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 provide coverage for incidents that occur during the policy period even if the claim is filed years later, while claims-made policies only cover claims reported while the policy is in force.

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

Subrogation gives the insurer the right to pursue the party responsible for causing the loss after paying the insured, allowing recovery of the amount paid without the insured having to sue.

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

Most property insurance policies include a coinsurance clause requiring coverage at 80% or more of replacement cost. If the association is underinsured relative to this threshold, it shares in any loss proportionally.

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 retention occurs when the association decides to absorb a financial risk itself through a deductible, self-insurance fund, or accepting the exposure, rather than paying an insurer to cover it.

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 deductible is the association's retained portion of each covered loss, the amount the association must pay before the insurer covers the remainder up to policy limits.

CMCA - Certified Manager of Community Associations Practice Test

CMCA - Certified Manager of Community Associations Practice Test

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