CPCU 551 - Chapter 7 Questions and Answers
business income insurance
Insurance that covers the reduction in an organization's income when operations are interrupted by damage to property caused by a covered peril
net income
the difference between total revenue and total expenses when tota...
CPCU 551 - Chapter 7 Questions and
Answers
business income insurance - answer Insurance that covers the reduction in an
organization's income when operations are interrupted by damage to property caused
by a covered peril
net income - answer the difference between total revenue and total expenses when
total revenue is greater
profit - answer net income that results when revenues exceed expenses
net loss - answer Net income that results when expenses exceed revenues
continuing expenses - answer Expenses that continue to be incurred during a
business interruption
noncontinuing expenses - answer Expenses that will not continue during a business
interruption
extra expenses - answer Expenses, in addition to ordinary expenses, that an
organization incurs to mitigate the effects of a business interruption.
dependent property exposure - answer The possibility of incurring business income
loss because of physical loss occurring on the premises of an organization that the
insured depends on for materials, products, or sales
coinsurance basis - answer The sum of the insured's estimated net income and
operating expenses for the twelve months following policy inception, minus only those
expenses listed in the business income worksheet.
business income worksheet - answer A worksheet for calculating the amount of
insurance necessary to comply with the Coinsurance condition of business income
insurance forms, for reporting business income values to the insurer, or for providing
underwriters with information they need to evaluate an organization's business income
loss exposure.
probable maximum loss (PML) - answer The largest loss that an insured is likely to
sustain
payroll limitation or exclusion endorsement - answer endorsement that limits
coverage for payroll expenses to a specified number of days or excludes such
, expenses altogether, allowing the insured to satisfy the coinsurance requirement with a
lower amount of insurance
discretionary payroll expense endorsement - answer An endorsement that extends
business income forms to cover payroll expenses for specified job classifications or
employees regardless of whether such expenses are necessary to resume operations.
power, heat and refrigeration deduction endorsement - answer endorsement that
eliminates power, heat, and refrigeration expenses from coverage and from the
coinsurance calculation, allowing the insured to satisfy the coinsurance requirement
with a lower limit of insurance
business income changes - educational institutions endoresment - answer an
endorsement that modifies business income coverage forms to make them more
appropriate for covering the business income loss exposures of schools
utility services - time element endorsement - answer an endorsement that covers
loss of business income or extra expense at the insured premises caused by the
interruption of utility services to or from the insured premises
ordinance or law - increased period of restoration endorsement - answer
endorsement that covers business income loss during the additional time required to
comply with building ordinances or laws
Business Income losses are measured in terms of - answer Net Income
Revenues - Expenses = Net Income
In order for business income to apply, this must occur: - answer an interruption of
operations caused by property damage from a covered peril to property at locations or
situations described in the policy resulting in a loss of business income and/or extra
expense
On-premises business income exposure is not limited to organizations own property.
Give an example: - answer If insured is a tenant
Business loss can occur because of damage to property at a location not owned by the
insured: Can result from - answer 1) Loss or damage to organizations own property
off premises
2) Dependent property exposures
3) Interruption of utility services
4) Acts of civil authorities
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