CAIB 2 LATEST 2026 EXAM QUESTIONS AND ANSWERS
SCORED A+
✔✔Accommodation business is best described as:
A. A specialized type of insurance risk which included hotels, motels, apartment
buildings and rental property
B. A risk which can be insured only under a subscription policy
C. A risk which is substandard or marginal, but which, because of its relationship with
the broker, the insurer agrees to to underwrite
D. A risk which is normally acceptable to the insurer but which cannot be bound by the
broker without the insurers consent - ✔✔C. A risk which is substandard or marginal, but
which, because of its relationship with the broker, the insurer agrees to underwrite
✔✔The accounts receivable form would not provide payment for:
A. Penalties charged the insured by suppliers for late payment of account
B. Sum charged by insureds accountant to reconstruct lost records
C. Sums charged by collector agency to collect amounts due to insured
D. Sums due from customers which the insured is unable to collect asa direct result of
the loss of records - ✔✔A. Penalties charged by the insured by suppliers for late
payment on the account
✔✔The coverages provided by the contractors equipment floater would insure which of
the following losses:
A. Damage caused to the front end loader due to its falling off the trailer being used to
transport it to the job site
B. Cracking of the engine block on caterpillar due to freezing
C. Fire damage to contractors plans, blueprints, designs or specs - ✔✔A. Damage
caused to the front end loader due to its falling off the trailer being used to transport it to
the job site
✔✔All of the following statements regarding commercial crime insurance policy are true
except one. Pick the exception:
A. When there is an existing policy in force, broker has the right to bind the insurer for
any interim increase in coverage limits
B. Insurer must provide the insured with 30 days notice when it intents to cancel the
policy, except when cancellation is for non-payment of premium
C. All losses under the policy will be paid in Canadian funds
D. Insured is required to maintain adequate records to substantiate the amount of the
loss under the policy - ✔✔A. When there is an existing policy in force, broker has the
right to bind the insurer for any interim increase in coverage limits
✔✔The insurance policy issued to Adanac Shoes LTD. Provides for the settlement of all
losses on an actual cash value basis. Generally, this has come to be understood as the
replacement cost or repair cost of lost or damaged property less any deprivation.
,However, the Adanac's must be advised that ACV can be measured in terms of "money
value", Explain:
1. Straight Line Depreciation
2. Plateau Acceleration Depreciation
3. Income approach - ✔✔1. Straight line depreciation is based on the number of years
that the building could have reasonable been expected to be functional.
2. Plateau Acceleration Deception is commonly used in the adjustment of losses to
older property
3. Income approach is commonly used with income producing properties
✔✔Courtney Holdings Owns 36 revenue properties in various cities across Canada.
Although the company normally insured to full values of all such property there is a
concern that an increase in inflation rates could cause the amounts of insurance to fall
below the co-insurance percentage required to be maintained under the policy. To avoid
the potential of a penalty being applied at the time of loss, it is your recommendation
that the co-insurance clause be rep[laced with the stated amount co-insurance clause.
Identify the underwriting conditions that must be satisfied by the insureds before the
insurer will agree to replace the standard co-insurance clause with the stated amount
co-insurance clause. - ✔✔1. Files a statement of values with the insurer representing
100% of the value of all property insured, as verified by appraisal or other means
acceptable to the insurers
2. Maintains those values throughout the term of the policy
3. Should be insured NOT maintain insurance to 100% of the stated amount during the
entire policy period the policy will revert a 100% co-insurance basis.
✔✔The valuations clause contained in commercial property insurance policies
establishes how certain property is to be valued by the policy after a loss. In the event of
a loss to the following property belonging to Happy Harry's Appliance Store LTD.
Indicate how each would be valued under the policy.
A. Refrigerator which has been sold but not yet delivered
B. Unsold stock
C. Customers appliances brought onto the premises for repair and upon which repair
has already been completed - ✔✔A. The selling price charged the purchaser, less any
discounts allowed, is the basis of settlement. Discounts could include credit for cash
purchases, pick up by purchaser, trade-ins and any reduction in selling price because of
negotiations between the seller and buyer
B. Restricted to its actual cash value at the time of loss
C. When the loss occurs, the insured may have already spent a significant amount on
materials and labour. These costs are insured by the policy
✔✔The Adanac's Shoes LTD account is new to your brokerage. In preparing for your
insurance quotation to the Adanac's, your office manager suggested that a fact finding
of survey by conducted.
