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Businessowners Policy

Practice questions on businessowners policy for the casualty exam, each with an answer and explanation.

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Study questions and answers

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1. The businessowners policy (BOP) is designed for:

  1. Large manufacturers with complex exposures
  2. Small to medium-sized businesses such as offices, apartments, and retail stores
  3. Individuals who own their homes
  4. Trucking companies with large fleets
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B. Small to medium-sized businesses such as offices, apartments, and retail stores
The BOP packages property and liability coverage for eligible small and medium-sized businesses at a simplified premium.

2. Which business would generally NOT be eligible for a businessowners policy?

  1. A small dental office
  2. A neighborhood clothing store
  3. A bank
  4. An apartment building
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C. A bank
Banks and other financial institutions are ineligible for the BOP, as are risks such as auto dealers, parking lots, and most bars.

3. How are buildings and business personal property usually valued under a businessowners policy?

  1. Actual cash value with an 80 percent coinsurance clause
  2. Replacement cost, with no coinsurance clause
  3. Agreed value only
  4. Stated amount with a 90 percent coinsurance clause
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B. Replacement cost, with no coinsurance clause
The BOP pays replacement cost and has no coinsurance requirement, which makes it simpler than the commercial property form.

4. Under the businessowners policy, business income coverage is usually provided:

  1. Only by a separate endorsement
  2. For actual loss sustained up to 12 months, with no separate dollar limit
  3. For up to 30 days with a dollar limit
  4. Only for losses caused by flood
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B. For actual loss sustained up to 12 months, with no separate dollar limit
Business income and extra expense are built into the BOP on an actual loss sustained basis for up to 12 months.

5. Business income coverage under the businessowners policy usually begins after a waiting period of:

  1. 24 hours
  2. 48 hours
  3. 72 hours
  4. 7 days
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C. 72 hours
The BOP applies a 72-hour waiting period to business income. Extra expense coverage starts right away.

6. A retail store's inventory rises before the holiday season. The businessowners policy addresses this with:

  1. A coinsurance penalty
  2. An automatic seasonal increase in the business personal property limit
  3. A separate inland marine floater
  4. A higher deductible
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B. An automatic seasonal increase in the business personal property limit
The BOP automatically increases the business personal property limit, usually by 25 percent, to cover seasonal inventory peaks.

7. Section II of the businessowners policy provides:

  1. Workers compensation benefits
  2. Business liability and medical expenses coverage
  3. Commercial auto liability
  4. Professional liability for all insureds
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B. Business liability and medical expenses coverage
Section I is property, Section II is liability, and Section III holds the common policy conditions.

8. Which exposure is excluded under the liability section of a businessowners policy?

  1. Injury to a customer who slips in the store
  2. Damage caused by the insured's products after sale
  3. Liability arising from the insured's owned autos
  4. Personal and advertising injury
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C. Liability arising from the insured's owned autos
Like the CGL, the BOP excludes auto liability, workers compensation, and professional services, so those need separate policies.

9. A business needs liability coverage for its company cars and its employees' work injuries in addition to its BOP. It should buy:

  1. A higher BOP liability limit
  2. A business auto policy and a workers compensation policy
  3. An umbrella policy only
  4. A commercial crime policy
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B. A business auto policy and a workers compensation policy
The BOP does not cover auto or workers compensation exposures. Those are written on separate commercial auto and workers compensation policies.

10. Employee dishonesty and equipment breakdown coverage under a businessowners policy are generally:

  1. Included automatically with unlimited limits
  2. Available as optional coverages for an additional premium
  3. Never available
  4. Required by law for all BOP insureds
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B. Available as optional coverages for an additional premium
Coverages such as employee dishonesty, equipment breakdown, and outdoor signs are optional additions to the BOP.
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