AU 61. Chapter 7 Questions
A request for a higher amount of direct loss coverage than needed should cause an
underwriter to seek more information because too much insurance might indicate: -
answer A moral hazard.
Which one of the following statements about determining the value at risk for business
income loss exposures is true? - answer The current values in the business income
worksheet may be estimates depending on the timing of the insured's financial
statements.
The Ralok Corporation recently suffered a direct fire loss to its property and will be out
of operation for several months. The business wants to reduce as many of its expenses
as possible during this period. Which one of the following expenses would be most
difficult to reduce immediately? - answer Property taxes, it takes time to obtain property
tax reductions, if they can be obtained at all.
A disaster recovery plan can help an organization respond to a loss and help minimize
the period of business interruption. Which one of the following statements about such
plans is true? - answerThey will indicate whether it is feasible to continue operations
following different types of direct losses.
Which one of the following statements about the business income coverage of
Businessowners Policies with an actual loss sustained coverage feature is true? -
answerThey usually contain a time limit, but no coverage dollar limit.
To convert the probable maximum loss (PML) to an amount that represents insurance
to value, an underwriter would start by doing which one of the following? -
answerDividing the PML by the coinsurance basis.
When estimating future business income losses, - answerPredicting which assets will
have the strongest effect on the insured's earnings is often not possible.
Applicants for business income coverage complete which one of the following forms that
becomes the basis for determining estimates of the insured's future financial
performance? - answerA business income worksheet.
The most prudent assumption for an underwriter when estimating the probable
maximum loss for business income is to assume that a loss will occur at which one of
the following times for an organization? - answerDuring the organization's peak season.
The proper way to determine how much business income coverage an insured needs is
to start with a probable maximum loss expressed as: - answerA dollar amount.
A request for a higher amount of direct loss coverage than needed should cause an
underwriter to seek more information because too much insurance might indicate: -
answer A moral hazard.
Which one of the following statements about determining the value at risk for business
income loss exposures is true? - answer The current values in the business income
worksheet may be estimates depending on the timing of the insured's financial
statements.
The Ralok Corporation recently suffered a direct fire loss to its property and will be out
of operation for several months. The business wants to reduce as many of its expenses
as possible during this period. Which one of the following expenses would be most
difficult to reduce immediately? - answer Property taxes, it takes time to obtain property
tax reductions, if they can be obtained at all.
A disaster recovery plan can help an organization respond to a loss and help minimize
the period of business interruption. Which one of the following statements about such
plans is true? - answerThey will indicate whether it is feasible to continue operations
following different types of direct losses.
Which one of the following statements about the business income coverage of
Businessowners Policies with an actual loss sustained coverage feature is true? -
answerThey usually contain a time limit, but no coverage dollar limit.
To convert the probable maximum loss (PML) to an amount that represents insurance
to value, an underwriter would start by doing which one of the following? -
answerDividing the PML by the coinsurance basis.
When estimating future business income losses, - answerPredicting which assets will
have the strongest effect on the insured's earnings is often not possible.
Applicants for business income coverage complete which one of the following forms that
becomes the basis for determining estimates of the insured's future financial
performance? - answerA business income worksheet.
The most prudent assumption for an underwriter when estimating the probable
maximum loss for business income is to assume that a loss will occur at which one of
the following times for an organization? - answerDuring the organization's peak season.
The proper way to determine how much business income coverage an insured needs is
to start with a probable maximum loss expressed as: - answerA dollar amount.
