CAIB 2 Chapter 7 Practice Test 1 Graded A+

CAIB 2 Chapter 7 Practice Test 1 Graded A+ Provide four sources of Business Interruption losses and an example of each. i) Physical damage to business example: Fire destroys business and customers cannot make purchases ii) Failure of public utilities example: Ice storm damages power lines and power cannot be restored for several weeks. This results in sales at the business to plummet iii) Transportation related accidents example: Railcar containing hazardous gas overturns causing evacuation of town. As a result, of this railcar accident, sales at business cease. iv) Physical damage to neighbouring premises example: Your client, who is a tenant in a shopping mall, experiences drop in sales when anchor store burns to the ground Identify three sources of funding available to businesses when their operations are interrupted. i) Reduce capital reserves ii) Take out a bank loan iii) Purchase adequate amounts of business interruption insurance What are the two key coverages provided by business interruption policies? i) Insure lost net profit of the business which it could have earned had there been no loss ii) Insure expense that must continue during period of business interruption What is the period of indemnity provided by Gross Earnings forms? Coverage begins on the date of destruction or damage and continues for time necessary to repair or replace damaged property What is the period of indemnity provided by Profits forms? Coverage begins on the date of destruction or damage and continues until the preloss sales have been re-established When would you recommend insureds purchase a Profits form? When customers need to be won back after shut down of business, Profits form should be purchased Identify five characteristics common to all Business Interruption policies and briefly explain each. i) Insure same perils covered by property insurance Explanation: Coverage on the property policy triggers coverage under business interruption policies ii) Contracts of indemnity Explanation: Claim payments based on amounts business could have earned had the loss not occurred iii) Indemnity period not limited by policy expiration Explanation: When losses occur during policy period, coverage will not end upon policy expiration.