Exam
CPCU 551 REAL EXAM AND STUDY GUIDE 270 QUESTIONS
AND CORRECT ANSWERS 2024-2025 LATEST VERSION//AL
CPCU 551 REAL EXAM AND STUDY GUIDE 270 QUESTIONS AND CORRECT
ANSWERS 2024-2025 LATEST VERSION//ALREADY GRADED A+ CPCU 551 REAL
EXAM AND STUDY GUIDE...
A building had been vacant for 60 days, and the insurer didn't know about it, when it
sustained 100K, 5K, and 1K losses due to windstorm, theft, and sprinkler leakage,
respectively. What amount is covered under CPP? - answer-85K, 0, and 0. If a building
is vacant for 60 or more consecutive days before the loss, they won't pay for any loss
caused by vandalism, sprinkler leakage, building glass breakage, water damage, theft,
or attempted theft... otherwise you'll only get 85%
A building is insured for $200,000 under an agreed value policy. The policy has a
$10,000 deductible and the agreed value of the building is $250,000. After suffering a
$43,000 loss, the insurer will pay (rounded to the nearest $100) - answer-24,400
A building under construction is insured on an unendorsed Builders Risk Basic Form
policy for $100,000. During the course of construction, defective materials caused the
main floor to collapse, resulting in a $10,000 loss. The actual cash value of the building
at the time of loss was determined to be $110,000. Assuming a $1,000 deductible, the
amount payable to the insured is - answer-0 as collapse is not a covered peril under the
basic form.
A business purchased an Earthquake and Volcanic Eruption Endorsement (Sub-Limit
Form) to attach to a Building and Personal Property Coverage Form (BPP). The insured
building has an insurable value of $3,000,000. The endorsement is subject to a 10
percent deductible and a sublimit of $2,000,000. In the event of a covered $450,000
loss, the amount payable is - answer-$150,000.
$450,000 − ($3,000,000 X .10) = $150,000
the 10% deductible applies to the insurable value, NOT the loss.
Furthermore, in this coverage, the deductible is always applied as a percentage.
A Combination Safe Depository Policy contains which insuring agreements? - answer-
Loss of Customers' Property; Premises Damage
,A disgruntled employee of the insured returned to his employer's store late at night and
broke into the locked registers, taking the minimal morning cash set up. The employee
also damaged the lock boxes and took some store merchandise. Which types of
property in this scenario would be covered under the Causes of Loss—Special Form? -
answer-The damaged registers and lock boxes would be covered as items stolen by
employees are not covered.
A financial institution purchased both a SFAA Computer Crime Policy and a Financial
Institution Bond. An employee of the institution managed to hack into and modify a
computer program in the insured's computer system. The insuring agreement that
addresses this type of loss is the - answer-Financial Institution Bond's Fidelity insuring
agreement.
A landlord leases a portion of a strip mall to a dry cleaning business. When the tenant
moved into the building, the tenant installed dry cleaning equipment for the business. It
also installed new carpeting and tile throughout the building.
Under the landlord's BPP - are the improvements considered part of building coverage
or personal property of others? - answer-Building Coverage. The owners' use interest in
improvements and betterments are covered as the 'owner's property'
A local savings and loan association purchased Financial Institution Bond Form 24.
Mandatory insuring agreements on their Form 24 include which one of the following? -
answer-Fidelity, On Premises, In Transit, and Counterfeit Money
A manufacturing company has business personal property valued at $1,500,000. The
risk manager is considering insuring the business personal property with 80 percent
coinsurance at a $0.40 rate per $100 of coverage. The 100 percent rate is $0.35 per
$100 of coverage. if the business personal property is insured with an 80 percent
coinsurance, how much premium will be saved? - answer-The savings will be $5,250 −
$4,800 = $450
A national telecommunications company is in the midst of constant change. They
frequently are opening new locations in various cities. Once they establish themselves
in a sector, they will close some of their locations initially intended for the acquisition
and set-up of new accounts. The type of policy that would best suit this type of business
is... - answer-An output policy because it provides "all-risks" coverage for property at
fixed locations AND property away from insured's premises
A self-storage facility purchases an ISO Commercial Package policy with the Market
Segments Customers' Property Legal Liability endorsement with its standard limit and
deductible. While the policy is in force, a fire occurs at the storage facility. The facility is
liable for $135,000 worth of damage to customer property. Based on the information
provided, the amount of money the storage facility will pay out of pocket is - answer-
After subtracting the $250 deductible, the covered loss is $134,750. Because this
exceeds the $100,000 policy limit, the full $100,000 would be paid. The remaining
$35,000 is the responsibility of the self-storage facility.
