CMCA Risk Management and Insurance 4

Question 1

A community association decides to self-insure its $5,000 deductible by not purchasing a separate deductible buy-down endorsement. This strategy is best described as:

Accepted Answer

Risk retention

Answer

Retaining the financial impact of the deductible internally rather than shifting it to an insurer is a classic example of risk retention.

Question 2

Which of the following is typically covered under a community association's commercial general liability (CGL) policy?

Accepted Answer

A visitor's bodily injury sustained in a common-area slip-and-fall

Answer

CGL policies cover third-party bodily injury and property damage claims that occur on association-controlled premises, such as common-area slip-and-falls.

Question 3

What key factor determines whether a loss to a unit owner's improvements should be covered by the master policy or the owner's HO-6 policy in a 'bare walls-in' master policy structure?

Accepted Answer

Whether the improvement is original construction or an owner-added upgrade

Answer

Under bare walls-in coverage, the master policy covers only original construction; owner-installed upgrades and betterments must be insured by the owner's HO-6 policy.

Question 4

An association's governing documents require that reserve funds be used only for capital expenditures. After a major uninsured hurricane loss, the board wants to use reserves for repairs. What should the board do first?

Accepted Answer

Obtain member approval via a special meeting to authorize using reserves for the loss

Answer

Reserves restricted by governing documents generally require member approval to be used for purposes outside their defined scope; a properly called meeting ensures legal compliance.

Question 5

When reviewing certificates of insurance from a vendor, which element is most critical for an association manager to verify?

Accepted Answer

That the association is listed as an additional insured and coverage limits meet contractual requirements

Answer

Confirming additional insured status and adequate limits ensures the association has direct coverage rights under the vendor's policy if a claim arises.

CMCA - Certified Manager of Community Associations Practice Test

CMCA - Certified Manager of Community Associations Practice Test

CMCA Risk Management and Insurance 4