Deck 9: Risk Management and Commercial Propertypart I

Question 1

One of the requirements for recovery under business income insurance is that there must be some physical damage to the property caused by an insured peril.

Answer 1

True

Question 2

Business income insurance may be written without a coinsurance clause.

Answer 2

True

Question 3

There would be no recovery under a business income policy unless it could be demonstrated that the firm would have earned a profit during the period of interruption by an insured peril.

Answer 3

False

Question 4

If a manufacturer is shut down because of a fire at a supplier's plant, this loss is insurable under contingent business income insurance.

Question 5

Accounts receivable insurance covers the loss stemming from lenient credit policies.

Question 6

Temperature damage insurance is important for the owner of a greenhouse.

Question 7

Rain insurance can be written on a valued basis as well as on a contract of indemnity.

Question 8

A reporting form is one in which the insured reports to the insurer each loss as it occurs.

Question 9

Leasehold interest insurance covers loss of rental income to a landlord when its property is damaged by a covered loss.

Question 10

Seasonal variations do not generally affect business income insurance recoveries.

Question 11

A consequential loss contract is usually written as an endorsement to a direct peril contract.

Question 12

A strike on the premises during reconstruction will extend the indemnity period of a business interruption policy.

Question 13

Actual total loss occurs when the property is completely destroyed.

Question 14

Boiler and machinery insurance anticipates a substantial outlay for loss-prevention activities.

Question 15

The limit of liability in a boiler and machinery policy applies to each coverage division on an independent basis.

Question 16

Extra expense covers loss incurred during the time that a piece of machinery has been put out of commission by a described accident.

Question 17

Match the descriptions with their terms:

-Losses not directly caused by a peril are called _________________.

A) agreed amount clause
B) Basic form
C) Boiler and machinery insurance
D) broad form
E) Business income
F) consequential damage endorsement
G) consequential losses
H) Contracts without time element
I) extended-period-of-indemnity endorsement
J) maximum period of indemnity
K) scheduled coverage
L) special form
M) Time-element contracts

Question 18

Match the descriptions with their terms:

-_________________ measure an indirect loss in terms of so many dollars per unit of time that passes until the subject matter can be restored.

A) agreed amount clause
B) Basic form
C) Boiler and machinery insurance
D) broad form
E) Business income
F) consequential damage endorsement
G) consequential losses
H) Contracts without time element
I) extended-period-of-indemnity endorsement
J) maximum period of indemnity
K) scheduled coverage
L) special form
M) Time-element contracts

Question 19

Match the descriptions with their terms:

-When property at two or more locations is specifically listed in an insurance contract, it is called _________________.

A) agreed amount clause
B) Basic form
C) Boiler and machinery insurance
D) broad form
E) Business income
F) consequential damage endorsement
G) consequential losses
H) Contracts without time element
I) extended-period-of-indemnity endorsement
J) maximum period of indemnity
K) scheduled coverage
L) special form
M) Time-element contracts

Question 20

Match the descriptions with their terms:

-_________________ reimburses the insured for profits and fixed charges lost as a result of damage to property from a peril.

A) agreed amount clause
B) Basic form
C) Boiler and machinery insurance
D) broad form
E) Business income
F) consequential damage endorsement
G) consequential losses
H) Contracts without time element
I) extended-period-of-indemnity endorsement
J) maximum period of indemnity
K) scheduled coverage
L) special form
M) Time-element contracts

Question 21

Match the descriptions with their terms:

-Under the _________________, the period of loss is defined to mean that period necessary to return to normal business operations.

A) agreed amount clause
B) Basic form
C) Boiler and machinery insurance
D) broad form
E) Business income
F) consequential damage endorsement
G) consequential losses
H) Contracts without time element
I) extended-period-of-indemnity endorsement
J) maximum period of indemnity
K) scheduled coverage
L) special form
M) Time-element contracts

Question 22

Match the descriptions with their terms:

-_________________ are used to insure those losses that result from fire, but where the loss cannot be measured by damage to property or time elapsed.

A) agreed amount clause
B) Basic form
C) Boiler and machinery insurance
D) broad form
E) Business income
F) consequential damage endorsement
G) consequential losses
H) Contracts without time element
I) extended-period-of-indemnity endorsement
J) maximum period of indemnity
K) scheduled coverage
L) special form
M) Time-element contracts

Question 23

Match the descriptions with their terms:

-The _________________ covers loss of power due to an insured peril to an object on the insured's own premises.

A) agreed amount clause
B) Basic form
C) Boiler and machinery insurance
D) broad form
E) Business income
F) consequential damage endorsement
G) consequential losses
H) Contracts without time element
I) extended-period-of-indemnity endorsement
J) maximum period of indemnity
K) scheduled coverage
L) special form
M) Time-element contracts

Question 24

Match the descriptions with their terms:

-_________________ covers explosions, such as those caused by steam boilers, compressors, engines, and furnaces.

A) agreed amount clause
B) Basic form
C) Boiler and machinery insurance
D) broad form
E) Business income
F) consequential damage endorsement
G) consequential losses
H) Contracts without time element
I) extended-period-of-indemnity endorsement
J) maximum period of indemnity
K) scheduled coverage
L) special form
M) Time-element contracts

Question 25

Match the descriptions with their terms:

-________________ is the BPP option that covers fire, lightning, explosions, windstorm and hail, smoke, riot or civil commotion, vandalism, sprinkler linkage, sinkhole collapse, and volcanic action.

