ADJUSTER PRO UPDATED STUDY EXAMS GUIDE
QUESTIONS AND SOLUTIONS RATED A+
✔✔In a commercial property policy, the Business Income Coverage Form provides
indemnification to the policyholder for the loss of income during which of the following
time frames? - ✔✔From 72 hours after the initial damage until the business is up and
running again
✔✔XYZ Carpet Manufacturing's main factory burns down during the night due to faulty
electrical wiring. No longer able to manufacture carpeting, XYZ Carpet faces a serious
cash flow dilemma. Which insurance coverage might help pay XYZ Carpet's bills while
the factory is repaired? - ✔✔Business Income coverage
✔✔ABC Paving owns a warehouse where they store all their pavers. Lightning strikes
the warehouse, which burns to the ground and destroys the entire fleet of pavers. In
order to complete the projects they are currently working on, ABC Paving has to lease
four pavers from another company. What commercial insurance coverage might pay for
this expense? - ✔✔Extra Expense
✔✔In a commercial property policy, Business Income Coverage would pay for which of
the following expenses? - ✔✔Rent
✔✔In a commercial property policy, Extra Expense Coverage provides indemnification
to the policyholder for additional expenses incurred during which of the following time
frames? - ✔✔From the point of initial damage until the moment the business is up and
running again
✔✔Helen owns a manufacturing company. She maintains a commercial property policy
that includes Business Income and Extra Expense coverage. One evening, a windstorm
blows a tree through the side of her building, leaving a hole in the wall and damaging a
production machine. When Helen has to rent another machine to keep her business in
operation, how long will she have to wait before she can be indemnified for this indirect
loss? - ✔✔0 hours—Extra Expense coverage kicks in immediately
✔✔Diana owns a manufacturing company. One evening, a windstorm blows a tree
through the side of her building, leaving a hole in the wall and damaging one of her
production machines. Diana temporarily fixes the hole with some plywood, but will have
to rent a new production machine until hers is repaired. Which coverage in her
commercial property policy could indemnify Diana for the cost of the machine rental? -
✔✔Extra Expense Coverage (Extra Expense coverage is designed to help the insured
business reduce their loss of income in the event of a covered loss, (such as a
production machine to keep the business going).)
,✔✔A fire breaks out in Anton's manufacturing plant, causing extensive damage which
will take at least three months to repair. In the meantime, Anton has rent and employees
who still need to be paid, and many other expenses that can't wait until the business is
up and running again. Which coverage form of his commercial property policy can help
Anton with his cash flow? - ✔✔Business Income Coverage
✔✔XYZ Computer's production building for circuit boards is struck by lightning, which
results in a fire that burns down the entire facility. XYZ Computer cannot continue the
production of computers until the facility is rebuilt. Which insurance coverage might
indemnify XYZ Computer for lost revenue until a new facility is built? - ✔✔Business
Interruption (The Business Income Coverage Form (a.k.a. Business Interruption Form)
indemnifies the insured for lost income due to damages caused by a covered loss, plus
any continuing operating expenses incurred during the period of restoration, such as
rent, salaries, utilities, taxes, etc.)
✔✔A fire in John's factory causes him to shut the doors for 90 days. While repairs take
place, John rents another building, along with some machinery and manufacturing
supplies, for $90,000. John's total loss is $300,000, but by renting the new building and
equipment he manages to reduce that loss by $50,000. Assuming John's commercial
property policy includes Business Income Coverage With Extra Expense, how much will
his insurer indemnify him? - ✔✔$340,000 (John was able to reduce his total loss by
$50,000, making his total loss $250,000. The extra expense of the equipment ($90,000)
is then added to the total loss ($250,000) giving us a total loss, with extra expenses, of
$340,000.)
✔✔When Bill's business is interrupted because of a fire, he must provide a profit and
loss statement to his insurer so they can determine an accurate amount of
indemnification. Which three core elements from the profit and loss statement are used
to calculate the net income? - ✔✔Total revenue, cost of goods sold, operating expenses
✔✔A fire in John's factory causes him to shut the doors for 90 days. While repairs take
place, John rents another building, along with some machinery and manufacturing
supplies, for $90,000. John's total loss is $300,000, but by renting the new building and
equipment he manages to reduce that loss by $50,000. Assuming John's commercial
property policy provides Business Income Coverage Without Extra Expense, how much
will his insurer indemnify him? - ✔✔$300,000
✔✔Which of the following coverage options does NOT waive the coinsurance
requirement in a commercial property policy? - ✔✔Replacement Cost
✔✔In a commercial property policy, Builders Risk coverage is sold based on which of
the following values? - ✔✔The value of the completed building (Builders Risk coverage
is sold on the basis of the completed value of the building, and the insured must carry
100% coinsurance on the policy to receive full coverage for partial losses.)
