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 clause in a commercial property insurance policy specifies the minimum percentage of a property's value that must be insured to collect full reimbursement on partial losses?
Answer: Coinsurance clause
The coinsurance clause penalizes policyholders who underinsure their property by reducing claim payments proportionally when coverage falls below the required percentage of value.
A commercial real estate investor uses a ground lease structure instead of purchasing land outright primarily to reduce which category of risk?
Answer: Capital risk / equity exposure
A ground lease reduces the investor's capital at risk because the land (often the largest component of value) is not purchased, lowering total equity exposure.
Which document produced during the due diligence phase of a commercial acquisition identifies physical deficiencies and deferred maintenance that represent potential future capital expenditures?
Answer: Property condition assessment (PCA)
A property condition assessment (PCA) evaluates the physical state of a building's systems and structure, flagging items that may require near-term capital investment.
An owner of a multi-tenant office building wants to limit exposure to large, infrequent losses while keeping premiums low. Which policy structure accomplishes this?
Answer: High-deductible policy with excess coverage
A high-deductible policy reduces premiums by retaining smaller losses and relies on excess coverage to protect against catastrophic events.
In commercial real estate, which risk arises specifically from a tenant failing to pay rent or abandoning the premises before lease expiration?
Answer: Credit/default risk
Credit or default risk refers to the possibility that a tenant will not fulfill its financial obligations under the lease, resulting in lost income for the owner.
A property manager conducts a quarterly review of all tenant certificates of insurance to verify current coverage. This activity mitigates which specific risk?
Answer: The risk of the owner being held liable for a tenant-caused injury without available tenant insurance
Verifying tenant insurance certificates ensures the owner has recourse against tenant liability claims and confirms that required contractual coverages remain in force.
Which type of environmental assessment evaluates the presence of hazardous materials such as asbestos, lead paint, and mold within a commercial building's structure?
Answer: Phase II ESA
A Phase II ESA involves actual sampling and laboratory analysis to confirm or quantify contamination identified in the Phase I review, including hazardous building materials.