CRM CRM Insurance and Financial Risk 1 — Questions and Answers
Question 1: What is the primary purpose of commercial property insurance for a business?
- To provide liability protection for employees
- To cover physical assets against loss or damage (Correct answer)
- To fund employee retirement plans
- To protect against regulatory penalties
Correct answer: To cover physical assets against loss or damage
Commercial property insurance protects a business's physical assets, including buildings and equipment, from covered perils.
Question 2: What does 'subrogation' mean in insurance?
- The insured's right to cancel a policy
- The insurer's right to pursue a third party that caused an insurance loss (Correct answer)
- The process of filing a claim
- A premium discount for good loss history
Correct answer: The insurer's right to pursue a third party that caused an insurance loss
Subrogation allows an insurer who has paid a claim to pursue recovery from the responsible third party.
Question 3: Which liability coverage protects a business against claims arising from its products after they leave the premises?
- Premises liability
- Products liability (Correct answer)
- Professional liability
- Employer liability
Correct answer: Products liability
Products liability coverage protects manufacturers and sellers against claims arising from harm caused by their products.
Question 4: What is a 'deductible' in an insurance policy?
- The maximum amount the insurer will pay per claim
- The amount the insured must pay before insurance coverage applies (Correct answer)
- The annual premium for the policy
- The policy cancellation fee
Correct answer: The amount the insured must pay before insurance coverage applies
A deductible is the portion of a loss that the insured must pay out-of-pocket before the insurance policy begins paying.
Question 5: Workers' compensation insurance provides coverage for:
- Property damage caused by employees
- Employee injuries or illnesses arising from employment (Correct answer)
- Customer injuries on business premises
- Director and officer liability
Correct answer: Employee injuries or illnesses arising from employment
Workers' compensation covers medical expenses and lost wages for employees injured or made ill in the course of their employment.
Question 6: What is a commercial 'umbrella policy'?
- A policy that covers outdoor business events
- Excess liability coverage that extends limits beyond primary policies (Correct answer)
- A bundled property and casualty policy
- Insurance for seasonal business fluctuations
Correct answer: Excess liability coverage that extends limits beyond primary policies
A commercial umbrella policy provides additional liability limits above and beyond primary insurance policies, covering catastrophic losses.
CRM CRM Insurance and Financial Risk 1
What is the primary purpose of commercial property insurance for a business?