CMCA CMCA - Certified Manager of Community Associations Risk Management and Insurance Questions and Answers 3

Question 1

What is the purpose of an occurrence-based commercial general liability policy compared to a claims-made policy?

Accepted Answer

An occurrence-based policy covers claims for events that happened during the policy period regardless of when the claim is filed, while claims-made covers only claims filed while the policy is active

Answer

Occurrence-based policies are cheaper

Answer

Claims-made policies provide broader coverage

Answer

There is no practical difference between the two

Question 2

Subrogation in insurance means that after paying a claim, the insurer:

Accepted Answer

Steps into the shoes of the insured to pursue the third party responsible for the loss

Answer

Cancels the association's policy

Answer

Returns the deductible to the association

Answer

Increases the premium by the amount paid

Question 3

A community association's property insurance should cover common area buildings at what value to avoid a coinsurance penalty?

Accepted Answer

80 to 100% of replacement cost value as required by most policies

Answer

50% of market value

Answer

The original construction cost

Answer

The tax-assessed value

Question 4

Which risk management strategy involves the association retaining financial risk rather than transferring it to an insurer?

Accepted Answer

Risk retention through self-insurance or a deductible

Answer

Risk avoidance

Answer

Risk transfer

Answer

Risk reduction

Question 5

An association's insurance deductible represents:

Accepted Answer

The portion of each covered loss the association must pay out of pocket before insurance benefits apply

Answer

The maximum amount the insurer will pay

Answer

The annual insurance premium

Answer

The amount the insurer charges per claim filed

Question 6

Workers' compensation insurance is required for an association that:

Accepted Answer

Has paid employees

Answer

Only uses independent contractors

Answer

Has no employees but uses volunteers

Answer

Is incorporated as a nonprofit