CPCU 551 - Chapter 3 Latest Update 2024-2025 Questions and 100% Verified Correct Answers Guaranteed A+ At First Attempt
Actual Cash Value (ACV) - CORRECT ANSWER: The cost to replace property with new
property of like kind and quality less depreciation.
Agreed Value Optional Coverage - CORRECT ANSWER: Optional coverage that
suspends the Coinsurance condition if the insured carries the amount of insurance agreed to by the insurer and insured.
Bailor - CORRECT ANSWER: A person who delivers personal property to a bailee.
Blanket Insurance - CORRECT ANSWER: Provides coverage for one type of property
in more than one separately rated building or two or more types of property in one or more separately rated buildings under a single limit.
Fraud - CORRECT ANSWER: An intentional misrepresentation resulting in harm to a
person or an organization.
General Lessee - CORRECT ANSWER: An entity that leases an entire building either for its own occupancy or to sublease to other tenants.
Indemnity - CORRECT ANSWER: Restoring the insured to the same financial position held immediately before a loss.
Replacement Cost Optional Coverage - CORRECT ANSWER: 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.
Specific Insurance - CORRECT ANSWER: Insurance that covers each building for a
specific limit of insurance and personal property at each building for a specific limit of insurance.
Subrogation - CORRECT ANSWER: 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.According to the BPP's Abandonment condition, who is responsible for making
arrangements for the repair or disposal of covered property? - CORRECT ANSWER:
The Abandonment condition clarifies that making arrangements for the repair or disposal of covered property is the insured's responsibility, unless the insurer chooses to exercise its option under the Loss Payment condition.
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Contrast misrepresentation and concealment: - CORRECT ANSWER: Misrepresentation is an active, deliberate, misstatement of fact. Concealment, in contrast, is an intentional failure to disclose a material fact.
Contrast specific and blanket limits of insurance: - CORRECT ANSWER: When specific limits are used, the declarations show separate limits of insurance for each covered building and for personal property at leach location. A blanket limit can apply one amount insurance to all property covered by the policy.
Define Rating - CORRECT ANSWER: Rating is the process of applying a rate to a
particular exposure and performing any other necessary calculations to determine an appropriate policy premium.
Describe the BPP's Liberalization condition: - CORRECT ANSWER: Under the BPP's Liberalization condition, if the insurer adopts any revision that would broaden coverage under the commercial property coverage part and for which there is no additional premium charge, the broader coverage is extended automatically to policies already in effect.
Describe the insurer's options in loss payment as established by the BPP: (4) -
CORRECT ANSWER: 1.) Pay the amount of loss or damage
2.) Pay the cost of repairing or replacing the damaged property.
3.) Take over all or any part of the property and pay its agreed or appraised value.
4.) Repair, rebuild, or replace the damaged property with other property of like kind and quality.
Describe the purpose and operation of the Agreed Value optional coverage in the BPP:
- CORRECT ANSWER: The purpose of the Agreed Value optional coverage in the BPP
is to remove the uncertainty as to whether the amount of insurance carried complies with the Coinsurance condition. The option suspends the Coinsurance condition if the insured carries the amount of insurance that the surer and insured agreed to be the property's full value.
Describe the rights granted to a mortgage holder that is named on the declarations page of a commercial property policy: (2) - CORRECT ANSWER: A mortgage holder
named on the dec page of a commercial property policy can:
1.) Payment for any claim for loss on the covered mortgaged property.
2.) Notification of cancellation or non-renewal.
Describe the two requirements an insured must meet before legal action can be brought against an insurer to enforce a commercial property policy: - CORRECT ANSWER: 1.) The insured must comply with all conditions of the policy, including those in the coverage part and the common policy conditions, as well as the applicable loss conditions.
2.) The action must be brought within two years after the date on which the direct physical loss occurred.
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