CRECI Property Risk Management 2

Question 1

Which type of insurance covers loss of rental income when a commercial property is rendered uninhabitable due to a covered peril?

Accepted Answer

Business interruption insurance

Answer

Business interruption insurance reimburses lost rental income and operating expenses when a covered peril prevents the property from generating revenue.

Question 2

A commercial property owner discovers that a tenant's operations have caused soil contamination. Which policy is specifically designed to address this environmental liability?

Accepted Answer

Pollution liability insurance

Answer

Pollution liability insurance covers bodily injury, property damage, and cleanup costs arising from pollution events at or from a covered property.

Question 3

In a risk transfer strategy, a commercial landlord requires tenants to carry their own liability insurance and name the landlord as an additional insured. This practice is known as:

Accepted Answer

Contractual risk transfer

Answer

Contractual risk transfer shifts financial responsibility to another party through lease agreements or contracts, such as requiring tenants to carry and share their insurance coverage.

Question 4

What is the primary purpose of a FEMA flood zone determination when acquiring commercial real estate?

Accepted Answer

To determine if flood insurance is federally required

Answer

A FEMA flood zone determination identifies whether the property lies in a Special Flood Hazard Area, which triggers a federal requirement to carry flood insurance for federally backed loans.

Question 5

Which risk management tool quantifies the maximum probable loss from a single catastrophic event at a commercial property?

Accepted Answer

Probable maximum loss (PML) estimate

Answer

A probable maximum loss (PML) estimate models the worst-case insurable loss scenario, guiding decisions on coverage limits and self-insurance retention levels.

(CRECI) Commercial Real Estate Certification Institute Practice Test

(CRECI) Commercial Real Estate Certification Institute Practice Test

CRECI Property Risk Management 2