A. Identify two advantages to be gained from conducting such a fact or survey
, B. Insureds who do not have their own inspectors on staff rely on their own
organizations to inspect certain commercial risks and to recommend rates to be
charged. Identify the organization used by most insurers to gather the info needed by
them to property underwrite commercial risks. - ✔✔A. It assists in identification of loss
exposures. Helps to eliminate purchase of coverages the business doesn't need.
Develops underwriting information needed by the insurer
B. Informco Inc
✔✔Explain:
A. The primary role of the underwriter in the risk selection process
B. What is meant by the term "risk classification"?
C. What is the chief advantage of risk classification in the underwriting process? - ✔✔A.
The underwriter will spend considerable amount of time and resources to determine if
there is any condition respecting the risk or the applicant which could cause a loss to
occur.
B. Risk classification refers to the grouping or classifying of risks according to
established criteria, which, in large part, is based on their profitability of loss as a class
C. If the risks is properly classed, it eliminates the chance of premium being charged in
excess of that required or being insufficient
✔✔During a risk survey of Risk and Hope Furniture Inc. you noticed several conditions
which, in your opinion, constitutes a greater than normal physical hazard. You also have
reason to be concerned about the moral hazard present in this risk.
A. What is the difference between a physical hazard and a moral hazard?
B. Identify which of 'physical hazard' or 'moral hazard' is indicated by the presence of
the following condition?
Owner has no established means of controlling the stores inventory and in general,
appears to have a total lack of regards for the protection of store property - ✔✔A. A
physical hazard is a condition relating to the use of tangible property which could cause
a peril to occur. It can be characteristics of the risk itself or of the environment in which it
is located. A moral hazard refers to subjective characteristics of the applicant that could
cause a peril to occur. Indicators of moral hazard include financial condition, associates,
moral character.
B. Physical Hazard
✔✔A. The insurance acts of the common law provinces require that policies insuring
against the peril of fire also insure direct losses caused by two additional perils. Identify
the two additional perils insured by the fire policy
B. Indicated whether the Fire Policy would respond to pay for the following losses. The
building stock and equipment are owned by the insured and are covered under the
policy. State whether covered or not covered.
i. Fire damage to six 15ft canoes being held for sale in the insureds business
SCORED A+
✔✔Accommodation business is best described as:
A. A specialized type of insurance risk which included hotels, motels, apartment
buildings and rental property
B. A risk which can be insured only under a subscription policy
C. A risk which is substandard or marginal, but which, because of its relationship with
the broker, the insurer agrees to to underwrite
D. A risk which is normally acceptable to the insurer but which cannot be bound by the
broker without the insurers consent - ✔✔C. A risk which is substandard or marginal, but
which, because of its relationship with the broker, the insurer agrees to underwrite
✔✔The accounts receivable form would not provide payment for:
A. Penalties charged the insured by suppliers for late payment of account
B. Sum charged by insureds accountant to reconstruct lost records
C. Sums charged by collector agency to collect amounts due to insured
D. Sums due from customers which the insured is unable to collect asa direct result of
the loss of records - ✔✔A. Penalties charged by the insured by suppliers for late
payment on the account
✔✔The coverages provided by the contractors equipment floater would insure which of
the following losses:
A. Damage caused to the front end loader due to its falling off the trailer being used to
transport it to the job site
B. Cracking of the engine block on caterpillar due to freezing
C. Fire damage to contractors plans, blueprints, designs or specs - ✔✔A. Damage
caused to the front end loader due to its falling off the trailer being used to transport it to
the job site
✔✔All of the following statements regarding commercial crime insurance policy are true
except one. Pick the exception:
A. When there is an existing policy in force, broker has the right to bind the insurer for
any interim increase in coverage limits
B. Insurer must provide the insured with 30 days notice when it intents to cancel the
policy, except when cancellation is for non-payment of premium
C. All losses under the policy will be paid in Canadian funds
D. Insured is required to maintain adequate records to substantiate the amount of the
loss under the policy - ✔✔A. When there is an existing policy in force, broker has the
right to bind the insurer for any interim increase in coverage limits
✔✔The insurance policy issued to Adanac Shoes LTD. Provides for the settlement of all
losses on an actual cash value basis. Generally, this has come to be understood as the
replacement cost or repair cost of lost or damaged property less any deprivation.