,A shipping company contracted with Cruise Ship Art Galleries for delivery of artwork to
be sold on the ship. The shipping company delivered the artwork directly to each port of
call. Coverage for the artwork was under an inland marine policy. The valuation
provision that would best be applied to a loss to the artwork prior to delivery would be
the - answer-Agreed value is appropriate for items that are difficult to value such as
works of art.
A small business owner purchased an unendorsed Building and Personal Property
Coverage Form (BPP). The limit on the policy is $500,000 which meets the coinsurance
requirements. The deductible is $1,000. The total value of the insured property is
$525,000. The insured suffered a $510,000 covered loss to the property. What will the
insurer pay? - answer-500K. The deductible comes off the loss not the limit of
insurance.
ACV. 100K limit. 1K deductible. 110K loss. What is payment? - answer-100K, since
110K-1K deductible exceeds the limit of insurance. NOT 99K!
Agreed Value optional coverage is often elected by risk averse firms in order to -
answer-Alleviate the risk of not complying with the Coinsurance condition.
Amount of insurance to buy (BIC) = - answer-coinsurance basis x coinsurance %
An A&E Accounting Company (A&E) operates a bookkeeping business insured with an
unendorsed Businessowners Policy (BOP). On rare occasions an A&E assistant will use
a personal auto to drop off completed tax returns at the local post office on the way
home from work. Recently, the assistant was involved in an at-fault accident en route to
the post office. Which one of the following best describes how the BOP will handle this
loss? - answer-There will be no coverage because there isn't a Hired and NonOwned
Auto endorsement on the policy.
An employee at an accounting firm uses a third-party vendor's accounting software on a
daily basis. During the course of employment at the firm, it is discovered that the
employee published a copy of the accounting software on an open-source software site.
As a result, the accounting firm must pay damages of $150,000 for the unauthorized
reproduction of the software. The accounting firm has an ISO Commercial Crime
Coverage Form that contains no endorsements. Does coverage apply? - answer-The
loss is not covered by the firm's ISO Commercial Crime Form.
An insurance company recently leased a new office location in Dallas, Texas. On
September 26, 2010, prior to occupying the building, the company spent $250,000 on
building improvements. The useful life of these improvements was 10 years. On
September 26, 2011, the improvements were destroyed and replaced by the building
owner at a cost of $300,000. Under the company's Building and Personal Property
Coverage Form policy the amount reimbursable for this loss is - answer-Under the
, company's Building and Personal Property Coverage Form policy the amount
reimbursable for this loss is $0. The building owner made the repairs, not the tenant.
An insured chooses the "Agreed Value" option for its Building and Personal Property
Coverage Form (BPP). The agreed value for the property is $100,000 and the limit of
insurance is $120,000 with a $5,000 deductible. The building is totally destroyed by a
covered cause of loss. At the time of the loss, the value of the building was $130,000.
The insurer would pay - answer-$120k.
An insured should set the limit for equipment breakdown business income coverage on
the basis of which one of the following? - answer-The estimated maximum loss of
business income or the amount needed to comply with the Coinsurance condition,
whichever is greater.
are credit card transactions covered under computer fraud? - answer-no, excluded
Are financial institution bonds cover losses on a loss-sustained basis or on a discovery
basis - answer-discovery
Are limits higher under emergency NFIP program or regular NFIP program? - answer-
regular
Are livestock eligible for Special Form Farm Property Coverage? - answer-No, they
aren't.
are losses to money and securities caused by theft, disappearance, or destruction
covered under the outside the premises insuring agreement? - answer-Yes, and so is
other property caused by actual or attempted robbery IF the property is outside the
premises AND in the care and custody of a messenger or an armored vehicle company.
are scams involving exchanges or purchases covered under crime insurance
inside/outside premises? - answer-no, excluded
are stress tests covered by equipment breakdown policies? - answer-nope, they're
excluded.
are telephone system's covered under equipment breakdown? - answer-Yes, office
equipment is a covered loss exposure
Bridges, piers, wharves, and docks are initially excluded from the Building and Personal
Property Coverage Form primarily because - answer-They require careful underwriting
Business Income = - answer-net income plus continuing normal operating expenses,
including payroll
