[h] CPCU 551 – Module 6
[q] Business income insurance
[a] Insurance that covers the reduction in an organization’s income when business is interrupted by property damage caused by a covered peril.
[q] Business interruption
[a] Loss of income that a business sustains because its operations are suspended as a result of damage to its property.
[q] Net income
[a] An organization’s revenue reduced by its expenses.
[a] Net income that occurs when an organization’s revenue exceeds its expenses.
[q] Net loss
[a] The loss that occurs when an organization’s expenses exceed its revenue.
[q] Continuing expenses
[a] Business expenditures that continue during a shutdown. Includes payroll of key employees, debt repayments, taxes, and insurance.
[q] Noncontinuing expenses
[a] Business expenditures that cease during a shutdown.
[q] Extra expenses
[a] Business expenses incurred to mitigate the effects of a business interruption.
[q] Estimated maximum loss
[a] The estimated maximum loss of business income that an organization might incur if a shutdown occurs.
[q] Coinsurance basis
[a] The sum of estimated net income and expenses for the 12 months following policy inception, reduced by those expenses listed in the business income worksheet as deductions.
[q] Business income worksheet
[a] A worksheet for calculating the amount of insurance necessary to comply with the Coinsurance condition of business income insurance forms.
[q] Business Income (and Extra Expense) Coverage Form
[a] A business income coverage form that covers both business income and extra expense losses, even if the extra expenses do not reduce the business income loss.
[q] Business Income (Without Extra Expense) Coverage Form
[a] A business income coverage form that covers business income losses. Extra expenses are also covered, provided the extra expenses reduce the business income loss.
[q] Business Income insuring agreement
[a] An insuring agreement in which the insurer agrees to pay business income lossses because of suspension of operations during the period of restoration.
[q] Business income
[a] The sum of the:
Net profit or loss that would have been earned if the suspension of operations had not occurred.
Normal operating expenses that continue during the suspension.
[q] Period of restoration
[a] The period during which a business income loss is covered. For business income losses, the period begins 72 hours after physical loss occurs. For extra expenses, the period begins immediately.
[a] The slowdown or cessation of business activities.
[q] Business income including rental value
[a] An option under the Business Income insuring agreement that covers loss of both rental value and other business income.
[q] Business income other than rental value
[a] An option under the Business Income insuring agreement that covers business income, but does not cover rental value.
[q] Rental value only
[a] An option under the Business Income insuring agreement that only covers rental value.
[q] Extra Expense insuring agreement
[a] An insuring agreement that provides coverage for expenses that the named insured incurs to minimize the suspension of operations.
[q] Civil Authority
[a] An additional coverage under the BIC form that insures loss of business income that results when damage occurs to property other than the insured’s and access to the insured’s premises is prohibited by civil authority.
[q] Alterations and New Buildings
[a] An additional coverage under the BIC form that provides coverage for the loss of income resulting from a delay in starting operations. The delay must result from damage at the premises by a covered cause of loss to:
New buildings or structures, either completed or under construction.
Alterations or additions to existing buildings.
Building materials within 100 feet of the premises.
[q] Extended Business Income coverage
[a] An additional coverage under the BIC form that extends business income coverage to include business income losses that continue after the period of restoration ends.
[q] Interruption of Computer Operations coverage
[a] An additional coverage under the BIC form that provides up to $2,500 of coverage when operations are suspended because of an interruption of computer operations.
[q] Fungus, Rot, and Bacteria
[a] An additional coverage under the BIC form that covers business income and extra expense due to fungus, wet rot, dry rot, and bacteria damage.
[q] Newly Acquired Locations coverage
[a] A coverage extension under the BIC form that provides coverage for property at a new premises. The extension requires at least 50% coinsurance.
[q] Probable maximum loss
[a] The largest loss an insured is likely to sustain.
[q] Loss Determination condition
[a] A condition under the BIC form. Under the condition, the loss is based on the following factors:
Net income before the loss occurred.
Probable net income if no loss had occurred.
Operating expenses that must continue during the period of restoration.
Other relevant sources of information.
[q] Loss Payment condition
[a] A condition of the BIC that stipulates that the insurer agrees to pay for a covered loss within 30 days of the date of an agreed-upon amount of loss.
[q] Coinsurance condition
[a] A condition of the BIC that establishes a coinsurance provision.