Property Risk Management Flashcards
7 cards from real CRECI practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Property Risk Management flashcards as text
Which type of insurance covers loss of rental income when a commercial property is rendered uninhabitable due to a covered peril?
Answer: Business interruption insurance
Business interruption insurance reimburses lost rental income and operating expenses when a covered peril prevents the property from generating revenue.
A commercial property owner discovers that a tenant's operations have caused soil contamination. Which policy is specifically designed to address this environmental liability?
Answer: Pollution liability insurance
Pollution liability insurance covers bodily injury, property damage, and cleanup costs arising from pollution events at or from a covered property.
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:
Answer: Contractual risk transfer
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.
What is the primary purpose of a FEMA flood zone determination when acquiring commercial real estate?
Answer: To determine if flood insurance is federally required
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.
Which risk management tool quantifies the maximum probable loss from a single catastrophic event at a commercial property?
Answer: Probable maximum loss (PML) estimate
A probable maximum loss (PML) estimate models the worst-case insurable loss scenario, guiding decisions on coverage limits and self-insurance retention levels.
A commercial property manager implements a formal inspection schedule, repairs faulty handrails, and installs security lighting. These actions primarily represent which risk management strategy?
Answer: Risk control/reduction
Risk control (reduction) involves physical or procedural measures that lower the frequency or severity of losses before they occur.
When a property owner self-insures by setting aside reserves for potential losses rather than purchasing a commercial insurance policy, this strategy is called:
Answer: Risk retention
Risk retention means the owner absorbs potential losses using internal funds or reserves instead of transferring the financial exposure to an insurer.