The replacement cost optional coverage is added to a building insured under CP 00 10. After a fire, the insured asks for replacement cost before rebuilding. How does the insurer respond?

It pays ACV now and the rest after repair or replacement

It pays replacement cost only if the insured rebuilds on the same site

It pays only ACV, with no later adjustment

It pays full replacement cost now, before repair

A dry cleaner insured under the Legal Liability Coverage Form (CP 00 40) has customers' clothes destroyed by a fire caused by lightning; the cleaner was not negligent. How does the form respond?

Nothing is paid, because the cleaner is not legally liable

The clothes are paid only if the customers file suit

Only the cleaner's lost cleaning charges are paid

The full value of the clothes is paid, regardless of fault

A bakery's sole flour supplier suffers a fire that destroys its mill, forcing the bakery to close for two weeks. The bakery's own property is not damaged. Which coverage would pay the bakery's lost income?

Business income from dependent properties

Utility services – time element endorsement

A bank must stay open no matter what happens, and its main exposure is the extra cost of operating from a temporary site rather than lost income. Which ISO form best fits?

Extra Expense Coverage Form (CP 00 50)

Business Income (and Extra Expense) Form (CP 00 30)

Business Income (without Extra Expense) Form (CP 00 32)

Leasehold Interest Coverage Form

Under the Broad causes of loss form, which falling-object loss is covered?

Stock damaged after a tree crashes through the roof

An interior wall cracked by a dropped ladder

Stock damaged when an inside shelf falls

Lumber stored in the open crushed by a falling tree

An employee backs the insured's own delivery van into the insured's building. Under the Causes of Loss–Basic Form, the building damage is

Not covered, since the van is the insured's own

Covered under the aircraft or vehicles peril in full

Covered, but only for the building's glass

Covered under the collapse additional coverage

A company car is parked inside the insured's warehouse when a fire destroys both. The car is licensed for road use. How is the car covered under CP 00 10?

It is not covered property under CP 00 10

It is covered as personal property of others

It is covered as business personal property

It is covered under the property off-premises extension

A commercial condominium association wants to insure the building and the property it owns in common. Which form is designed for it?

Condominium Association Coverage Form

Condominium Commercial Unit-Owners Coverage Form

Which of the following is covered property under CP 00 10 without purchasing any extension or endorsement?

Outdoor fixtures attached to the building

Coverage partCommercial lines

Share of general blockabout 7%our synthesis of state exam outlines

Drill18 items

Commercial property on the P&C exam

The ISO Building and Personal Property Coverage Form, CP 00 10 10 12, is the core of commercial property insurance: it insures a business's buildings, its own personal property and others' property in its care, while an attached causes of loss form decides which perils apply and CP 00 30 pays for the shutdown afterward. Its default valuation is actual cash value, with a coinsurance clause commonly set at 80%.

What the coverage form insures

CP 00 10 sorts covered property into three buckets: Building, Your Business Personal Property (BPP) and Personal Property of Others. Building includes completed additions, permanently installed machinery, fixtures (outdoor fixtures too) and equipment used to service the building. BPP includes furniture, machinery, stock, and a tenant's improvements and betterments, the alterations a tenant paid for and cannot legally remove. Property in the open or in a vehicle counts as on premises if it is within 100 feet.

The "Property Not Covered" list is long and specific: money and securities, land and water, foundations below the lowest basement floor, underground pipes, bridges and paved surfaces, animals (unless boarded for others or held as stock), and vehicles licensed for road use. A few of those come back through a coverage extension with a small limit (outdoor signs, trees and shrubs, valuable papers), so "not covered" and "covered up to an extension limit" are different answers.

Valuation

The form values loss at actual cash value (ACV) unless the replacement cost (RC) optional coverage is shown. With RC in place, the insured can take ACV now and claim the difference after the repair or replacement is done. Coinsurance, normally 80%, is measured against value at the time of loss, and the deductible comes off after the penalty; the coinsurance formula page runs the full sequence, and the general valuation vocabulary sits on property insurance basics.

Business income and related forms

Business income (CP 00 30) pays lost net income plus continuing expenses during the period of restoration after a 72-hour waiting period; extra expense has no waiting period. Extended business income adds 60 days after the property is restored. Civil authority pays when an order blocks access to premises within one mile of a covered loss, beginning 72 hours after the order, for up to four weeks. Builders risk (CP 00 20) must be written at 100% of completed value, and the legal liability form (CP 00 40) pays for others' property only if the insured is legally liable for the damage.

