Alabama Insurance Adjuster Practice Exam

What type of coverage would be applicable to Lucille's woodworking business under Coverage A after a fire destroys her operation?

1. Inventory coverage

2. Equipment coverage

3. Building coverage

4. Personal property coverage

The correct answer is: Building coverage

In the context of a woodworking business, Coverage A typically refers to building coverage. This coverage is specifically designed to protect the physical structure of a business property against risks such as fire, theft, and vandalism. When a fire destroys the operation, building coverage will apply to repair or rebuild the physical premises that housed Lucille's woodworking business. Building coverage includes not only the walls and roof of the building but also fixtures and any permanently installed equipment that is part of the physical structure. Given the scenario of a fire destroying the operation, this type of coverage is crucial for restoring Lucille's business to its previous condition concerning the physical location. While inventory, equipment, and personal property coverage are important aspects of a comprehensive insurance policy for a business, they concern different elements. Inventory coverage relates to the finished goods and materials; equipment coverage deals with the tools and machinery used in the business; and personal property coverage insures items that belong to the business, excluding the building structure itself. Therefore, for the specified loss related to the destruction of the building due to fire, building coverage is the appropriate type under Coverage A.