Aic 31 C

Front 1

Hard goods

Back 1

Merchandise made principally from glass, metal, and china, which can be cleaned after exposure to smoke or water.

Front 2

Soft goods

Back 2

Merchandise made principally from textile and fabric, which is not truly restored by cleaning.

Front 3

Incoming freight charges

Back 3

The amount that the insured pays to have goods shipped to the insured's premises from a supplier.

Front 4

Trade discounts and allowances

Back 4

Reductions from the stated purchase price, given by the supplier, for such reasons as purchasing in bulk or paying in a timely manner.

Front 5

Internal handling costs

Back 5

The insured's cost to have its own employees handle stock, such as pricing and arranging.

Front 6

Retail method of accounting

Back 6

An accounting procedure that assumes a consistent profit percentage so that goods marked down at retail also lose value as assets on the business's books.

Front 7

Out-of-sight merchandise

Back 7

Merchandise that has been damaged beyond recognition.

Front 8

Income statement

Back 8

The financial statement that reports an organisation's profit or loss for a specific period by comparing the revenues generated with the expenses incurred to produce those revenues.

Front 9

Balance sheet

Back 9

The financial statement that reports the assets, liabilities, and owners' equity of an organization as of a specific date.

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Cost of goods sold

Back 10

An expense representing the cost of merchandise sold to customers during the period.

Front 11

Cost of sales

Back 11

An income statement value that represents the cost to the company of merchandise sold or services provided during the year (the inventory at the beginning of the period adjusted for all purchases made during the period, less the goods on hand at the end of the period).

Front 12

Shrinkage

Back 12

The reduction in stock on hand because of petty theft, breakage, unrecorded sales, and other mishaps.

Front 13

Perpetual Inventory

Back 13

A method of continuously tracking inventory that may not have been reconciled to the actual physical inventory.

Front 14

Reporting form

Back 14

A form to periodically report fluctuating property values to an insurer.

Front 15

Full reporting clause

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A clause that states that if the last report of values is less than the full value of the covered property at the time of loss, then the insured participates in the loss in much the same manner as in coinsurance.

Front 16

Specific Insurance

Back 16

Insurance that covers each building for a specific limit of insurance and personal property at each building for a specific limit of insurance.

Front 17

Coverage for Merchandise Losses occurrs under what two policies?

Back 17

1. The Building & Personal Property Coverage Form (BPP)

2. BOP

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The Business & Personal Property Coverage Form extends coverage for Personal property to

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- furniture and fixtures

- machinery and equipment

- Stock (merchandise held for sale, supplies used in packing and shipping)

*Note: Coverage is for direct physical loss unless excluded or on a specified=perils basis.

Front 19

The BOP policy coverage extends to

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all likely exposures, including owned property, property of others, and improvements and betterments

Front 20

Policies can differ in what areas pertaining to claim coverage?

Back 20

- coinsurance clause

- coinsurance percentage

- deductible

Front 21

Under the BPP, coverage exists

Back 21

regardless of the insured's legal liability for the damage.

Front 22

Replacement cost

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Insured's cost to buy stock from its suppliers, less any trade discounts or allowances, plus incoming freight.

* Can also include cost of receiving, opening, tagging, marking, and arranging the goods in the insured's premises by supplier.

Front 23

Freight charges

Back 23

Amounts insureds pay to have goods shipped to them from suppliers. Any freight paid by the insured's is NOT covered!

Front 24

Trade discounts and Allowances

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are stated purchase price reductions suppliers grant insured for purchasing in volume or for paying in time.

Front 25

There are two types of "Handling Costs"

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1. INTERNAL - costs of insured's employees handling items. (this is NOT added to cost of goods sold)

2. EXTERNAL - coasts of a third party handling the item for the insured and adding a separate charge tot he cost.

Front 26

Causes of physical damage are

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Careless handling Dust fading moisture or humidity

missing parts infestation

Excessive heat Freezing and thawing

Front 27

what elements contribute to shrinkage?

Back 27

petty theft
breakage
unrecorded sales
other mishaps

Front 28

how do you calculate the "cost value of items sold?"

Back 28

Retail value X cost-to-sales ratio

Front 29

What is the "Salver's " role?

Back 29

protect inventory, and if necessary, sell damaged merchandise.

Front 30

Salvage can be sold before the adjuster and insured have agreed on a settlement

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but they must agree to sell the salvage "on account of whom it may concern."

these are goods like perishable goods.

Front 31

How can a salvor help an adjuster?

Back 31

protect items from further damage

inventory all property on premises

advise adjuster as to possibilities for a % of the damage settlement.

Front 32

An adjuster should be familiar with the law in the jurisdiction of the claim

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because the insured may be entitled to first-dollar recovery on salvage regardless of coinsurance.

Front 33

What happens when an insured never files a report before a loss occurs under the value reporting form?

Back 33

The insurer will pay no more than 75% of the amount that otherwise would have been paid.

Front 34

When damage to merchandise is severe and widespread but not total, the first visit by the adjuster involves

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inspecting premises, taking photos, and guiding the insured.

