Deck 18: Commercial Property Insurance

Question 1

Which of the following is not a benefit of standard policies?

A)smaller insurers can offer cheaper insurance than larger companies for the same exposures
B)litigation should be reduced as policy meaning becomes understood
C)consumers are more likely to learn and understand the meaning of standard policies
D)data collection and rate computation is easier and more accurate

Answer 1

A

Question 2

Which of the following is not a type of property covered by the CPPs Building and Personal Property form?

A)automobiles
B)business personal property
C)personal property of others
D)building

Answer 2

A

Question 3

All of the following are true concerning marine insurance except:

A)bottomry was an early form of insurance that covered the outstanding balance on a loan for a ship
B)respondentia was an early form of insurance that covered outstanding loans on cargo
C) the earliest ocean marine contracts only covered losses caused by pirates and ship owner's fraud
D)originally coverage did not specify (list)the individual perils causing loss

Answer 3

C

Question 4

Jana loans a leather jacket to Brenda. Brenda must return the jacket to Jana in one week. This arrangement is called a/an:

A)mortgage
B)agency rent
C)assignment
D)bailment

Question 5

All the following are true about schedule rating except:

A)used in rating some commercial buildings
B)analyzes each property individually
C)starts with a rate for a standard building in the same city as the building being rated
D)the rate is looked up based upon a few rating factors such as construction type and territory

Question 6

Which of the following perils is not found in the Basic Cause of Loss form?

A)windstorm or hail
B)volcanic action
C)flood
D)explosion

Question 7

Which of the following is not an indirect loss?

A)loss of rental income after a flood
B)continuing expenses during a shutdown after a loss
C)extra expenses after a loss to keep the business going
D)loss of inventory in a flood

Question 8

Ocean marine insurance typically covers all the following categories of loss except:

A)losses caused by ship owner's fraud
B)loss of ship by pirates
C)loss of cargo in a tidal wave
D)loss of freight

Question 9

Which of the following statements about schedule rating is false?

A)analyzes each property individually
B)is used primarily in rating commercial buildings
C)starts with a rate for a standard building in the same city as the building being rated
D)uses the same rate for all buildings that have a particular construction type

Question 10

All the following statements are true concerning a general average loss under an ocean marine contract except:

A)property is jettisoned voluntarily
B)property is thrown overboard to try to save life and minimize loss of property
C)anyone having a direct property interest in the voyage contributes toward the loss
D)the ship owner does not have to contribute toward any loss since only cargo is destroyed

Question 11

Indirect loss coverage (business income insurance)will cover all the following except:

A)lost profits
B)continuing expenses
C)income taxes on lost profits
D)extra expenses incurred to maintain operations after a loss

Question 12

Which of the following factors would not be considered in a class rating scheme for property insurance?

A)community fire fighting capability
B)use of the structure
C)external surrounding exposures
D)age of the named insured

Question 13

Identify the exposure that is not shared by aircraft and marine insurance policies.

A)cargo loss exposure
B)legal liability exposure
C)freight loss exposure
D)all of the above are similar in aircraft and marine coverage

Question 14

Which of the following is not an example of a hostile fire?

A)house burns down
B)automobile is destroyed by arson
C)fire in the fireplace destroys a valuable paper accidentally used to start the fire
D)fire starts on a couch when a cigarette falls on it

Question 15

Which of the following is not a "bailment?"

A)leaving your car at an auto dealer for repair
B)loaning your car to your neighbor
C)eating at a restaurant
D)shipping goods on a truck

Question 16

Floater policies are used to insure:

A)property that is not waterproof
B)property that is easily and frequently moved
C)property that can't be covered by any other type of insurance
D)small boats, canoes, rafts, etc

Question 17

Inland marine policies typically cover all of the following classes of property except:

A)valuable personal property
B)bridges
C)factory buildings
D)property designated for import

Question 18

Which of the following factors would not be considered in setting an ocean marine insurance rate?

A)route of the ship
B)type of cargo being transported
C)experience of the captain and crew
D)ISO's standard base rate for marine exposures

Question 19

All the following are coverages available in an ocean marine policy except:

A)freight
B)cargo
C)liability
D)wharf physical damage coverage

Question 20

Which of the following is not a factor in the cost of aircraft insurance?

A)perils covered
B)experience and training of the pilot
C)type of cargo carried
D)landing and hangar fees charged by local airports

Question 21

Early fire departments in the U.S.would extinguish a fire only if the building _______________ .

A)was near a dynamite factory or otherwise threatened neighboring properties
B)had that fire department's fire mark attached
C)had any fire mark attached
D)none of the above

Question 22

Which of the following is not a rating factor in ocean marine insurance?

A)seaworthiness of the ship
B)experience of the captain and crew
C)route to be traveled
D)experience of the cargo shippers

Question 23

Which of the following statements is false?

