CAIB 2 - Chapter 7 Study Guide with Questions and Correct Answers

Identify three reasons or obstacles to selling business interruption instance 1. Is perceived as being too technical 2. Reluctance of insured to reveal earnings 3. Lack of consumer knowledge Identify seven sources of business interruption losses 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) Identify four options for funding to pay continuing expenses during a business interruption 1. Reduction of capital reserves 2. Bank loan 3. Increasing product prices 4. Purchase of adequate limits of business interruption insurance Identify the two things that all business interruption insure 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 Identify the period of indemnity for the following forms; Gross earnings form and profits form 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 Identify five characteristics common to all business interruption forms 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 Identify any types of expense that may be necessarily incurred for the purpose of reducing the amount of loss 1. Over time salaries to building contractors 2. Advertising costs to advise new location/service arrangements 3. Rental or alteration premises