A) agreed amount clause
B) Basic form
C) Boiler and machinery insurance
D) broad form
E) Business income
F) consequential damage endorsement
G) consequential losses
H) Contracts without time element
I) extended-period-of-indemnity endorsement
J) maximum period of indemnity
K) scheduled coverage
L) special form
M) Time-element contracts

Question 26

Match the descriptions with their terms:

-The _________________ causes of loss include the basic perils plus falling objects (exterior damage must occur before interior damage is covered); the weight of ice, sleet, and snow; and accidental discharge of water or steam from a system or appliance containing steam or water other than an automatic sprinkler system.

A) agreed amount clause
B) Basic form
C) Boiler and machinery insurance
D) broad form
E) Business income
F) consequential damage endorsement
G) consequential losses
H) Contracts without time element
I) extended-period-of-indemnity endorsement
J) maximum period of indemnity
K) scheduled coverage
L) special form
M) Time-element contracts

Question 27

Match the descriptions with their terms:

-The _________________ cause of loss covers all direct physical losses except those that are excluded; its new name is "open perils."

A) agreed amount clause
B) Basic form
C) Boiler and machinery insurance
D) broad form
E) Business income
F) consequential damage endorsement
G) consequential losses
H) Contracts without time element
I) extended-period-of-indemnity endorsement
J) maximum period of indemnity
K) scheduled coverage
L) special form
M) Time-element contracts

Question 28

Match the descriptions with their terms:

-The _________________ option replaces the insurance-to- value requirement with a maximum restoration period of 120 days.

A) agreed amount clause
B) Basic form
C) Boiler and machinery insurance
D) broad form
E) Business income
F) consequential damage endorsement
G) consequential losses
H) Contracts without time element
I) extended-period-of-indemnity endorsement
J) maximum period of indemnity
K) scheduled coverage
L) special form
M) Time-element contracts

Question 29

Match the descriptions with their terms:

-A/An _________________ is an endorsement that substitutes a dollar amount for the coinsurance percentage with respect to insurance to value provisions in a property insurance contract.

A) agreed amount clause
B) Basic form
C) Boiler and machinery insurance
D) broad form
E) Business income
F) consequential damage endorsement
G) consequential losses
H) Contracts without time element
I) extended-period-of-indemnity endorsement
J) maximum period of indemnity
K) scheduled coverage
L) special form
M) Time-element contracts

Question 30

The basic characteristics of a consequential loss include:

A) the loss is an indirect result of a given peril,
B) the insured peril must first cause a direct loss from which the indirect loss stems,
C) the loss must be measurable,
D) the consequential loss generally involves loss of fixed charges and profits,
E) all of these.

Question 31

If a consequential loss involves lost profits and fixed charges stemming from shutdown of a supplier or customer, it is called

A) business income,
B) contingent business income,
C) leasehold interest,
D) accounts receivable,
E) none of these.

Question 32

An insured can avoid a coinsurance penalty under a business income policy by

A) carrying a policy amount equal to the amount required,
B) adding an agreed-amount endorsement,
C) using the earnings form,
D) all of these.

Question 33

A laundry suffers a severe loss from fire but continues business in another facility that it rents from a competitor. There is no actual stoppage of business, but there are considerable extra costs involved. The laundry would be indemnified for its loss under

A) a business income form,
B) an expenses-to-reduce-loss provision,
C) an extra-expense form,
D) both business income and extra-expense insurance.

Question 34

Consequential losses involve

A) costs that continue after the direct loss occurs,
B) losses that are caused only by fire,
C) no time element.

Question 35

Blanket insurance coverage requires

A) an 80 percent coinsurance clause,
B) a 90 percent coinsurance clause,
C) a 100 percent coinsurance clause.

Question 36

Accounts receivable insurance provides coverage for receivables that are not collected because

A) of fire at the customer's plant,
B) the customer cannot pay,
C) fire destroyed the insured's records.

Question 37

The advisability of rain insurance depends on the promoter's estimate of

A) the size of the crowd,
B) the effect of rain on the crowd,
C) the time of day of the event.

Question 38

The business owner's program has a mandatory

A) 80 percent coinsurance clause,
B) 0 percent coinsurance clause,
C) 90 percent coinsurance clause.

Question 39

Flood and earthquake may be insured against under

A) a DIC policy,
B) the BPP,
C) a business owner's policy.

Question 40

In boiler and machinery insurance, the portion of premium used for inspection services is approximately

A) 1/8,
B) 1/4,
C) 3/8.

Question 41

Because of the technical nature and diversity of boilers, tanks, and furnaces, the boiler and machinery policy

A) is mainly sold to utilities,
B) pays only if large deductibles are accepted,
C) specifies the exact definition of an accident for each insured object.

Question 42

The boiler and machinery insurance contract generally is characterized by all but one of the following:

A) about one-fourth of the premium is for inspection services rather than for pure insurance against the loss,
B) it usually covers all of the firm's boilers and other equipment under one blanket form,
C) it insures several different types of losses under one form,
D) the limits of indemnity apply successively to named losses until the aggregate limits of liability are fully exhausted,
E) the insurer typically sends an inspector to the insured plant two or more times each year.

Question 43

Use and occupancy insurance in the boiler and machinery contract is most similar to

A) business income insurance,
B) expenses-to-reduce-loss insurance,
C) extra-expense insurance,
D) profits and commissions insurance,
E) none of these.