,✔✔Acme Boats experiences a devastating fire in their factory. They turn to their
Business Income coverage to recover their loss of income due to the fire. When Acme
Boats initiated the policy, they chose the Maximum Period of Indemnity coverage option
with a policy limit of $150,000. Acme Boats experienced the following loss of business
income in the months after the fire:
Monthly Income Losses
Month 1 - $20,000
Month 2 - $20,000
Month 3- $15,000
Month 4 - $15,000
Month 5 - $10,000
Month 6 - $10,000
How much money might Acme Boats be indemnified for the loss of business income? -
✔✔$70,000 (The Maximum Period of Indemnity coverage option pays for the actual loss
to business income and any extra expenses incurred, but only up to a maximum of 120
days (approximately 4 months). So, add up the losses for months 1 through 4 and we
come up with $70,000.)
✔✔Argo Sciences Inc. wants to build a new testing laboratory for their line of chemicals.
They want insurance coverage to protect their insurable interest in the building and
materials while under construction. What commercial property coverage might Argo
Sciences Inc. purchase to protect their new facility while it's under construction? -
✔✔Builder's Risk coverage
✔✔A storm travels through town, partially destroying Wilma's business, which is
covered by a commercial property policy. Wilma maintains Business Income Coverage
with a $100,000 limit, and the Maximum Period of Indemnity coverage option. Wilma's
business incurred the following losses:
Monthly Losses
Month 1---$19,000
Month 2---$16,000
Month 3---$14,000
Month 4---$11,000
Month 5---$6,000
How much would her policy pay for lost income? - ✔✔$60,000
✔✔A storm travels through town, partially destroying Wilma's business. Wilma
maintains a Business Income coverage policy with $120,000 limit, and the Monthly Limit
of Indemnity coverage option. Wilma's business incurred the following expenses:
Monthly Expenses
Month 1---$29,000
Month 2---$36,000
Month 3---$24,000
Month 4---$31,000
, How much would her policy pay for lost income if Wilma had a monthly limit of 1/4 in
place? - ✔✔$113,000 (With a monthly limit of 1/4, Wilma's Business Income coverage
will pay a maximum of 1/4 of her limit every month during the period of restoration, until
the policy limit is reached. 1/4 of $120,000 is $30,000. So, she'll receive the actual loss
amount in months 1 & 3, since they fall below the limit, and she'll only receive $30,000
for months 2 & 4. This totals $113,000.)
✔✔In a commercial property policy, the Monthly Limit of Indemnity coverage option for
Business Income insurance: - ✔✔requires an insured to parcel the stated policy limit
into a fractional maximum amount of coverage available per month during the period of
restoration.
✔✔Veronica is in the process of building an extra structure for the sole purpose of kiln
firing her pottery. After 40 days of waiting for it to be completed, she decides to go
ahead and begin using it, since the kiln is already set up, even though the interior
drywall isn't completely finished. Her Builder's Risk Coverage Form is then terminated
because: - ✔✔Veronica has now put the building to its intended use. (The policy period
of a Builders Risk Coverage form is unique, since the coverage is designed for buildings
under construction. So the policy begins when construction starts, and can end for a
variety of reasons, one of which is that the building is put into its intended use.)
✔✔When a fire destroys a car parts manufacturer in China, USA Motors finds itself
without the necessary parts to build its vehicles. Which commercial property insurance
coverage option could indemnify USA Motors from lost business due to the damages
sustained by its Chinese supplier? - ✔✔Contingent Business Interruption
✔✔Mackey Manufacturing signs a five-year lease at a new location, only to have the
building burn down one year into their new lease. Now they have to lease a new
property, and the rental prices have increased, so the company now has to pay higher
rental costs. Which commercial property coverage form might indemnify Mackey
Manufacturing for the difference in lease costs? - ✔✔Leasehold Interest Coverage Form
(Leasehold Interest Coverage is a type of "time element" coverage that pays for the
difference between the cost of the old rental and the new, often more expensive, rental.)
✔✔ABC Computers experiences a fire overnight at their corporate offices. ABC
Computers had purchased an older building to house their offices, and the repair costs
include upgrading the old building to adhere to modern fire codes. Which coverage
might indemnify ABC Computers for the added expense of these upgrades? -
✔✔Ordinance or Law endorsement
✔✔While working on a customer's industrial copier in the repair facility, an employee at
RZJ Electronics Repair accidentally destroys the copier, causing $3,000 in damage.
