COST ACCOUNTING
INFORMATION FOR DECISION MAKING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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covers property losses resulting from fire, storm, accidents, theft, and vadalism
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provides compensation for ongoing business expenses that occur is a business has temporary shut down due to a fire, flood, or other major problem
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compensates business owners in the event of a bankruptcy or business failure
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insures the lives of key executives because of their importance to the company’s success
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Detailed explanation-1: -Business interruption insurance helps replace the lost income and other expenses if a business is forced to temporarily shut down due to a covered peril that affects its commercial property. Covered perils typically include natural disasters such as fire, wind, or lightning, as well as theft and falling objects.
Detailed explanation-2: -Business interruption: While commercial property pays for actual physical damages or losses, BI covers lost net income due to the closure of the business while repairs are underway. These policies may cover rent or lease payments, relocation costs, employee wages, taxes, and loan payments.
Detailed explanation-3: -Business interruption insurance covers the cost of rental and lease payments while your business isn’t making money. Example: A fire damages an electronics store, making it impossible for the business to serve customers. While the business is closed for renovations, it still needs to make rental payments on the store.
Detailed explanation-4: -Business interruption risk refers to the financial loss a company suffers when its operations are disrupted. This loss includes both observable components, such as reduced sales and increased cost of working, and hidden components, such as loss of future revenue streams due to potential reputational damage.
Detailed explanation-5: -1 Most business interruption insurance policies define this period as the date that the covered peril began until the date that the damaged property is physically repaired and returned to the same condition that existed prior to the disaster. There may also be a waiting period of 48 to 72 hours.