Colorado · Property Insurance Sample Interactive Mind Map
BOP Section I — Property Coverages
A visual breakdown of BOP Section I — Property Coverages — one of the concepts you can count on seeing on the exam.
The TESTivity Interactive Mind Mapping Graphic we picked for the Colorado Property Insurance sample is BOP Section I — Property Coverages — and this is a concept you can count on seeing on your pre-licensing exam. Get the structure straight once and those questions turn into free points.
So explore it. Click through, see how the pieces relate, and let the layout do some of the remembering for you.
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BOP Section I provides the physical-asset protection at the foundation of the policy, written on a Special (open perils) form.
It includes three primary property coverages: the building (if the insured owns it), business personal property, and business income. Business Income gets its own cluster (it is heavily tested); this cluster covers the property you insure — plus the limited coverage for others' property in your care.
It includes three primary property coverages: the building (if the insured owns it), business personal property, and business income. Business Income gets its own cluster (it is heavily tested); this cluster covers the property you insure — plus the limited coverage for others' property in your care.
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Building Coverage
Only if the insured OWNS the building
✅ If You Own the Building, It Covers
The described structure and completed additions
Permanently installed fixtures, machinery, and equipment
Property used to maintain or service the building (fire extinguishers, floor coverings, appliances)
Outdoor fixtures owned by the building owner
❌ If You Lease (Rent) the Space
There is no building coverage — the landlord owns the structure and insures it
A tenant may still need coverage for tenant improvements and betterments (covered as BPP)
How they test thisThe very first thing to settle on any BOP property question is own versus lease. If the insured rents, building coverage is the landlord's job — the tenant's BOP covers BPP and any improvements and betterments, not the structure.
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Business Personal Property (BPP)
The insured's own property used in the business
- Furniture and fixtures
- Machinery and equipment
- Stock — inventory held for sale
- All other personal property owned by the insured and used in the business
- Labor, materials, and services the insured furnishes on the personal property of others
- Tenant's improvements and betterments — additions to the leased premises that cannot be legally removed
Where It's Covered
Business personal property is covered at the described premises and for a limited distance adjacent to the described premises.
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Personal Property of Others
A limited extension — not full bailee's coverage
What It Is (and Isn't)
The BOP provides limited coverage for others' personal property in the insured's care, custody, or control at the described premises — think of a customer leaving an item for repair or service. This is not full bailee's coverage. A business with significant bailee exposure should obtain dedicated inland marine bailee's coverage.
Look out for this on the examIf a stem describes a repair shop or service business holding a lot of customer property, the answer often is that the BOP's limited extension is inadequate and a dedicated bailee's form is needed. Do not mistake this limited extension for true bailee's coverage.
The BOP property section uses the Special form — open perils — meaning all causes of loss are covered EXCEPT those specifically excluded.
So on this topic, the exclusions are the whole game. They mirror the commercial property Special form, and several have a dedicated coverage solution you are expected to name.
So on this topic, the exclusions are the whole game. They mirror the commercial property Special form, and several have a dedicated coverage solution you are expected to name.
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Standard BOP Property Exclusions
All causes covered except these — with the fix for each
- Flood and surface water — separate NFIP or private flood insurance required
- Earth movement (earthquake, landslide, subsidence) — separate earthquake coverage required
- Mechanical breakdown and electrical failure — Equipment Breakdown endorsement fills this gap
- Dishonest acts by the insured or employees — Crime endorsement fills this gap
- Power failure originating off premises
- Governmental action, nuclear hazard, and war and military action
- Wear and tear and gradual deterioration
- Settling, cracking, shrinkage, bulging, or expansion
The quartet they always testFour exclusions are treated as 'always excluded from standard property': flood, earthquake, mechanical breakdown, and dishonest acts. Each needs a separate solution (flood policy, earthquake coverage, Equipment Breakdown endorsement, Crime endorsement). When a stem hands you one of these, the answer is the separate coverage — not the BOP property form.
