CRECI Property Risk Management 2

Question 1

Which type of insurance covers loss of rental income when a commercial property is rendered uninhabitable due to a covered peril?

Accepted Answer

Business interruption insurance

Answer

General liability insurance

Answer

Umbrella liability insurance

Answer

Directors and officers insurance

Question 2

A commercial property owner discovers that a tenant's operations have caused soil contamination. Which policy is specifically designed to address this environmental liability?

Accepted Answer

Pollution liability insurance

Answer

Workers' compensation policy

Answer

Product liability insurance

Answer

Inland marine insurance

Question 3

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:

Accepted Answer

Contractual risk transfer

Answer

Risk avoidance

Answer

Risk retention

Answer

Risk diversification

Question 4

What is the primary purpose of a FEMA flood zone determination when acquiring commercial real estate?

Accepted Answer

To determine if flood insurance is federally required

Answer

To estimate property tax assessments

Answer

To calculate depreciation schedules

Answer

To identify zoning classifications

Question 5

Which risk management tool quantifies the maximum probable loss from a single catastrophic event at a commercial property?

Accepted Answer

Probable maximum loss (PML) estimate

Answer

Net operating income analysis

Answer

Debt service coverage ratio

Answer

Capitalization rate analysis

Question 6

A commercial property manager implements a formal inspection schedule, repairs faulty handrails, and installs security lighting. These actions primarily represent which risk management strategy?

Accepted Answer

Risk control/reduction

Answer

Risk transfer

Answer

Risk financing

Answer

Risk avoidance

Question 7

When a property owner self-insures by setting aside reserves for potential losses rather than purchasing a commercial insurance policy, this strategy is called:

Accepted Answer

Risk retention

Answer

Risk transfer

Answer

Captive insurance

Answer

Indemnification