The three causes of loss forms

Basic (CP 10 10): Named perils: fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicles, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, volcanic action.
Broad (CP 10 20): Everything in Basic, plus falling objects, weight of snow, ice or sleet, and water damage; collapse comes in as an additional coverage.
Special (CP 10 30): Open perils: any direct physical loss not excluded or limited, with theft sublimits on furs, jewelry and patterns, dies and molds.
Excluded on all three: Flood, earth movement, ordinance or law, war, nuclear hazard, and mechanical breakdown or steam-boiler explosion. That last pair goes to equipment breakdown, covered under specialty commercial coverages.

Additional coverages and extensions with figures

Amounts printed in CP 00 10 10 12. Extensions apply only when the coinsurance percentage is 80% or higher or a value reporting symbol is shown.
Item	Limit	The catch
Debris removal	25% of paid loss plus deductible, plus up to $25,000 more	Only the $25,000 sits outside the limit; pre-2012 texts say $10,000
Preservation of property	30 days after the move	The 30 days run from the move
Fire department service charge	$1,000 per premises	The BOP figure is higher
Pollutant clean-up	$10,000 per premises, per 12 months	Must be reported within 180 days
Increased cost of construction	Lesser of $10,000 or 5% of the building limit	A "lesser of" figure: check both halves
Newly acquired building / BPP	$250,000 / $100,000, up to 30 days	Extension: needs 80% coinsurance
Outdoor property	$1,000; $250 per tree, shrub or plant	No windstorm coverage
Property off premises	$10,000	Extension: needs 80% coinsurance

Coinsurance with a 90% clause

WorksheetCoinsurance

Warehouse underinsured at the time of loss

Value at the time of loss: $750,000
Coinsurance percentage: 90%
Limit carried: $540,000
Covered loss: $90,000
Deductible: $2,000

Insurance required90% × $750,000$675,000
Carried ÷ required$540,000 ÷ $675,0000.80
Loss after the penalty0.80 × $90,000$72,000
Deductible, taken last$72,000 − $2,000$70,000

Insurer pays$70,000

Subtracting the deductible before applying the ratio would give $70,400, which is wrong. So is measuring value at policy inception instead of at the time of loss.

Vacancy: what changes after 60 consecutive days

No coverage for vandalism, building glass breakage, water damage, or theft and attempted theft.
No coverage for sprinkler leakage, unless the system was protected against freezing.
Every other covered loss is reduced by 15%.
For a building owner, "vacant" means less than 31% of the square footage is rented or used for customary operations.
A building under construction or renovation is not vacant.

Commercial property practice

0 of 18 answered · 0 right

This set mixes covered property, the three causes of loss forms, business income and the specialty property forms for condominiums and bailees. The causes of loss list and the extensions table above are the references to keep at hand.

Notes on each optionCommit to an answer first. The notes under the item then open on every option: what rules it in or out, and the one word that splits the runner-up from the key.