Business Income is automatically included in the BOP — it is not a separately priced option.
That automatic inclusion is one of the BOP's biggest advantages over piecing together a commercial policy, where small-business owners frequently overlook business income. When a question asks what is automatically included in a BOP, Business Income is always on the list.
That automatic inclusion is one of the BOP's biggest advantages over piecing together a commercial policy, where small-business owners frequently overlook business income. When a question asks what is automatically included in a BOP, Business Income is always on the list.
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What Business Income Does — and Doesn't
Triggered by a covered property loss that suspends operations
✅ It Pays For
Net income the business would have earned during the period of restoration
Continuing normal operating expenses — rent, loan payments, utilities, payroll, insurance premiums
❌ It Does NOT Pay For
Extra expenses to continue operations (that is separate Extra Expense)
Losses from economic downturns or voluntary business decisions
Losses from a supplier's property loss (that is contingent business income, separate)
Trigger & Period
Coverage is triggered by a covered property loss that forces the suspension or reduction of operations. It runs for the period of restoration — the time reasonably required to repair or replace the damaged property.
The trap they setTwo favorites: (1) claiming Business Income must be elected separately on a BOP — false, it is automatic; and (2) offering an 'economic downturn' or a 'slow season' as the cause — never a trigger. The trigger is always a covered physical loss that suspends operations.
Knowing what's covered is half the battle — the other half is how a loss is valued and paid, and what extras ride along automatically.
Replacement cost, the 80% condition, the property-only deductible, and the package of automatic Additional Coverages are all fair game.
Replacement cost, the 80% condition, the property-only deductible, and the package of automatic Additional Coverages are all fair game.
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Valuation — Replacement Cost
Repair or replace like kind and quality, no depreciation
How It Settles
The BOP settles covered building (if owned) and business personal property losses at replacement cost — the cost to repair or replace with new property of like kind and quality, with no deduction for depreciation.
Conditions for Full RC
The insured must actually repair or replace (or begin within a set time) — otherwise payment is limited to ACV — and must carry coverage equal to at least 80% of replacement cost value (coinsurance-style). Antiques/custom items with no readily determinable RC may settle at ACV or market value.
How they test thisTwo levers turn full RC into ACV: not actually replacing the property, and carrying less than 80% of replacement value. If a stem says the insured 'chose not to rebuild' or 'was underinsured,' expect an ACV answer.
📊 Coverage Limits
• Building: should equal 100% of replacement cost (the BOP requires RC on an owned building)
• BPP: should reflect total value of furniture, equipment, inventory — frequently underestimated
• Business Income: often no separate dollar limit (pays actual loss sustained during restoration); some forms use an annual limit or a set number of months
• BPP: should reflect total value of furniture, equipment, inventory — frequently underestimated
• Business Income: often no separate dollar limit (pays actual loss sustained during restoration); some forms use an annual limit or a set number of months
🧾 Deductibles
• Commonly $500, $1,000, or $2,500 per occurrence (higher available for premium savings)
• Applies to each covered property loss occurrence
• No deductible applies to the liability section of the BOP
• Some forms carry separate, higher wind/hail deductibles in coastal areas
• Applies to each covered property loss occurrence
• No deductible applies to the liability section of the BOP
• Some forms carry separate, higher wind/hail deductibles in coastal areas
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The Deductible Lives on the Property Side Only
The property deductible reduces property claims. It does not touch the BOP's liability section. A favorite exam move is to attach a property deductible to a liability settlement — don't take the bait.
➕ Automatic Additional Coverages
Debris Removal
Removes debris of covered property after a covered loss.
Preservation of Property
Covers property moved to protect it from an impending covered loss, up to 30 days.
Fire Department Service Charges
Pays fire department charges to protect covered property.
Collapse
Sudden collapse of the building from specified causes.
Water Damage from Appliances
Sudden, accidental discharge from plumbing, heating, AC, or fire-suppression systems.