What commercial property coverage might apply? - ✔✔Legal Liability coverage
QUESTIONS AND SOLUTIONS RATED A+
✔✔In a commercial property policy, the Business Income Coverage Form provides
indemnification to the policyholder for the loss of income during which of the following
time frames? - ✔✔From 72 hours after the initial damage until the business is up and
running again
✔✔XYZ Carpet Manufacturing's main factory burns down during the night due to faulty
electrical wiring. No longer able to manufacture carpeting, XYZ Carpet faces a serious
cash flow dilemma. Which insurance coverage might help pay XYZ Carpet's bills while
the factory is repaired? - ✔✔Business Income coverage
✔✔ABC Paving owns a warehouse where they store all their pavers. Lightning strikes
the warehouse, which burns to the ground and destroys the entire fleet of pavers. In
order to complete the projects they are currently working on, ABC Paving has to lease
four pavers from another company. What commercial insurance coverage might pay for
this expense? - ✔✔Extra Expense
✔✔In a commercial property policy, Business Income Coverage would pay for which of
the following expenses? - ✔✔Rent
✔✔In a commercial property policy, Extra Expense Coverage provides indemnification
to the policyholder for additional expenses incurred during which of the following time
frames? - ✔✔From the point of initial damage until the moment the business is up and
running again
✔✔Helen owns a manufacturing company. She maintains a commercial property policy
that includes Business Income and Extra Expense coverage. One evening, a windstorm
blows a tree through the side of her building, leaving a hole in the wall and damaging a
production machine. When Helen has to rent another machine to keep her business in
operation, how long will she have to wait before she can be indemnified for this indirect
loss? - ✔✔0 hours—Extra Expense coverage kicks in immediately
✔✔Diana owns a manufacturing company. One evening, a windstorm blows a tree
through the side of her building, leaving a hole in the wall and damaging one of her
production machines. Diana temporarily fixes the hole with some plywood, but will have
to rent a new production machine until hers is repaired. Which coverage in her
commercial property policy could indemnify Diana for the cost of the machine rental? -
✔✔Extra Expense Coverage (Extra Expense coverage is designed to help the insured
business reduce their loss of income in the event of a covered loss, (such as a
production machine to keep the business going).)
,✔✔A fire breaks out in Anton's manufacturing plant, causing extensive damage which
will take at least three months to repair. In the meantime, Anton has rent and employees
who still need to be paid, and many other expenses that can't wait until the business is
up and running again. Which coverage form of his commercial property policy can help
Anton with his cash flow? - ✔✔Business Income Coverage
✔✔XYZ Computer's production building for circuit boards is struck by lightning, which
results in a fire that burns down the entire facility. XYZ Computer cannot continue the
production of computers until the facility is rebuilt. Which insurance coverage might
indemnify XYZ Computer for lost revenue until a new facility is built? - ✔✔Business
Interruption (The Business Income Coverage Form (a.k.a. Business Interruption Form)
indemnifies the insured for lost income due to damages caused by a covered loss, plus
any continuing operating expenses incurred during the period of restoration, such as
rent, salaries, utilities, taxes, etc.)
✔✔A fire in John's factory causes him to shut the doors for 90 days. While repairs take
place, John rents another building, along with some machinery and manufacturing
supplies, for $90,000. John's total loss is $300,000, but by renting the new building and
equipment he manages to reduce that loss by $50,000. Assuming John's commercial
property policy includes Business Income Coverage With Extra Expense, how much will
his insurer indemnify him? - ✔✔$340,000 (John was able to reduce his total loss by
$50,000, making his total loss $250,000. The extra expense of the equipment ($90,000)
is then added to the total loss ($250,000) giving us a total loss, with extra expenses, of
$340,000.)
✔✔When Bill's business is interrupted because of a fire, he must provide a profit and
loss statement to his insurer so they can determine an accurate amount of
indemnification. Which three core elements from the profit and loss statement are used
to calculate the net income? - ✔✔Total revenue, cost of goods sold, operating expenses
✔✔A fire in John's factory causes him to shut the doors for 90 days. While repairs take
place, John rents another building, along with some machinery and manufacturing
supplies, for $90,000. John's total loss is $300,000, but by renting the new building and
equipment he manages to reduce that loss by $50,000. Assuming John's commercial
property policy provides Business Income Coverage Without Extra Expense, how much
will his insurer indemnify him? - ✔✔$300,000
✔✔Which of the following coverage options does NOT waive the coinsurance
requirement in a commercial property policy? - ✔✔Replacement Cost
✔✔In a commercial property policy, Builders Risk coverage is sold based on which of
the following values? - ✔✔The value of the completed building (Builders Risk coverage
is sold on the basis of the completed value of the building, and the insured must carry
100% coinsurance on the policy to receive full coverage for partial losses.)