Item 01
The replacement cost optional coverage is added to a building insured under CP 00 10. After a fire, the insured asks for replacement cost before rebuilding. How does the insurer respond?
1. ARebuilding on the same site is not required; rebuilding elsewhere is allowed, with payment capped at what rebuilding on the original site would cost.
2. BThe insured is not stuck with ACV: after repair or replacement the insurer pays the difference up to replacement cost.
3. CThe insurer will not pay more than ACV until the property is actually repaired or replaced, so full RC up front is wrong.
4. DCorrect: the insured can collect ACV now and claim the rest of the replacement cost once the property is actually repaired or replaced.
More notes ↓
Item 02
A dry cleaner insured under the Legal Liability Coverage Form (CP 00 40) has customers' clothes destroyed by a fire caused by lightning; the cleaner was not negligent. How does the form respond?
1. AA lawsuit is not the trigger; the form turns on whether the cleaner is legally liable, and here it is not.
2. BCorrect: the Legal Liability Coverage Form pays for others' property only when the insured is legally liable, and a non-negligent lightning fire creates no liability.
3. CThe form does not pay the cleaner's lost charges; with no legal liability it pays nothing at all.
4. DPaying regardless of fault describes a bailee's customers policy, not the legal liability form.
More notes ↓
Item 03
A bakery's sole flour supplier suffers a fire that destroys its mill, forcing the bakery to close for two weeks. The bakery's own property is not damaged. Which coverage would pay the bakery's lost income?
1. ACorrect: business income from dependent properties covers income lost because of physical damage at a location the insured depends on but does not own, such as its sole supplier.
2. BCivil authority needs a government order blocking access to the insured's premises, which did not happen here.
3. CExtended business income covers the period after the insured's own property is restored, and the bakery's property was never damaged.
4. DThe utility services endorsement covers interruption of power, water or communication service, not a fire at a supplier.
More notes ↓
Item 04
A bank must stay open no matter what happens, and its main exposure is the extra cost of operating from a temporary site rather than lost income. Which ISO form best fits?
1. AThe combined BI and Extra Expense form also insures lost income the bank barely has, so it is broader and costlier than this exposure needs.
2. BCP 00 32 covers business income without extra expense, leaving out the very cost the bank faces.
3. CCorrect: the Extra Expense form covers only the added cost of continuing operations after a loss, which fits a bank that must stay open at any cost.
4. DLeasehold interest covers the loss of a favorable lease, not the cost of operating from a temporary site.
More notes ↓
Item 05
A retailer rents a detached trailer to store overflow stock at its premises, and a fire destroys the trailer itself. Under CP 00 10 with 80% coinsurance, the non-owned detached trailers extension pays up to
1. A$10,000 is the property off-premises figure, not the trailer extension.
2. BCorrect: the non-owned detached trailers extension pays up to $5,000 for a trailer the insured does not own but uses in the business.
3. C$1,000 is the outdoor property extension figure.
4. D$2,500 is the personal effects and property of others figure.
More notes ↓
Item 06
Under the Broad causes of loss form, which falling-object loss is covered?
1. AInside damage from falling objects is covered only if the roof or an outside wall is damaged first by the falling object; a dropped ladder does not qualify.
2. BA shelf falling inside the building does not first damage the roof or an outside wall, so it fails the falling-objects condition.
3. CCorrect: under the Broad form, property inside is covered for a falling object only when the roof or an outside wall is damaged first, and the tree broke the roof.
4. DThe falling objects peril excludes personal property in the open, so the lumber outside is not covered.
More notes ↓
Item 07
An employee backs the insured's own delivery van into the insured's building. Under the Causes of Loss–Basic Form, the building damage is
1. AThe aircraft or vehicles peril excludes damage caused by vehicles the insured owns or operates in the course of its business, so 'in full' is wrong.
2. BThere is no glass-only carve-back for the insured's own vehicle; the exclusion removes the whole loss under this peril.
3. CCollapse is about a building falling down from specified causes, not a vehicle impact, so this borrows the wrong coverage.
4. DCorrect: the Basic Form's vehicles peril does not cover damage from vehicles the insured owns or that are operated in its business.
More notes ↓
Item 08
A company car is parked inside the insured's warehouse when a fire destroys both. The car is licensed for road use. How is the car covered under CP 00 10?
1. APersonal property of others is property the insured holds for others, and this car belongs to the insured anyway.
2. BOwned by the business does not make it BPP; road-licensed vehicles are specifically listed as property not covered.
3. CCorrect: vehicles licensed for public road use are property not covered under CP 00 10, so the car belongs under the business auto physical damage coverage.
4. DThe property off-premises extension covers property temporarily away from the premises, and the car was inside the warehouse and not covered property anyway.
More notes ↓
Item 09
A commercial condominium association wants to insure the building and the property it owns in common. Which form is designed for it?
1. AThe Unit-Owners form insures an individual unit owner's business property and improvements, not the association's building.
2. BThe Legal Liability form covers others' property when the insured is legally liable, not owned buildings.