Front 35

Damage to or destruction of tangible property can cause loss of

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revenue or increased expenses.

Front 36

Business Income Loss

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Financial loss that occurs when tangible commercial property is damaged or destroyed, resulting in a loss of revenue or increased expenses during the time that the property is being replaced or expired.

Front 37

Business interruption

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Loss of revenue that a business or another organization sustains because its operations are suspended as a result of physical injury to its property.

Front 38

Time element loss (indirect loss)

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A loss that arises as a result of damage to property, other than the direct loss to the property.

Front 39

Forensic Accountant

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An expert at evaluating business income losses.

Front 40

Assets

Back 40

Tangible and intangible property, owned by an entity.

Front 41

Liabilities

Back 41

Financial obligations , or debts, owed by a company to another entity, usually the policyholder in the case of an insurer.

Front 42

Owners' Equity (net worth)

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The balance sheet value that represents the difference between total assets and total liabilities as of the balance sheet date and that represents the value of the owners' interest in the business.

Front 43

Expense directly related to sales

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An expense that increases or decreases in direct relationship to sales, such as cost of goods sold.

Front 44

General operating expense

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An expense that is necessary to run a business but bears no direct relationship to the volume of sales.

Front 45

Gross Profit

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an income statement value that represents sales or operating revenue minus the cost of goods sold.

Front 46

Gross margin (gross profit margin)

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The percentage of sales remaining after deducting the cost of goods sold from sales, calculated by dividing gross profit by sales.

Front 47

Mark-up

Back 47

Gross profit expressed as a percentage of cost of goods sold.

Front 48

Depreciation Expense

Back 48

An accounting method that spreads out the expense of a purchase over the life expectancy of the item.

Front 49

Net Income

Back 49

The difference between revenues (such as money received for goods or services) and expenses (such as money paid for merchandise, rent, and insurance).

Front 50

Extra Expenses

Back 50

Expenses, in addition to ordinary expenses, an organization incurs to mitigate the effects of a business interruption.

Front 51

Continuing expenses

Back 51

Expenses that continue to be incurred during a business interruption.

Front 52

Trend sheets

Back 52

Spreadsheets that show a businesses' historical gross revenue data in a series of days, weeks, months, quarters, years.

Front 53

Reconciliation

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The process of matching the net income and continuing expenses projections with the actual sales made and expenses incurred during the loss period.

Front 54

An organization's balance sheet answers the question?

Back 54

Where do we stand right now?

Front 55

An organization's income statement answers the question?

Back 55

How did we do during a particular time period?

Front 56

For-profit business revenue comes from

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sale of its products or services

Front 57

Not-for-profit business revenue comes fromm

Back 57

Memberships, dues, fees, or sales

Front 58

What are the two types of operating expenses?

Back 58

1. General operating expenses

2. Expense related directly to sales

Front 59

Business Income coverage might cover

Back 59

loss of income

loss caused by extra expenses

or both

Front 60

The BIC recognizes three types of extra expenses

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1. Expenses to avoid/minimize the suspension of business and to continue operations;

2. Expenses to minimize suspension of business when the insured can't continue operations;

3. Expenses to repair property or restore records to extent it reduces other costs.

Front 61

The insured value of stock is

Back 61

the cost to the business of replacing the stock, not its selling price.

Front 62

The accuracy or perpetual inventory depends on

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the accuracy of the information on which it is based.

Front 63

Practical difficulties that can arise when adjusting a loss are

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destruction of records

the phenomenon of shrinkage

the differences between perpetual and physical inventory.

Front 64

Gross Profit is

Back 64

Operating Revenue - Cost of goods sold

Front 65

The intent of the BIC limitation to actual loss sustained is

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To limit recovery to losses that are real and direct, rather than speculative.

*Not every loss results in a loss of business income.

Front 66

Trend sheets are more accurate at evaluating revenue trends than daily, monthly, or weekly average because

Back 66

they reflect fluctuations in revenue and are more reflective of the loss period.

Front 67

Two methods used to determine the value of net income plus continuing expenses owed under the BIC?

Back 67

net income + continuing expenses

gross profit - noncontinuing expenses.

Front 68

Civil Authority coverage applies

Back 68

when civil authorities prevent access to the insured premises because of direct physical loss to other property caused by a covered cause of loss.

Front 69

Coverage for alterations and new buildings applies

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whenever loss to alterations and new buildings causes actual loss of business income.

Front 70

Coverage for extended business income applies

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for up to 30 days when the business income loss continues after property has been restored.

Front 71

Coverage for interruption of computer operations provision

Back 71

extends coverage to a loss by an interruption in computer operations caused by the destruction or corruption of electronic data from a covered cause of loss.

Front 72

Coverage for newly acquired locations applies

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up to an additional $100,000 for newly acquired property. intent is to parallel the property coverages for locations acquired during the policy term.

Front 73

The Limits of Insurance Clause of the BIC restricts recovery to the stated limit for which additional coverages?

Back 73

1. Alterations and New Buildings

2. Civil Authority

3. Extra Expense

4. Extended Business Income