Other Than Life (OTL) Practice Exam

What type of insurance protects against risks of a business shutdown?

1. Property insurance

2. Business interruption insurance

3. Liability insurance

4. Extra Expense insurance

The correct answer is: Business interruption insurance

Business interruption insurance specifically protects against the financial loss that a business experiences due to a temporary shutdown caused by an unexpected event, such as a natural disaster, fire, or other disruptions. This type of insurance covers lost income during the period when the business is unable to operate and can also cover ongoing expenses that need to be paid even when the business is not generating revenue, such as rent, utilities, and payroll. In context, property insurance primarily focuses on protecting physical assets and property from damage or loss, liability insurance protects against claims from third parties for injury or damage, and extra expense insurance covers additional costs incurred to continue business operations after a loss. While these other types of insurance play important roles in a business’s overall risk management strategy, they do not specifically address the financial impact of a business shutdown the way business interruption insurance does.