CPCU 551 - Chapter 4 Questions & Answers
Blanket Insurance
Insurance that covers either of the following with one limit of insurance: (1) one type of property in one or more separately rated buildings or (2) two or more types of property in one or more separately rated buildings.
A disadva...
CPCU 551 - Chapter 4 Questions &
Answers
Blanket Insurance - answer Insurance that covers either of the following with one
limit of insurance: (1) one type of property in one or more separately rated buildings or
(2) two or more types of property in one or more separately rated buildings.
A disadvantage of blanket insurance is that the minimum coinsurance percentage is
____% - answer 90%
Specific insurance provides a __% discount with 90% coinsurance - answer 5%
No discount is offered w/ blanket insurance
What are 2 advantages of blanket insurance? - answer 1) Insured with multiple
locations is fully insured for a loss at any one location
2)Additional debris removal coverage is available if the insured selects blanket
coverage
Risk managers prefer to combine Agreed Value with Blanket insurance, however risk
managers are often reluctant to combine these coverages without a
_______________________ - answer Margin clause - provides the insured's
recovery is limited to specified % above the value filed with the insurer.
Example: Margin clause: 20%
Filed value: $2M Agreed Value
Loss = 2M *.20
Max loss collected: $2.4M
Benefits of combining Agreed Value w/ Blanket:
-Insured and insurer agree on value up front
-Avoid coinsurance penalty
-Danger of underinsurance is greatly reduced
Name the 2 approaches for dealing with fluctuating personal property values - answer
1) Peak Season Limit of Insurance Endorsement - used when inventory values are
somewhat predictable
2) Value reporting - used when fluctuations are not as predictable
, Advantages of the Peak Season Limit of Insurance Endorsement? - answer 1)
Eliminates the need for extra transactions to change value based on fluctuating
inventory
2) Avoids risk the insured may overlook the need to increase its insurance
(Endorsement may be added mid-term - pro-rata increased premium is charged)
Value Reporting Form - answer A commercial property form that bases the insured's
premium for business personal property on the values that the insured reports to the
insurer periodically during the policy period.
Using this form avoids the costs of over or under insuring business personal property
With the Value Reporting form, as long as the insured reports the values
________________, insurer will pay the full amount of any loss - answer Accurately
Note that final premium is based on the values reported by the insured as exposed to
loss.
A limit of insurance is set high enough to cover the insured's maximum expected values
at any time during the policy period.
True or false:
With the Value Reporting Form, the insured must pay a premium based on the full value
even if it exceeds the limit of insurance. - answer True
Example:
$150K in insurance limits
$200K inventory
Insured must pay premium based on the $200K inventory
Value Reporting Form - insured must file required report within ____ days after the end
of each reporting period and ____ days for the initial report - answer 30-days
60-days
Value Reporting Form - Potential penalties
1) Initial report not filed - insurer pays no more than ___% of amount due
2) Subsequent report not filed - insurer will pay no more than ____________________
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Pogba119. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $13.49. You're not tied to anything after your purchase.