BI from Dependent Properties
Limited coverage when a supplier's or customer's loss affects the insured's operations.
Newly Acquired / Constructed Property
Automatic coverage at new locations for 30 days.
Outdoor Signs
Coverage for signs attached to the building.
Money & Securities
Limited coverage for theft or destruction of money and securities.
Employee Dishonesty
Limited employee-theft coverage — a low sub-limit that may be inadequate.
Mechanical Breakdown
Some newer BOP forms include limited Equipment Breakdown.
Look out for this on the examThe Additional Coverages mirror the homeowners policy's. Two get tested most: the 30-day windows (Preservation of Property, Newly Acquired/Constructed) and the low Employee Dishonesty sub-limit, which is often inadequate for real theft exposure and points toward a Crime policy.
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Top Exam Tips — BOP Section I Property
1. Own vs lease decides building coverage. No building coverage for a tenant — the landlord insures the structure. The tenant insures BPP and improvements & betterments.
2. Improvements & betterments are the tenant's BPP. Additions the tenant made that can't be legally removed are covered even though the tenant doesn't own the building.
3. Special form = open perils: all causes covered except those excluded. Flood, earthquake, mechanical breakdown, and dishonest acts are the always-excluded quartet — each needs a separate solution.
4. Business Income is automatically included — pays net income plus continuing expenses during the period of restoration. An economic downturn is never a trigger.
5. Replacement cost applies to owned building and BPP — but only with actual repair/replacement and at least 80% coverage; otherwise ACV.
6. The deductible is property-only. No deductible applies to the BOP's liability section.
7. Personal Property of Others is a limited extension, not full bailee's coverage — significant bailee exposure needs a dedicated inland marine form.
2. Improvements & betterments are the tenant's BPP. Additions the tenant made that can't be legally removed are covered even though the tenant doesn't own the building.
3. Special form = open perils: all causes covered except those excluded. Flood, earthquake, mechanical breakdown, and dishonest acts are the always-excluded quartet — each needs a separate solution.
4. Business Income is automatically included — pays net income plus continuing expenses during the period of restoration. An economic downturn is never a trigger.
5. Replacement cost applies to owned building and BPP — but only with actual repair/replacement and at least 80% coverage; otherwise ACV.
6. The deductible is property-only. No deductible applies to the BOP's liability section.
7. Personal Property of Others is a limited extension, not full bailee's coverage — significant bailee exposure needs a dedicated inland marine form.
Exam vocabulary
Key Terms to Know
BOP Section I (Property)
The property half of the BOP: building (if owned), business personal property, and business income, written on a Special (open perils) form.
Special Form (Open Perils)
A causes-of-loss basis covering all perils except those specifically excluded — the BOP property standard.
Building Coverage
Insures the owned structure, completed additions, permanently installed fixtures/equipment, and property used to service the building. Not available to tenants.
Business Personal Property
The insured's furniture, fixtures, machinery, equipment, and stock used in the business, covered at the premises and a limited distance adjacent.
Improvements & Betterments
Additions a tenant makes to leased premises that cannot be legally removed — covered under the tenant's business personal property.
Personal Property of Others
A limited BOP extension for others' property in the insured's care at the premises. Not full bailee's coverage.
Business Income
Automatically included coverage paying lost net income and continuing expenses during the period of restoration after a covered loss suspends operations.
Period of Restoration
The time reasonably required to repair or replace the damaged property — the window Business Income is paid.
Replacement Cost
Settlement to repair or replace with new property of like kind and quality, with no deduction for depreciation.
80% Replacement Cost Condition
The insured must carry coverage equal to at least 80% of replacement cost value to receive full RC settlement — a coinsurance-style requirement.
Actual Cash Value (ACV)
Replacement cost less depreciation — the fallback when the insured doesn't replace, is underinsured, or RC isn't readily determinable.
Property Deductible
The amount the insured absorbs per covered property loss occurrence. Applies to property only — never to the BOP's liability section.
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