3. CBuilders risk insures buildings under construction, not a finished condominium.
4. DCorrect: the Condominium Association Coverage Form insures the building and the property the association owns in common.
More notes ↓
Item 10
Which of the following is covered property under CP 00 10 without purchasing any extension or endorsement?
1. AFoundations below the lowest basement floor are listed as property not covered.
2. BCorrect: the Building definition includes fixtures, including outdoor fixtures, so they are covered property with no extension needed.
3. CMoney and securities are property not covered under CP 00 10; they belong on a crime policy.
4. DLand is property not covered, since it is not destroyed by the covered perils.
More notes ↓
Item 11
Burglars steal $12,000 of fur coats from a clothing store insured under the Causes of Loss–Special Form. With no increased limit, what is the most the insurer pays for the furs?
1. A$1,500 is the homeowners theft limit for furs, not the commercial Special Form figure.
2. BCorrect: the Special Form limits theft of furs and fur garments to $2,500 per occurrence.
3. CPaying the full $12,000 ignores the Special Form theft sublimit for furs.
4. D$5,000 is not a Special Form theft limit; it echoes the non-owned detached trailers figure.
More notes ↓
Item 12
Under the commercial property Broad causes of loss form, which loss is covered by the water damage peril?
1. AWater overflowing from a sump is not covered by the water damage peril; sump overflow needs separate coverage.
2. BContinuous seepage over 14 days or more is excluded as a maintenance problem, so months of leaking is out.
3. CRoof drains, gutters and downspouts are excluded from the water damage peril.
4. DCorrect: the Broad form water damage peril covers accidental discharge when a plumbing, heating or air-conditioning system or appliance breaks apart or cracks.
More notes ↓
Item 13
A dentist owns a unit in a commercial condominium. Which ISO commercial property form insures the dentist's business personal property and unit improvements?
1. ACorrect: the Condominium Commercial Unit-Owners form insures a commercial unit owner's business personal property and the improvements it owns.
2. BThe Association form insures the building and common property for the association, not one owner's unit contents.
3. CCP 00 10 is the general building and BPP form; a commercial condo unit owner uses the dedicated unit-owners form.
4. DThe HO-6 is for residential unit owners and does not cover a dental practice's business property.
More notes ↓
Item 14
When the replacement cost optional coverage is chosen in CP 00 10, which of the following remains valued at actual cash value unless separately endorsed?
1. AThe building is exactly what the replacement cost option is designed for, so it moves to RC.
2. BMachinery and equipment are the insured's own BPP and are valued at RC once the option is chosen.
3. CCorrect: the replacement cost option does not apply to personal property of others, which stays at ACV unless an extension is added.
4. DFurniture and fixtures the insured owns are its own BPP and move to replacement cost with the option.
More notes ↓
Item 15
A business has two warehouses, each valued at $500,000, and moves stock between them constantly. Why might the insured choose a blanket limit rather than specific limits?
1. ABlanket coverage changes how the limit is applied, not the valuation; ACV versus RC is a separate choice.
2. BBlanket limits still carry a coinsurance clause, often at a higher percentage.
3. CCorrect: a blanket limit applies one amount across locations, so it follows the stock wherever it happens to be at the time of loss.
4. DDeductibles are a separate provision; a blanket limit does not remove them.
More notes ↓
Item 16
All of the following perils are excluded under every ISO commercial property causes of loss form EXCEPT
1. ACorrect: sinkhole collapse is a named peril in the Basic form and is also covered by the Broad and Special forms, so it is the exception.
2. BNuclear hazard is excluded under all three causes of loss forms.
3. CFlood is excluded under all three forms and needs separate flood coverage.
4. DEarth movement, including earthquake, is excluded under all three forms and needs an endorsement.
More notes ↓
Item 17
A manufacturer wants to lower its business income premium by limiting coverage for rank-and-file employees' payroll to 90 days after a loss. Which endorsement does this?
1. AMaximum period of indemnity caps the whole BI recovery at 120 days, not payroll alone.
2. BCorrect: the payroll limitation or exclusion endorsement limits or removes coverage for ordinary payroll, such as rank-and-file wages, to a set number of days.
3. CExtended period of indemnity lengthens coverage after restoration, which would raise the premium, not lower it.
4. DMonthly limit of indemnity caps how much of the total BI limit can be paid each month, not payroll specifically.
More notes ↓
Item 18
A furniture repair shop insured under CP 00 10 has customers' sofas in its shop for reupholstering when a fire destroys them. Under which category of covered property are the sofas insured?
1. ABuilding covers the structure and its fixtures, not movable sofas.
2. BImprovements and betterments are fixtures a tenant installs in a leased building, not customers' furniture.
3. CYour business personal property is property the shop owns, and the sofas belong to customers.
4. DCorrect: customers' sofas in the shop's care, custody or control fall under Personal Property of Others.
More notes ↓

Mixed practice test · Timed mock

AWhat the coverage form insures

Valuation

Business income and related forms

BThe three causes of loss forms

CAdditional coverages and extensions with figures

DCoinsurance with a 90% clause

EVacancy: what changes after 60 consecutive days

FCommercial property practice