S-08- Loss of Profits Insurance Mock Test 05
ALOP/DSU Insurance provides protection against financial losses caused by delays in project completion and is generally purchased alongside Marine Insurance for critical project items and CAR/EAR policies. Loss of Profits Insurance also considers extensions such as Lay-off/Retrenchment Compensation and Increased Cost of Working. Business planning helps organizations respond to problems and opportunities created by the business environment. Strikes may temporarily interrupt operations and reduce sales and revenue. Fire Insurance primarily covers material property such as buildings, machinery, fixtures, and goods. Underwriters seek to minimize adverse selection by carefully selecting risks. MLOP considers relative importance of machinery, while regular communication with insurers and surveyors supports effective claim management.
1. What two types of insurance is the ALOP/DSU policy recommended to be purchased in conjunction with?
a) Fire Insurance and Marine Cargo Insurance
b) Marine Insurance for critical items of the project AND Erection All Risks Insurance/Construction All Risk Insurance, irrespective of whether the delay results from damage covered under the Marine or the Erection policy
c) Life Insurance and Engineering Insurance
d) CAR Insurance and Public Liability Insurance
e) Worker's Compensation and Professional Indemnity Insurance
2. What additional premium loading is charged for the Lay-off/Retrenchment Compensation extension on a CL policy?
a) 25% over the Consequential Loss basis rate
b) 50% loading over the Consequential Loss basis rate
c) 75% loading over the Consequential Loss basis rate
d) 100% loading over the Consequential Loss basis rate
e) No additional loading - it is included in the base rate
3. In Case Study 1, what was the Increased Cost of Working claimed and was it within the Economic Limit?
a) Rs.1,00,000; not within economic limit
b) Rs.1,25,000; it was within the economic limit as 25% of Rs.6,00,000 (turnover saved) = Rs.1,50,000 which is more than ICOW of Rs.1,25,000, so ICOW of Rs.1,25,000 is payable
c) Rs.1,50,000; exceeds economic limit so only Rs.1,25,000 payable
d) Rs.2,00,000; within limit
e) Rs.75,000; within limit
4. Planning purely means what is to be done in the future. When the Business Environment presents a problem or an opportunity, it is up to the business to decide what plan would it have to come up with to address the future. This relates to which importance?
a) Tapping Useful Resources
b) Identifying Business Opportunities
c) Coping with Changes
d) Improving Performance
e) Assistance In Planning
5. What consequence can strikes have on a business according to Chapter 2?
a) Strikes have no significant business impact
b) Strikes always lead to permanent business closure
c) Strikes only affect large corporations
d) Strikes can force a business to close for the short-term, leading to a loss in sales and revenue
e) Strikes only affect government-owned businesses
6. What type of property does Fire Insurance cover as its subject matter?
a) Earning capacity of the business premises
b) Business income and trading profits
c) Future profits and goodwill of the business
d) Material property - buildings, machinery, fixtures, goods etc.
e) Investment portfolios and financial assets
7. What must insurers minimize to achieve the purpose of underwriting?
a) The number of claims processed
b) The effects of adverse selection by carefully selecting the applicants whose loss exposures they are willing to insure
c) The number of agents employed
d) The amount of premium charged
e) The number of policies issued
8. What does Memo 2 - Relative Importance - mean in the context of the MLOP policy?
a) The policy only covers machinery above a specified minimum value
b) The relative importance refers to the percentage effect which a breakdown of a particular machine will have on the total gross profit, disregarding any loss minimizing measures
c) The most important machine in the list gets higher coverage
d) Relative importance is the proportion of turnover contributed by each machine
e) It refers to the relative ranking of machines by age and replacement cost
9. What does it mean to keep insurers and surveyors informed on a regular basis?
a) Only informing them when major milestones are achieved
b) Cooperating with the insurers and keeping them informed regarding the progress of restoration/reinstatement on regular basis
c) Sending weekly photographs of damaged property
d) Providing only financial information and no operational updates
e) Informing only the surveyor and not the insurer directly
10. What does Reinsurance Deconstructed or risk-attaching reinsurance cover?
a) Only risks that occur outside the coverage period
b) Only risks that are specifically named in the contract
c) Only risks above a certain premium threshold
d) All claims established during the effective period of a contract regardless of whether the losses occurred outside the coverage period - no coverage is provided for claims originating outside the coverage period even if the losses occurred while the contract was in effect
e) Only risks in specific geographic areas
