S-08- Loss of Profits Insurance Mock Test 03
Loss of Profits Insurance and ALOP/DSU coverage provide financial protection against business interruption following insured damage. ALOP claims are generally settled after restoration and the required financial statements have been received for the relevant period after full production resumes. Claims require additional documents such as proof of incidence, resumption of business, and audited financial information. The Dual Basis method specifies a minimum initial period of full cover. The Alternative Basis Clause helps determine correct indemnity where output is substituted for turnover. Surveyors must record detailed claimed losses. The indemnity period may extend beyond the policy period, while turnover forms the basis of Loss of Profit Insurance.
1. When can the Claims of ALOP be settled under the policy?
a) Immediately after the damage to the project occurs
b) Only after the project has been completely restored and the financial statements have been received for period not less than the indemnity period after the full production has been started
c) Within 30 days of the occurrence of the damage
d) After the Insurance Regulatory authority approves the claim
e) After the first interim payment has been received
2. What must the Additional Documents for ALOP/DSU Insurance claims include, in addition to material damage documents?
a) Only the Claim Form and Proof of Date of Incidence
b) Standard claim form for material damage only
c) Claim Form, Proof regarding Date of Incidence, Proof regarding Date of resuming of the business activity to its full potential after restoration/reinstatement, and Details of Audited financials for last one completed financial year
d) Only financial projections for the project Insurance
e) Insurance certificate from the main contractor
3. Under the Dual Basis method, what limitation applies regarding the initial period of full cover?
a) The initial period of full cover must not be less than 2 weeks
b) The initial period of full cover must not be less than 4 weeks
c) The initial period of full cover must not be less than 6 weeks
d) The initial period of full cover must not be less than 8 weeks
e) The initial period of full cover must not be less than 10 weeks
4. What is stated about External factors vs. economic condition as the most powerful factor affecting business?
a) Technological factors are always more important than economic conditions
b) Customer demand always overrides economic conditions
c) Only government policies are more important than economic conditions
d) External factors have less impact than economic conditions
e) No external factors affect business more than an economic condition, which is the present state of the economy
5. What is the purpose of the Alternative Basis Clause in a CL policy issued on turnover basis?
a) To allow insurers to reduce premium based on output
b) To provide correct indemnity by identifying the exact loss when output is substituted for turnover
c) To exclude coverage for seasonal fluctuations in turnover
d) To allow extension of the indemnity period
e) To permit the insured to change the basis of specification mid-term
6. What creates a potential for conflict between the underwriter and the insurance agent?
a) Differences in premium rates charged
b) Differences in company policies
c) Differences in product offerings
d) The underwriters performance is judged on quality of applications while the agent is compensated based on quantity of production - and agents responsibilities include initial screening of applicants
e) Differences in geographic territories
7. What should the Surveyor record under the Claim of the Insured section of the assessment report?
a) Only the total claim amount in a single figure
b) The details of the Loss claimed by the insured giving details of quantities and amount claimed. In case the claim involves more than one head - Building, machinery, stock - may be discussed separately. In case of Loss of profit claims, record details of Gross profit, Standing charges and additional cost of working and other claimed charges
c) The insurer's preliminary assessment of the claim
d) The legal basis of the insured's right to claim
e) The documentary evidence supporting the claim only
8. What is the distinction between the Indemnity Period and the Period of Insurance?
a) They are exactly the same and interchangeable
b) The indemnity period is always longer than the period of insurance
c) The period of insurance is always one year while indemnity period is negotiated separately
d) The indemnity period is to be distinguished from the period of insurance which is usually a year - the fire must have occurred during the period of insurance but the indemnity period which commences then may well extend beyond the expiry date of insurance
e) The period of insurance is always shorter than the indemnity period
9. What are the three things that Specification provides for?
a) Premium conditions exclusions
b) Coverage start date end date and premium payment date
c) Items insured under the policy and relative sums insured; Definitions; and A formula for ascertaining the liability for any loss
d) Name of insured address of insured and occupation
e) Claims procedure time limits and documentation required
10. What is the basis of Loss of Profit Insurance?
a) Sum Insured
b) Indemnity Period
c) Replacement Cost
d) Turnover
e) Previous Year Profits
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