Course Name- Risk and Insurance Management

Course Code- Fin 410

Class Test Assignment

Submitted by:

Name ID
Sharfa Nur Yasin 183004902
Mohammad Irfanul Hoque 192000502

Submitted to:

Ms. Tabassum Chowdhury

Assistant Professor

School of Business Administration

East Delta University

Q-1: Vince owns a television repair shop that is insured under a commercial package
policy. The policy includes the building and personal property coverage form and the
causes-of-loss broad form. The declarations page indicates that coverage applies to both the
building and the named insured’s business property. Explain whether or not the following
losses would be covered under his policy.

a) A fire occurs on the premises, and the building is badly damaged.

Answer: Under Building and personal property coverage form it covers the building described in
the declaration and includes machinery and equipment. Equipment used to maintain or service
the building (such as fire-extinguishing equipment, appliance for cooking and dishwashing, flood
buffers and vacuum cleaners) is also covered. This form also cover additions, alternation or
repairs to the building which includes material and supplies on or within 100 feet of the
premises.

Under Cause-of-Loss Broad Form which includes causes of loss covered by the basic form plus
several additional causes. So, yes, the premises would be covered because fire occurs on the
premises and is one of the basic causes of loss (perils).

b) A burglar steals some money and securities from an unlocked safe.

Answer: This loss would not be compensated because the money is stolen as a result of the
owner’s carelessness. Stealing money from an unlocked safe is not part of Commercial package
policy.

c) A business computer is damaged by vandals who break into the shop after business
hours.

Answer: Under Business Personal Property of the name insured inside or on the building or
within 100 feet of the premises is also covered. It includes furniture and fixtures; machinery and
equipment; stock and all other personal property owned by the insured and use in the insured
business. So, yes, the damages would be covered because the declaration indicates the cover
would compensate for the premises and its properties.

d) A tornado touches down near the store. Several television sets of customers in the shop
for repair are damaged in the storm.

Answer: Under personal property of others which includes the care, custody or control of the
named insured can be covered. As tornado destroys several television sets which belongs to
customers is damaged, the loss would be covered.
Q-3: Ashley owns a retail shoe store that is insured for $120,000 under the business income
(and extra expense) coverage form. Because of a fire, Ashley was forced to close the store
for 3 months. Based on past and projected future earnings, Ashley expected the store to
earn a net income of $30,000 during the 3-month shutdown period if the loss had not
occurred. During the shutdown period, there were no revenues, and Ashley had continuing
expenses of $10,000. How much will Ashley recover for the business income loss? Explain
your answer.

Answer: Ashley will recover $40000 ($30000+$10000) for the business income loss.

Ashley insured his store under business income (and extra expense) coverage form at $120000.
The Business income and expense coverage basically coverage form for the loss of business
income due to the suspension of operations during the period of restoration. According to the
business income and (extra expense) coverage form the suspension of Ashley's stores operations
result from damage to property caused by an insured peril (fire) at the described premises. The
extra expense coverage form covers only extra expenses incurred by a firm in continuing
operations during the period of restoration. Loss of profit is not covered.

Because of the damage to property caused by fire Ashley had to close the operations of his store
for 3 months. If there is no loss occurred Ashley expected the store would earn during the 3
month shutdown period a net income of $30000 on the basis of past and projected future
earnings. But there were no revenue during that during period and had to continue expenses of $
10000. As a result Ashley's store had to experience a net loss of $10000. In this case the business
income is $40000 calculated as $30000 - (- $10000). The loss payment covers the net income
that would have earned if the loss had not occurred and continue expenses during the shutdown
period.