A)Trucking companies spend about 3% of their operating expenses on insurance premiums
B)Federal law requires trucks traveling across state lines to have at least $1.5 million in liability insurance
C)The peril causing the largest amount of inland marine losses is theft
D)Inland marine insurance developed because commerce in the U.S. moved inland

Question 24

"Loss of use" coverage will not provide payment for:

A)extra expenses incurred to stay in operation after an insured loss occurs
B)payment for a direct loss caused by fire at a described premises
C)lost profits after an insured loss due to the interruption of business
D)coverage for any continuing fixed expenses due to the loss of cash flow

Question 25

Which of the following factors would generally not be considered in a class rating scheme?

A)community fire fighting capability
B)use of the structure
C)external surrounding exposures
D)the existence of sidewalks around the building

Question 26

A hostile fire is:

A)deliberately ignited
B)unconfined and beyond its desired boundaries
C)both a & b above
D)none of the above

Question 27

Historically,fire marks were symbols mounted on buildings to identify the building's fire insurer.

Question 28

"Cargo" and "freight" losses are the same thing in ocean marine insurance.

Question 29

If the Bartow Publishing House sends a shipment of textbooks to the university bookstore via a common carrier,it needs:

A)no inland marine insurance because the trucking company already has this coverage
B)inland marine insurance because a shipper cannot recover from a common carrier
C)liability insurance to sue the common carrier for the carrier's legal liability
D)inland marine insurance even though it can collect a liability claim from the carrier, because such collection could be slow and potentially expensive.

Question 30

Ocean marine policies are typically "specified perils" contracts.

Question 31

Which of the following is not an indirect loss?

A)loss of income subsequent to a direct property loss
B)continuing expenses incurred during a shutdown after a direct property loss
C)extra expenses to keep a business operating after a direct property loss
D)production machine is destroyed due to fire

Question 32

Reporting forms for inventory insurance require the insured to ____________________ .

A)purchase insurance equal to 100% of the inventory's value
B)purchase insurance equal to 80% of the inventory's value
C)report inventory values with scrupulous honesty
D)have very stable inventory levels

Question 33

A friendly fire is:

A)deliberately ignited
B)within its desired boundaries
C)both a & b above
D)none of the above

Question 34

The amount an insurer charges per $100 of exposed property value is called the

A)rate
B)premium
C)expense ratio
D)funding ratio

Question 35

Amanda Miranda owns a soft drink manufacturing company that makes Fizzy Dizzy soda. She asks you to determine if she has any intangible property. Which of the following items would you tell her are intangibles?

A)secret formula for Fizzy Dizzy
B)patented design of the Fizzy Dizzy bottle
C)patented name of the product (Fizzy Dizzy)
D)all of the above

Question 36

Which of the following is not a function of the Insurance Services Office (ISO)?

A)collecting loss data
B)developing standard insurance policies
C)coordinating prices between insurance companies
D)providing public information about insurance

Question 37

An aircraft owner would need all of the following coverages except:

A)hull insurance
B)freight insurance
C)fire insurance
D)liability insurance

Question 38

An office building is an example of:

A)personal property
B)intangible property
C)intellectual property
D)real property

Question 39

Which of the following is an example of intangible property?

A)custom-designed accounting software
B)leased shopping center space that your business occupies
C)custom-made cabinetry in a retail space
D)a limited edition automobile

Question 40

Which of the following types of business income coverage would pay for losses due to the destruction of your supplier of raw goods or a buyer of your products?

A)contingent business interruption
B)additional insured interruption
C)consequential business interruption
D)suppliers' protection and interruption

Question 41

Class rating and schedule rating use the same approach in arriving at a final fire insurance rate;both use a system of debits and credits and charges for particular property as compared to a standard.

Question 42

What is the difference between a general average and a particular average in ocean marine insurance?

Question 43

The CPPs building and personal property insurance form is designed to cover residential property for individuals.

Question 44

What are the categories of business income losses? Briefly explain each.

Question 45

More inland than ocean marine insurance has been sold in recent years.

Question 46

The personal articles floater is a type of inland marine coverage

Question 47

The term "aircraft" is restricted to "fixed?wing aircraft" capable of speeds in excess of 150 mph

Question 48

Damage from both friendly and hostile fires is covered by insurance contracts covering the peril of fire.

Question 49

The Broad Cause of Loss form adds perils to the Basic Cause of Loss form but does not increase the dollar amount of coverage.

Question 50

A bailees' customer policy is a type of ocean marine insurance.

Question 51

Aviation insurers have some difficulty complying with the law of large numbers.

Question 52

What is a fire? What is the difference between a friendly and a hostile fire?

Question 53

"Bailment" is an ocean marine term applying to sinking ships.

Question 54

The dependent property business income form pays for loss of income when the insured's owned property is damaged by an insured peril.

Question 55

Loss of income after a fire loss is an indirect loss.

Question 56

Commercial insurance contracts covering the fire peril never explicitly define the term "fire."

Question 57

Neither explosion nor smoke damage is covered by a commercial property contract.

Question 58

What purpose do reporting forms serve in commercial property insurance contracts?

Question 59

What is the difference between class rating and schedule rating?

Question 60

"Fire" means rapid combustion accompanied by heat,light or glow,when used in insurance terminology.

Question 61

List and explain the major types of ocean marine loss exposures