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
, 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
1. Cost - can be high
2. Delay - can take months
3. Risk - amounts may not be sufficient - ANSWERIdentify three problem end that could be created
by waiting to collect from responsible third parties - in regards to business interruption insurance
1. Nature of the business
2. Types of perils most likely to cause an interruption - ANSWERIdentify two key factors to be
considered when selecting the proper coverage form
1. Completion of the appropriate worksheet
2. Allowance for future trends - ANSWERIdentify two items to consider when determining the
amount of coverage needed
1. Over time salaries to building contractors
2. Advertising costs to advise new location/service arrangements
3. Rental or alteration premises - ANSWERIdentify any types of expense that may be necessarily
incurred for the purpose of reducing the amount of loss
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