CCS CCS Condominium Insurance & Risk Management 2 — Questions and Answers
Question 1: Condominium associations in flood-prone areas are typically required to purchase flood insurance through which program?
- State surplus lines market only
- The National Flood Insurance Program (NFIP) (Correct answer)
- Private mortgage insurers
- Federal Housing Administration (FHA)
Correct answer: The National Flood Insurance Program (NFIP)
The National Flood Insurance Program (NFIP), administered by FEMA, is the primary source of flood insurance for condominiums in participating communities.
Question 2: What is coinsurance in the context of a condominium association's property insurance policy?
- A requirement that two insurers share every claim equally
- A penalty applied when the insured carries less than the required percentage of the property's replacement value (Correct answer)
- A discount given for having multiple policies with one carrier
- Joint coverage between the association and individual unit owners
Correct answer: A penalty applied when the insured carries less than the required percentage of the property's replacement value
Coinsurance requires the association to insure the property to a specified percentage (typically 80–100%) of replacement value or face a penalty reducing claim payouts.
Question 3: Which liability coverage is essential for a condominium association that operates a pool or fitness center on common property?
- Professional liability insurance
- Commercial general liability (CGL) insurance (Correct answer)
- Inland marine coverage
- Boiler and machinery insurance
Correct answer: Commercial general liability (CGL) insurance
Commercial general liability insurance covers bodily injury and property damage claims arising from accidents on common areas such as pools and fitness centers.
Question 4: An association's insurance deductible for hurricane damage is often expressed as a percentage rather than a flat dollar amount. This percentage is applied to:
- The total annual assessment income
- The insured replacement value of the building (Correct answer)
- The individual unit owner's purchase price
- The amount of the specific claim
Correct answer: The insured replacement value of the building
Hurricane (wind/hail) percentage deductibles are applied to the total insured replacement value of the building, which can result in very large deductible amounts.
Question 5: What risk management strategy involves the association retaining financial risk internally rather than transferring it to an insurer?
- Risk transfer
- Risk avoidance
- Risk retention (self-insurance) (Correct answer)
- Risk reduction
Correct answer: Risk retention (self-insurance)
Risk retention means the association accepts financial responsibility for certain losses, often using reserves or a self-insurance fund instead of purchasing insurance.
Question 6: Which document provided by the insurer outlines all coverage terms, exclusions, and conditions of the condominium master policy?
- Certificate of insurance
- Declarations page only
- Insurance policy jacket (policy form) (Correct answer)
- ACORD form
Correct answer: Insurance policy jacket (policy form)
The full insurance policy jacket contains the complete terms, conditions, exclusions, and endorsements that govern coverage, whereas the declarations page is only a summary.
CCS CCS Condominium Insurance & Risk Management 2
Condominium associations in flood-prone areas are typically required to purchase flood insurance through which program?