North Carolina Adjuster Practice Exam

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What is the primary purpose of Business Interruption Insurance?

To cover physical damage to property
To cover loss of income during repairs or closures
To cover legal liabilities for injuries
To cover employee theft or fraud

The correct answer is: To cover loss of income during repairs or closures

Business Interruption Insurance is specifically designed to provide coverage for loss of income that a business suffers as a result of a covered event that disrupts its operations, such as a fire or natural disaster. This type of insurance helps ensure that the business can continue to meet its financial obligations while it is recovering from the incident. The primary purpose is to replace lost income during the period of restoration, allowing the business to maintain its financial stability despite operational interruptions. The other options revolve around different types of insurance coverage. Physical damage to property relates to property insurance, which protects against direct loss or damage to assets. Legal liabilities for injuries are generally covered under liability insurance, which addresses lawsuits or claims made against a business for damages caused to others. Finally, employee theft or fraud falls under crime insurance, specifically designed to cover losses resulting from dishonest acts committed by employees. Each type of insurance serves its unique purpose, but Business Interruption Insurance is distinct in its focus on financial loss due to operational disruptions.