CMCA - Certified Manager of Community Associations Risk Management and Insurance Questions and Answers Flashcards

A condominium master policy that covers the building structure but not unit interior finishes or improvements is commonly called:

Answer: Bare walls coverage

Bare walls coverage excludes interior fixtures, finishes, and improvements, which owners insure through HO-6 policies.

Which owner policy can help a unit owner pay a special assessment levied after a large uninsured common-area loss?

Answer: Loss assessment coverage under an HO-6 policy

Loss assessment coverage in an HO-6 policy reimburses the owner's share of covered assessments.

A property policy with a coinsurance clause penalizes the association at claim time when:

Answer: The building is insured for less than the required percentage of its value

Underinsuring below the coinsurance percentage reduces the claim payment proportionally.

What is the main difference between replacement cost and actual cash value settlement?

Answer: Actual cash value deducts depreciation; replacement cost does not

Actual cash value equals replacement cost minus depreciation, so it usually pays less.

After a fire, local code requires the damaged clubhouse to be rebuilt with costly sprinklers not originally installed. Which coverage pays for this added cost?

Answer: Ordinance or law coverage

Ordinance or law coverage pays added costs of complying with current building codes during repair.

Standard association property policies typically exclude which peril, requiring separate coverage?

Answer: Flood

Flood is excluded from standard property forms and is usually insured through the NFIP or private flood carriers.

A burst boiler motor fails internally due to mechanical breakdown. Which coverage is designed for this loss?

Answer: Equipment breakdown (boiler and machinery)

Equipment breakdown covers sudden mechanical or electrical failure that standard property forms exclude.