S-08- Loss of Profits Insurance Mock Test 17
S-08 Loss of Profits Insurance covers practical aspects of consequential loss assessment, underwriting, policy conditions, and ALOP/DSU claims. Actual claims can be more complex than simplified case studies and may involve multiple factors and detailed documents. The chapter explains Turnover and Output bases, Alternative Basis Clauses, misrepresentation, supplier premises extensions, and underwriting principles. ALOP/DSU settlement considers reduction in turnover and specified standing charges during delays. Marine inland transit claims require appropriate transport documents such as GR/RR. Business Environment scanning helps identify useful resources. Gross profit calculations, reduction in turnover, and apportionment of standing charges are important for accurate Loss of Profit claim assessment.
1. What does the chapter conclude about actual cases versus the case studies presented?
a) Actual cases are exactly like the case studies presented
b) The actual cases may be very complex and involve more than one factor which may affect the assessment. The chapter kept matter simple so readers can understand concepts - in actual practice there may be many variants and data may be derived from documents/information provided by the insured
c) Actual cases are simpler than the case studies presented
d) All actual cases follow the same 8-step calculation method
e) Actual cases never involve under-insurance
2. Why might the Output basis policy be issued when the policy is on Turnover basis?
a) To reduce the premium payable by the insured
b) The output basis policy may be unsuitable and an Alternative Basis Clause may be attached to a Turnover basis policy to provide more equitable indemnity by identifying the exact loss
c) To extend the indemnity period beyond the standard maximum
d) To include cover for professional fees under the same policy
e) To allow the insurer to settle claims faster without detailed audit
3. What does Condition (b) of the MLOP policy state about policy voidability?
a) The policy is void if any machine is more than 25 years old
b) This Policy shall be voidable in the event of misrepresentation, mis-description or non-disclosure in material particular
c) The policy is void if the insured changes the location of machinery
d) The policy is void if the insured fails to pay premium within 30 days
e) The policy is void if any unlisted machine is used in production
4. Under the extension for Damage at Supplier's Premises, what condition must be met for the extension to apply?
a) The supplier must be located within the same city as the insured
b) Loss as insured by the policy, resulting from interruption of or interference with the business in consequence of damage to property at the supplier's premises shall be deemed to be loss resulting from damage to property used by the insured at the premises
c) The supplier must also have a CL policy in force
d) The damage at supplier's premises must be caused exclusively by fire
e) The supplier must be on the insured's approved vendor list
5. What is the goal of the insurance underwriter in terms of rules?
a) To establish rules that deny all borderline cases
b) To establish rules that maximize premium income only
c) To establish rules that reject sole proprietorships
d) To establish rules which will result in securing an average proportion of good risks resulting in lower average mortality cost for the company
e) To establish rules that only accept low-value policies
6. How is the loss settlement for Specified Standing Charges calculated under the ALOP/DSU policy?
a) By paying the fixed overhead costs regardless of actual revenue
b) In respect of specified standing charges, the insurer shall pay the amount obtained by multiplying the percentage by which the actual turnover during the indemnity period falls short of the turnover which would have been achieved had the delay in start-up not occurred by the amount of specified standing charges incurred during the indemnity period
c) By paying only the insured standing charges that cannot be deferred
d) By paying the standing charges for the first 3 months of delay only
e) By paying the actual cost of maintaining the project during the delay
7. For Marine Inland Transit Loss of cargo/machinery claims, which document represents the official delivery receipt from the transporter?
a) Bill of Lading
b) Invoice and Packing List
c) Survey Report and Duly paid Survey fee bill
d) GR/RR (Goods Receipt/Railway Receipt)
e) Letter of Subrogation cum Undertaking
8. Careful scanning of the Business Environment helps in tapping the useful resources required for the business. It helps the firm to track these resources and convert them into goods and services. This refers to which benefit?
a) Enabling to Identify Business Opportunities
b) Coping with Changes
c) Helps In Tapping Useful Resources
d) Assistance In Planning
e) Helps In Improving Performance
9. In the Gross Profit apportionment example in Chapter 4, if Insured Standing Charges are Rs.4,00,000 and Total Standing Charges are Rs.5,00,000 and Net Trading Loss is Rs.1,00,000, what is the Gross Profit for the purpose of the policy?
a) Rs.4,00,000
b) Rs.5,00,000
c) Rs.1,00,000
d) Rs.3,20,000
e) Rs.2,40,000
10. In Case Study 1, what was the Reduction in Turnover during the Indemnity Period?
a) Rs. 6,00,000
b) Rs. 7,00,000
c) Rs. 8,00,000
d) Rs. 9,00,000
e) Rs. 10,00,000
