pg. 1 2025 Cpcu 551 Exam Commercial Property Management 300 Prep Questions And Correct Answers/ Cpcu 551 Exam 2025 Prep Test Bank (Brand New!)
What is the primary advantage of using retention as a risk financing measure to help an organization meet its risk financing goals? - ANSWER-Managing the cost of risk
The analysis step of the risk management process involves considering the four dimensions of a loss exposure. If any of these dimensions of loss exposure analysis involve empirical distributions developed from past losses, what needs to be determined? - ANSWER-The credibility of the data being used
An example of an administrative expense that can minimize the cost of risk is - ANSWER-Risk management consulting
Sandi purchased a $130,000 home three years ago and took out a $100,000 mortgage. Today her home is worth $150,000 and she still owes $55,000 on the home. The mortgage holder has an insurable interest of how much in Sandi's home? - ANSWER-$55,000
Martin enters a warehouse by smashing a basement window and climbing through the opening. He steals supplies and a box of petty cash and exits the building through the same window. This is an example of what type of theft? - ANSWER- Burglary
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pg. 2 A hazard is defined as - ANSWER-Anything that increases the frequency or the severity of a loss
Charlotte, Chloe, and Jessica have concurrent ownership in a restaurant, each owning one third. Their combined interests equal the value of the restaurant. If one of them should die, her share would pass to her heirs. This type of ownership is referred to as - ANSWER-Tenancy in common
One dimension of analyzing loss exposures is timing of losses. The timing of losses is significant because - ANSWER-Money held in reserve to pay for a loss can earn interest until the actual payment is made
A risk financing goal is - ANSWER-Managing uncertainty of loss outcomes
When analyzing loss exposures, total dollar losses can be determined by multiplying loss frequency by - ANSWER-Loss severity
In loss analysis, the Prouty approach primarily involves - ANSWER-Loss frequency and severity
What is true regarding the risk financing goal of maintaining an appropriate level of liquidity? - ANSWER-Both the amount of cash to pay for retained losses and the timing of the payments are important in deciding on an appropriate level of liquidity.
Jeremy is a bailee who insures bailor Sam's property for Sam's benefit. Jeremy has an insurable interest in the property, but if Sam's property becomes damaged or destroyed, Jeremy - ANSWER-Pays any awarded insurance proceeds to Sam
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pg. 3 Generally, funds used to pay for property losses are - ANSWER-Disbursed relatively soon after the losses occur
David is a risk management consultant. He advised a client that the DIC policy can serve a variety of needs. Its basic purpose is to - ANSWER-Fill in gaps left by the insured's other property insurance
The risk manager for Hazel Property advised the owners that an advantage of a layered property program is that it provides - ANSWER-Adequate and flexible limits
Bentley Organization has a retrospective rating plan. It experiences $1.5 million in losses subject to the policy limit; however, Bentley's adjusted premium is limited to $1 million. This is likely because - ANSWER-Bentley has a maximum premium of $1 million
Many businesses have refrigeration equipment, production equipment, steam boilers, and air condition systems. These are all examples of - ANSWER-Boilers and machinery
Spouses Ed and LeeAnn own a home. If Ed dies, LeeAnn will become the sole owner of the house. Both Ed and LeeAnn have an insurable interest in the property equal to the full value of the property. This is a - ANSWER-Tenancy by the entirety
The availability of funds to pay for losses is most important to organizations when
- ANSWER-Operations have been disrupted
Retail Store insures its business personal property under a Building and Personal Property Coverage Form (BPP) with a value reporting form. The limit of insurance 3 / 4
pg. 4 is $1,000,000 and the deductible is $5,000. On December 21, a fire destroyed the store and the personal property. The store's last reported value on November 30 was $750,000. Assuming that the last report of values was accurate, how much would the insurer pay for the store's personal property loss which amounted to
$700,000? - ANSWER-$695,000
$700,000 - $5,000 = $695,000
When the owners of Jackson Wholesale told their insurance agent that they were building a new warehouse, the agent advised them that they needed a separate Builders Risk Coverage Form (BRCF). Property covered under the unendorsed ISO BRCF includes - ANSWER-Building materials and supplies intended to become a permanent part of the building
A self-supporting solid wall that prevents a fire from passing through or around it is a - ANSWER-Fire wall
A building with concrete exterior walls and wooden support beams as defined by Insurance Services Office, Inc. (ISO) - ANSWER-Joisted masonry
In theory, liability losses are limited only by the - ANSWER-Defendant's total wealth
Customer Mary gave dry cleaner Ike her fur coat so he could remove a large stain.Ike could not eliminate the stain so he asked restoration specialist Peter to attempt to remove it. The bailor in this scenario is - ANSWER-Mary
Jack and Susan own and manage a hotel. They are concerned about their responsibility for the property of their guests and whether they have an insurable interest in that property and thus could buy insurance to cover their responsibility.
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