2. Coinsurance 3. Duties in the Event of Loss or Damage 4. Appraisals 5. Loss Payment 6. Recovered Property 7. Vacancy 8. Mortgageholders Condition 9. Loss Payable Provision Endorsement
Other Commercial Property Insurance Property Conditions 1. Valuation (ACV, RC, Selling Price) 3 approaches: 1.(ACV): RC less depreciation. 2. (RC): the cost to replace the property with new property, determined at the time and place of loss 3. Selling Price: Stock sold but not delivered valued at sales price less discounts and expenses
Other Commercial Property Insurance Property Conditions 2. Coinsurance Coins penalizes insds who do not buy coverage equal to 80-100% of the prop's full value. have/should have * % - ded ((Limit of insurance)/(value of covered property x coinsurance percentage)) x amount of covered loss - deductible
Other Commercial Property Insurance Property Conditions 3. Duties in the Event of Loss or Damage Must promptly give notice of loss, file a policy report if a law may have been broken, protect the covered property from further loss; give us complete inventories of damaged and undamaged properties including values; let us inspect the property and your
Created by: hongaro