Chapter 7 Flashcards
What is the primary purpose of commercial property insurance?
To cover physical damage to insured buildings and property, such as damage from fire, natural disasters, vandalism, or accidents (e.g., vehicle impact).
What types of damage are typically covered under a commercial property policy?
Structural damage, damage to fixtures and fittings, and losses to contents such as equipment, furniture, and inventory.
What is business interruption insurance?
It provides coverage for loss of income and increased costs of working when a business is temporarily unable to operate due to an insured event like fire or structural damage.
How is gross profit loss calculated in a business interruption claim?
By comparing the actual gross profit during the closure with the expected gross profit based on historical financial records or previous periods of similar trading.
What is an indemnity period in business interruption insurance?
The maximum time during which the insurer will compensate the policyholder for loss of income following an insured event, starting from the date of the incident.
What is the excess in a property damage or business interruption insurance policy?
The deductible amount that the policyholder must pay out-of-pocket before the insurer covers the remaining cost of the claim.
What are increased costs of working in a business interruption claim?
Additional expenses incurred by the policyholder to minimize the loss of income or speed up repairs, such as temporary premises or hiring extra staff.
How can policy extensions affect a property damage claim?
Extensions can provide additional cover for items like outdoor fixtures (e.g., seating, signage) or denial of access due to safety orders, which might not be covered under the standard policy.
What are some common exclusions in commercial property and business interruption policies?
Exclusions may include wear and tear, gradual deterioration, damage due to faulty workmanship, or losses occurring outside the insured period.
Why is mitigation important in a business interruption claim?
The policyholder is required to take reasonable steps to reduce the financial impact of the interruption, such as continuing operations elsewhere or expediting repairs.
What is the significance of policy limits in a property damage claim? A:
Policy limits cap the maximum payout the insurer will provide for a particular claim, meaning any costs above this limit must be covered by the policyholder.
What is a denial of access extension in a business interruption policy?
It covers the loss of income if authorities prevent access to the insured premises due to safety concerns following an insured event.
