P&C Property Insurance Policies 3

Question 1

What is the difference between 'replacement cost' and 'functional replacement cost' in commercial property insurance?

Accepted Answer

Functional replacement cost pays for a modern, less expensive replacement with equal functionality rather than an exact duplicate, often used for older or unique buildings

Answer

They are identical terms used interchangeably

Answer

Functional replacement cost always pays less than actual cash value

Answer

Replacement cost always pays market value only

Question 2

Which of the following best describes 'business income' (business interruption) coverage in a commercial property policy?

Accepted Answer

It reimburses the insured for lost net income and continuing expenses when business operations are interrupted by a covered property loss

Answer

It pays for physical damage to business personal property

Answer

It covers the insured's liability for lost income of customers

Answer

It covers employee wages permanently, regardless of whether the business resumes operations

Question 3

Under a commercial property policy, 'extra expense' coverage pays for:

Accepted Answer

Additional costs incurred to continue operations or reduce the period of shutdown after a covered loss, above normal operating expenses

Answer

The insured's extra profits lost during the shutdown

Answer

The cost of replacing damaged inventory at replacement cost

Answer

Legal expenses arising from the property damage

Question 4

What is an 'Installation Floater' in inland marine insurance?

Accepted Answer

Coverage for materials and equipment during transit to a job site and while being installed, until acceptance by the owner

Answer

A policy covering watercraft at marinas

Answer

A policy covering the insured's own permanent building

Answer

A policy for art galleries and museums

Question 5

In commercial property insurance, 'ordinance or law' coverage pays for:

Accepted Answer

The increased cost to rebuild to current building codes after a covered loss, when the existing structure was built to older codes

Answer

Fines and penalties imposed by building code violations

Answer

Legal defense costs for zoning violations

Answer

The cost of code compliance inspections

Question 6

Which of the following would be covered under a 'builders risk' policy?

Accepted Answer

A building under construction, protecting the structure from the ground up during the construction period

Answer

An occupied commercial building that has been in use for 5 years

Answer

The contractor's own tools and equipment

Answer

Worker injuries at the job site