1. Is perceived as being too technical
2. Reluctance of insured to reveal earnings
3. Lack of consumer knowledge - ANSWERIdentify three reasons or obstacles to selling business interruption instance
1. Physical damage to property
2. Failure or breakdown of public utilities
3. Transportatio...
CAIB 2 STUDY NOTES;
CHAPTER 7 Questions &
Answers 100% Correct
1. Is perceived as being too technical
2. Reluctance of insured to reveal earnings
3. Lack of consumer knowledge - ANSWERIdentify three reasons or obstacles to selling business
interruption instance
1. Physical damage to property
2. Failure or breakdown of public utilities
3. Transportation related accidents
4. Physical damage to neighbouring premises
5. Loss caused to property of major supplier or costumer
6. Actions of regulatory authorities
7. Ancillary cause (strikes, lock-outs) - ANSWERIdentify seven sources of business interruption losses
1. Reduction of capital reserves
2. Bank loan
3. Increasing product prices
4. Purchase of adequate limits of business interruption insurance - ANSWERIdentify four options for
funding to pay continuing expenses during a business interruption
1. The operating expenses which necessarily must continue during the period the interruption
2. The net profit that is lost because of a partial or total interruption to the business -
ANSWERIdentify the two things that all business interruption insure
1. Gross earnings form (American); Commences at the time of loss and ceases immediately upon
reinstatement of lost or damaged property
, 2. Profits form (British); Commencing at the time of loss and continues until income is restored to the
level that would have resulted had the loss not occurred - ANSWERIdentify the period of indemnity
for the following forms; Gross earnings form and profits form
1. Insure against same perils as are insured by the property policy
2. Are contracts of indemnity
3. Period of indemnity will continue beyond expiry of the policy
4. Indemnity provided while access prohibited by order of civil authority
5. Provide for payment of those expenses necessarily incurred for the purpose of reducing the
amount of loss - ANSWERIdentify five characteristics common to all business interruption forms
1. Broker must be an accountant to understand
2. Should be sold only to those businesses operations at a profit
3. If any loss caused by someone not insured by policy, no need to purchase business interruption -
ANSWERIdentify three myths with business interruption insurance
1. Income; all monies from sales/service
2. Fixed expenses; mortgage interest
3. Semi-variable expenses; advertising
4. Variable expenses; do not continue after a loss (electricity)
5. Gross profit; total net sales less cost of goods sold
6. Net profit; reducing gross profit by all other expenses earned by the business - ANSWERIdentify
the example for each of the following terms regarding business interruption insurance
1. Gross profit; in accounting allows for more deductions, than insurance does - insured could be
under insured
2. Gross earnings; unique to business interruption - ANSWERBriefly explain the following eras as they
apply to business interruption insurance and accounting
False - ANSWERBrokers should know as much about accounting and accountants
Businesses in a net loss will also incur continuing expenses which have to be paid - ANSWERBriefly
explain why business interruption insurance should not only be carried by profitable business
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