,✔✔Acme Boats experiences a devastating fire in their factory. They turn to their
Business Income coverage to recover their loss of income due to the fire. When Acme
Boats initiated the policy, they chose the Maximum Period of Indemnity coverage option
with a policy limit of $150,000. Acme Boats experienced the following loss of business
income in the months after the fire:
Monthly Income Losses
Month 1 - $20,000
Month 2 - $20,000
Month 3- $15,000
Month 4 - $15,000
Month 5 - $10,000
Month 6 - $10,000
How much money might Acme Boats be indemnified for the loss of business income? -
✔✔$70,000 (The Maximum Period of Indemnity coverage option pays for the actual loss
to business income and any extra expenses incurred, but only up to a maximum of 120
days (approximately 4 months). So, add up the losses for months 1 through 4 and we
come up with $70,000.)
✔✔Argo Sciences Inc. wants to build a new testing laboratory for their line of chemicals.
They want insurance coverage to protect their insurable interest in the building and
materials while under construction. What commercial property coverage might Argo
Sciences Inc. purchase to protect their new facility while it's under construction? -
✔✔Builder's Risk coverage
✔✔A storm travels through town, partially destroying Wilma's business, which is
covered by a commercial property policy. Wilma maintains Business Income Coverage
with a $100,000 limit, and the Maximum Period of Indemnity coverage option. Wilma's
business incurred the following losses:
Monthly Losses
Month 1---$19,000
Month 2---$16,000
Month 3---$14,000
Month 4---$11,000
Month 5---$6,000
How much would her policy pay for lost income? - ✔✔$60,000
✔✔A storm travels through town, partially destroying Wilma's business. Wilma
maintains a Business Income coverage policy with $120,000 limit, and the Monthly Limit
of Indemnity coverage option. Wilma's business incurred the following expenses:
Monthly Expenses
Month 1---$29,000
Month 2---$36,000
Month 3---$24,000
Month 4---$31,000
, How much would her policy pay for lost income if Wilma had a monthly limit of 1/4 in
place? - ✔✔$113,000 (With a monthly limit of 1/4, Wilma's Business Income coverage
will pay a maximum of 1/4 of her limit every month during the period of restoration, until
the policy limit is reached. 1/4 of $120,000 is $30,000. So, she'll receive the actual loss
amount in months 1 & 3, since they fall below the limit, and she'll only receive $30,000
for months 2 & 4. This totals $113,000.)
✔✔In a commercial property policy, the Monthly Limit of Indemnity coverage option for
Business Income insurance: - ✔✔requires an insured to parcel the stated policy limit
into a fractional maximum amount of coverage available per month during the period of
restoration.
✔✔Veronica is in the process of building an extra structure for the sole purpose of kiln
firing her pottery. After 40 days of waiting for it to be completed, she decides to go
ahead and begin using it, since the kiln is already set up, even though the interior
drywall isn't completely finished. Her Builder's Risk Coverage Form is then terminated
because: - ✔✔Veronica has now put the building to its intended use. (The policy period
of a Builders Risk Coverage form is unique, since the coverage is designed for buildings
under construction. So the policy begins when construction starts, and can end for a
variety of reasons, one of which is that the building is put into its intended use.)
✔✔When a fire destroys a car parts manufacturer in China, USA Motors finds itself
without the necessary parts to build its vehicles. Which commercial property insurance
coverage option could indemnify USA Motors from lost business due to the damages
sustained by its Chinese supplier? - ✔✔Contingent Business Interruption
✔✔Mackey Manufacturing signs a five-year lease at a new location, only to have the
building burn down one year into their new lease. Now they have to lease a new
property, and the rental prices have increased, so the company now has to pay higher
rental costs. Which commercial property coverage form might indemnify Mackey
Manufacturing for the difference in lease costs? - ✔✔Leasehold Interest Coverage Form
(Leasehold Interest Coverage is a type of "time element" coverage that pays for the
difference between the cost of the old rental and the new, often more expensive, rental.)
✔✔ABC Computers experiences a fire overnight at their corporate offices. ABC
Computers had purchased an older building to house their offices, and the repair costs
include upgrading the old building to adhere to modern fire codes. Which coverage
might indemnify ABC Computers for the added expense of these upgrades? -
✔✔Ordinance or Law endorsement
✔✔While working on a customer's industrial copier in the repair facility, an employee at
RZJ Electronics Repair accidentally destroys the copier, causing $3,000 in damage.
What commercial property coverage might apply? - ✔✔Legal Liability coverage
