Chapter 11 Property and Business Income Insurance

Question 1

What kind of insurance policy covers several buildings under the same policy?

Answer 1

Blanket insurance

Question 2

What is the preferred valuation method in most instances?

a. actual cash value
b. market value
c. utility value
d. replacement cost value

Answer 2

d. replacement cost value

Question 3

Your company uses a small tractor to cut grass at several property sites. In transit, the landscape worker stops for lunch. When he returns to the truck, the tractor has been stolen. You will be fully covered if you have:

a. comprehensive coverage on the tractor
b. a transportation floater
c. an equipment floater
d. professional liability insurance

Answer 3

c. an equipment floater

Question 4

There are many reasons for insurers not to cover certain properties. Which of the following is NOT a reason?

a. property is already covered through a different policy
b. property can only be leased by other companies
c. property is not subject to loss
d. property cannot legally be owned

Answer 4

b. property can only be leased by other companies

Question 5

What provision do most property forms and loss-of-income forms have that ensures that buildings are insured to their proper value?

Answer 5

Coinsurance provisions. They penalize the policyholder after a loss if it has not purchased adequate insurance coverage for the true value of its property or loss of income

Question 6

What is the replacement cost value of a building?

Answer 6

Replacement Cost Value-the actual cost necessary to replace a building after uninsured loss with a new property of like kind and quality

Actual Cash Value-replacement cost of the building minus a deduction for depreciation

Question 7

What ten types of losses are typically excluded from the special form?

Answer 7

• enforcement of laws relating to building construction, demolition, repair, use or debris removal
• utility failure
• earth movement other than sinkhole collapse
• most pollutants
• water such as floods, overflow, backup of sewers or drains, mudslides, and water under the ground
• nuclear reaction, radiation, or contamination
• government action, such as a property seizure
• war or military action
• equipment breakdown, including steam boilers, pipes, engines, or turbine explosions, and mechanical breakdown
• losses due to employee dishonesty

Question 8

Randy is searching to identify all causes of loss that are covered in his insurance policy, so he is looking to locate a specific form referred to as:

a. Causes of Loss-Basic Form
b. Causes of Loss-Special Form
c. Causes of Loss-Broad Form
d. Causes of Loss-General Form

Answer 8

b. Causes of Loss-Special Form

Question 9

__________ covers situations where a computer is used to cause loss through transfers from inside the business premises.

a. Computer and fraud insurance
b. Funds transfer fraud insurance
c. Fund loss insurance
d. Hacking insurance

Answer 9

a. Computer and fraud insurance

Question 10

What is generally true of equipment breakdown insurance?

Answer 10

Provides property insurance for the damage that results from the breakdown of covered equipment

Question 11

What type of insurance protects a building owner from vandalism during construction?

Answer 11

vacant building insurance

also covers:

• sprinkler leakage
• building glass breakage
• water damage
• theft
• attempted theft

Question 12

What are the two types of coverage provided by computer fraud and funds transfer fraud insurance?

Answer 12

computer fraud insurance-covers situations in which a computer is used to cause loss or damage to money, securities, or other property by fraudulently causing the transfer of that property from inside the business premises to a person or place outside the premises

funds transfer insurance-pays for the loss of money or securities from a fraudulent instruction directing a financial institution to transfer or pay funds from a transfer account.

Question 13

To cover damage or theft loss of construction equipment that is often moved from one location to another, Mr. O’Malley added ________ insurance to his insurance policy.

a. computer
b. equipment
c. vacant building
d. sign

Answer 13

b. equipment

Question 14

The Cause of Loss form that covers all causes of loss in a property policy except those specifically excluded is called the:

a. specified peril form
b. special form
c. basic form
d. broad form

Answer 14

b. special form.

Question 15

what type of insurance protects against loss to buildings under construction?

a. builder’s risk insurance
b. equipment breakdown insurance
c. building and personal property insurance
d. ordinance insurance

Answer 15

a. builder’s risk insurance

Question 16

What is business income insurance?

Answer 16

coverage for the loss of income a business suffers following covered damage to insured property. Also called “business interruption insurance” or “loss of income insurance”

Question 17

What insurance covers damage to furniture, machinery, stock, equipment, and movable fixtures?

Answer 17

Equipment breakdown insurance

Question 18

Which of the following type of equipment is NOT typically covered by equipment break-down insurance?

a. security systems
b. electrical equipment.
c. worn-out equipment
d. production equipment

Answer 18

c. worn-out equipment

Question 19

For insurance, the loss-of-income coverage form combines both:

a. business interruption and loss-of-rents insurance
b. business interruption and personal property insurance
c. extra-expense and business personal property insurance
d. business personal property and loss-of-rents insurance

Answer 19

a. business interruption and loss-of-rents insurance

Question 20

Business income insurance covers:

a. the loss of revenue from poor employee productivity
b. the loss of income from the loss of major accounts
c. the loss of income from direct physical damage to insured properties.
d. the loss of revenue from a declining reputation

Answer 20

c. the loss of income from direct physical damage to insured properties.

Question 21

For blanket coverage to be written, an insurance company wants to know that the amount of coverage is accurate. To do this, an insured submits a(n):

a. replacement cost analysis
b. business property inventory
c. statement of value
d. affidavit of insurability

Answer 21

c. statement of value

Question 22

Which property insurance form covers all causes of loss except those specifically excluded?

Answer 22

Causes of Loss-Special Form

Question 23

What are the two types of coverage provided by computer fraud and funds transfer fraud insurance?

Answer 23

computer fraud insurance-covers situations in which a computer is used to cause loss or damage to money, securities, or other property by fraudulently causing the transfer of that property from inside the business premises to a person or place outside the premises