BCM 455 Final UPDATED Actual Exam Questions and CORRECT Answers
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Course
BCM 455
Institution
BCM 455
BCM 455 Final UPDATED Actual Exam
Questions and CORRECT Answers
What are the four business risks that a construction company is exposed to? - CORRECT
ANSWER- Health and safety of its employees while working on a job or at another
location, injury or property loss to third parties as a result...
BCM 455 Final UPDATED Actual Exam
Questions and CORRECT Answers
What are the four business risks that a construction company is exposed to? - CORRECT
ANSWER✔✔- Health and safety of its employees while working on a job or at another
location, injury or property loss to third parties as a result of company activities, damage or
loss to construction work in place but not yet accepted by the owner, and loss or damage to its
vehicles and construction equipment.
What are the three alternative strategies for managing a risk? - CORRECT ANSWER✔✔-
Avoid the risk, accept the risk and transfer the risk
How does a construction company transfer some of its risk by purchasing insurance policies?
- CORRECT ANSWER✔✔- Transfer risk to a professional risk taker, combine risk transfer
with risk assumption by the use of deductibles, protect against severe financial loss associated
with risk, spread the cost of risk overtime.
What is the difference between an insurance broker and an insurance company? - CORRECT
ANSWER✔✔- Insurance brokers are the individuals who work for an insurance company.
Why might a construction company need to purchase both equipment floater insurance and
automobile insurance? - CORRECT ANSWER✔✔- Equipment floater insurance is a type of
inland marine coverage that protects a construction company against financial loss due to loss
or damage to construction equipment, temporary structures to support construction operations
and materials and supplies that will not be incorporated into a construction project.
Automobile insurance covers financial loss due to the loss of or physical damage to the
vehicles and liability for bodily injury to others or damage to the property owned by others
caused by the operation of a vehicle.
What is the difference between occurrence-based and claims-based liability insurance
policies? - CORRECT ANSWER✔✔- Occurrence -based provides coverage regardless of
when the claim is made, provided that the insured occurrence took place during the policy
period. Claims-based covers only claims made during the policy period, irrespective of when
the insured occurrence took place. Claim based is the preferred policy and most used.
What is builder's risk insurance? Why is it purchased? - CORRECT ANSWER✔✔- First-
party insurance that provides coverage for the cost of damages to project during construction
,which include temporary structures and any materials stored on the project site during
construction but not the equipment. Protects but the owner and the contractor against direct
losses. If listed as named insureds, the insurance aso protects all subcontractors working on
the project.
Why might the purchaser of a builder's risk insurance policy require that a waiver of
subrogation among all insured parties be included in the policy? - CORRECT ANSWER✔✔-
It grants the insurance company the right of insured to recover from the party that caused the
loss. This means that the insurance company will compensate the insured for the loss and
then have the have the right to pursue action to recover its cost from the offending party.
What is errors and omissions insurance? Why might a construction company purchase such
insurance coverage? - CORRECT ANSWER✔✔- A professional liability insurance that
covers the professional negligence of design professionals. Needed because most general
liability and umbrella excess policies have professional liability exclusions.
What is commercial liability insurance and why is it purchased by many construction firms? -
CORRECT ANSWER✔✔- Protects the policyholder and other named insureds against
financial losses that may result from injuries or property losses sustained by third parties as a
consequence of the construction firm's activities.
What is workers compensation? - CORRECT ANSWER✔✔- No-fault insurance that is
mandated by state law, in that the employer cannot deny a claim by an insured employee on
the basis that the employee was negligent in causing the injury.
How does a surety bond differ from an insurance policy? - CORRECT ANSWER✔✔- a. A
surety bond is a three-party contract. Should the construction company default on its
contractual obligations, the surety agrees to step in and perform the contractual obligations or
to compensate the oblige for any additional costs up to the penal sum of the bond.
b. An insurance policy are two-party contracts under which the insurer promises, for a fee or
premium, to assume financial responsibility for specified losses or liabilities of the insured
for a specified period of time.
Who are the three parties in a typical surety contract? - CORRECT ANSWER✔✔-
Contractor, Owner, Surety
, How are worker's compensation insurance premiums determined? - CORRECT
ANSWER✔✔- a. Base premium = (direct wages)(base rate)/$100
b. Modified Premiums = (Base Premiums)(EMR)
What is a surety bond indemnity agreement? - CORRECT ANSWER✔✔- Provides that the
construction company will pay the surety back for any losses that the surety incurs in making
good on the guarantee to the oblige.
What are the responsibilities of a bonding agent? - CORRECT ANSWER✔✔- a. Acts as a
representative of the construction company in locating the most advantageous bonding
arrangement with an underwriting company.
b. Helps the construction firm establish a bond program.
What factors are considered by surety underwriters when determining how much bond
coverage they will provide to a construction company? - CORRECT ANSWER✔✔-
Character, capacity and capital.
Why might a construction company purchase surety bonds? - CORRECT ANSWER✔✔- a.
Statutory requirements for public projects
b. Project owner requires as part of its risk management strategy
c. General contractor requires from subcontractors either as a part of its risk management
strategy or at the request of the contractor's surety.
What is the difference between marketing and sales? - CORRECT ANSWER✔✔- a.
Marketing is the process of retaining existing customers, identifying prospective new ones
and attracting new customers to consider the company as their provider.
b. Sales is contacting a specific potential customer identified by the marketing process and
winning the contract.
What are the five types of surety bonds used in construction? What re the purposes of each
type of bond? - CORRECT ANSWER✔✔- a. Bid Bond - is a guarantee that the successful
bidder will furnish a performance bond and any other contractual requirements and enter into
a construction contract for the price contained in its bid.
b. Performance Bond - is a guarantee that the construction contractor will perform according
to the terms of the construction contract.
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