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CMA Intermediate · Financial Accounting · Insurance Claim for Loss of Stock and Loss of Profit

In a consequential loss (loss of profit) insurance policy, the 'indemnity period' is best described as:

The indemnity period is the maximum period after the damage during which the fall in turnover and increased cost of working are taken into account for the claim. It is fixed in the policy and limits the insurer's liability, regardless of how long the business takes to recover.

  1. AThe period from the date of policy purchase to the date of fire
  2. BThe maximum period after the fire during which reduction in turnover is considered for the claimCorrect
  3. CThe financial year in which the fire occurred
  4. DThe period taken by the insurer to settle the claim

Explanation

The indemnity period is the maximum period, fixed in the policy, during which the business results are affected by the damage and for which the insurer compensates the loss. Counting from policy purchase or the financial year has no link to it, and claim settlement time is irrelevant.

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