CAIB 2 - CHAPTER 7
- Seen as being too technical;
- Reluctant to reveal earnings;
- Lack of consumer knowledge.—ANSWER--Why some clients may be reluctant to
discuss business interruption Insurance.
- Physical damage to property;
- Failure or breakdown of public utilities;
- Transportation-related accidents;
- Physical damage to neighbouring premises;
- Loss caused to property of major supplier or customer;
- Ancillary causes - strikes/lockouts.—ANSWER--Sources of business interruption
losses.
1) Use capital reserves to pay expenses;
2) Bank loan;
3) Increase product prices to cover the loss.—ANSWER--Three other sources of funding
to pay continuing expenses, other than business interruption insurance.
, Includes all monies from sales or services rendered by a business.—ANSWER--
"Income."
Expenses that continue during the period of an interruption. Includes mortgage interest,
interest on accounts payable, management salaries and salaries under contract, etc.—
ANSWER--"Fixed expenses."
Expenses that may or may not continue during the period of interruption. Includes
advertising, short-term salary continuation, warehousing costs, etc.—ANSWER--"Semi-
variable expenses."
1) Insure against same perils as insured by the property policy;
2) Contracts of indemnity;
3) Period of indemnity is not limited by the policy period;
4) Provide payment of expenses necessarily incurred to reduce amount of loss;
5) Provide payment when access to insured's premises is prohibited by order of civil
authority.—ANSWER--Five common characteristics of business interruption insurance
forms.
The sum of "net profit" and "standing charges."—ANSWER--"Gross profit" in insurance
terms.
Gross profit minus all other expenses earned by the business.—ANSWER--"Net profit"
in insurance terms.
"Gross profit" on a financial statement allows more deductions than "gross profit"
calculated for insurance. If the accounting amount were used, the insured would be
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law, Copyrighted By Brittie Donald
- Seen as being too technical;
- Reluctant to reveal earnings;
- Lack of consumer knowledge.—ANSWER--Why some clients may be reluctant to
discuss business interruption Insurance.
- Physical damage to property;
- Failure or breakdown of public utilities;
- Transportation-related accidents;
- Physical damage to neighbouring premises;
- Loss caused to property of major supplier or customer;
- Ancillary causes - strikes/lockouts.—ANSWER--Sources of business interruption
losses.
1) Use capital reserves to pay expenses;
2) Bank loan;
3) Increase product prices to cover the loss.—ANSWER--Three other sources of funding
to pay continuing expenses, other than business interruption insurance.
, Includes all monies from sales or services rendered by a business.—ANSWER--
"Income."
Expenses that continue during the period of an interruption. Includes mortgage interest,
interest on accounts payable, management salaries and salaries under contract, etc.—
ANSWER--"Fixed expenses."
Expenses that may or may not continue during the period of interruption. Includes
advertising, short-term salary continuation, warehousing costs, etc.—ANSWER--"Semi-
variable expenses."
1) Insure against same perils as insured by the property policy;
2) Contracts of indemnity;
3) Period of indemnity is not limited by the policy period;
4) Provide payment of expenses necessarily incurred to reduce amount of loss;
5) Provide payment when access to insured's premises is prohibited by order of civil
authority.—ANSWER--Five common characteristics of business interruption insurance
forms.
The sum of "net profit" and "standing charges."—ANSWER--"Gross profit" in insurance
terms.
Gross profit minus all other expenses earned by the business.—ANSWER--"Net profit"
in insurance terms.
"Gross profit" on a financial statement allows more deductions than "gross profit"
calculated for insurance. If the accounting amount were used, the insured would be
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law, Copyrighted By Brittie Donald
