Question

Acme Boats experiences a devastating fire in their factory. They turn to their Business Income coverage to recover their loss of income due to the fire. When Acme Boats initiated the policy, they chose the Maximum Period of Indemnity coverage option with a policy limit of $150,000. Acme Boats experienced the following loss of business income in the months after the fire:

Monthly Income Losses
Month 1 - $20,000
Month 2 - $20,000
Month 3- $15,000
Month 4 - $15,000
Month 5 - $10,000
Month 6 - $10,000
How much money might Acme Boats be indemnified for the loss of business income?

A. $300,000
B. $210,000
C. $260,000
D. $70,000

Answer 1

Acme Boats might be indemnified for a total of $90,000 for their loss of business income, as their six-month losses added up to $90,000, which is below their policy limit of $150,000.

Step-by-step explanation:

Acme Boats would be indemnified for the loss of business income they experienced after a devastating factory fire under their Business Income coverage, which included the Maximum Period of Indemnity option with a policy limit of $150,000.

To calculate the indemnity, we simply add up the losses incurred in each month following the fire:

• Month 1 - $20,000
• Month 2 - $20,000
• Month 3 - $15,000
• Month 4 - $15,000
• Month 5 - $10,000
• Month 6 - $10,000

The total income loss amounts to $90,000 ($20,000 + $20,000 + $15,000 + $15,000 + $10,000 + $10,000), which is less than the policy limit of $150,000. Therefore, Acme Boats might be indemnified for a total of $90,000.