,However, the Adanac's must be advised that ACV can be measured in terms of "money
value", Explain:
1. Straight Line Depreciation
2. Plateau Acceleration Depreciation
3. Income approach - ✔✔1. Straight line depreciation is based on the number of years
that the building could have reasonable been expected to be functional.
2. Plateau Acceleration Deception is commonly used in the adjustment of losses to
older property
3. Income approach is commonly used with income producing properties
✔✔Courtney Holdings Owns 36 revenue properties in various cities across Canada.
Although the company normally insured to full values of all such property there is a
concern that an increase in inflation rates could cause the amounts of insurance to fall
below the co-insurance percentage required to be maintained under the policy. To avoid
the potential of a penalty being applied at the time of loss, it is your recommendation
that the co-insurance clause be rep[laced with the stated amount co-insurance clause.
Identify the underwriting conditions that must be satisfied by the insureds before the
insurer will agree to replace the standard co-insurance clause with the stated amount
co-insurance clause. - ✔✔1. Files a statement of values with the insurer representing
100% of the value of all property insured, as verified by appraisal or other means
acceptable to the insurers
2. Maintains those values throughout the term of the policy
3. Should be insured NOT maintain insurance to 100% of the stated amount during the
entire policy period the policy will revert a 100% co-insurance basis.
✔✔The valuations clause contained in commercial property insurance policies
establishes how certain property is to be valued by the policy after a loss. In the event of
a loss to the following property belonging to Happy Harry's Appliance Store LTD.
Indicate how each would be valued under the policy.
A. Refrigerator which has been sold but not yet delivered
B. Unsold stock
C. Customers appliances brought onto the premises for repair and upon which repair
has already been completed - ✔✔A. The selling price charged the purchaser, less any
discounts allowed, is the basis of settlement. Discounts could include credit for cash
purchases, pick up by purchaser, trade-ins and any reduction in selling price because of
negotiations between the seller and buyer
B. Restricted to its actual cash value at the time of loss
C. When the loss occurs, the insured may have already spent a significant amount on
materials and labour. These costs are insured by the policy
✔✔The Adanac's Shoes LTD account is new to your brokerage. In preparing for your
insurance quotation to the Adanac's, your office manager suggested that a fact finding
of survey by conducted.
A. Identify two advantages to be gained from conducting such a fact or survey
, B. Insureds who do not have their own inspectors on staff rely on their own
organizations to inspect certain commercial risks and to recommend rates to be
charged. Identify the organization used by most insurers to gather the info needed by
them to property underwrite commercial risks. - ✔✔A. It assists in identification of loss
exposures. Helps to eliminate purchase of coverages the business doesn't need.
Develops underwriting information needed by the insurer
B. Informco Inc
✔✔Explain:
A. The primary role of the underwriter in the risk selection process
B. What is meant by the term "risk classification"?
C. What is the chief advantage of risk classification in the underwriting process? - ✔✔A.
The underwriter will spend considerable amount of time and resources to determine if
there is any condition respecting the risk or the applicant which could cause a loss to
occur.
B. Risk classification refers to the grouping or classifying of risks according to
established criteria, which, in large part, is based on their profitability of loss as a class
C. If the risks is properly classed, it eliminates the chance of premium being charged in
excess of that required or being insufficient
✔✔During a risk survey of Risk and Hope Furniture Inc. you noticed several conditions
which, in your opinion, constitutes a greater than normal physical hazard. You also have
reason to be concerned about the moral hazard present in this risk.
A. What is the difference between a physical hazard and a moral hazard?
B. Identify which of 'physical hazard' or 'moral hazard' is indicated by the presence of
the following condition?
Owner has no established means of controlling the stores inventory and in general,
appears to have a total lack of regards for the protection of store property - ✔✔A. A
physical hazard is a condition relating to the use of tangible property which could cause
a peril to occur. It can be characteristics of the risk itself or of the environment in which it
is located. A moral hazard refers to subjective characteristics of the applicant that could
cause a peril to occur. Indicators of moral hazard include financial condition, associates,
moral character.
B. Physical Hazard
✔✔A. The insurance acts of the common law provinces require that policies insuring
against the peril of fire also insure direct losses caused by two additional perils. Identify
the two additional perils insured by the fire policy
B. Indicated whether the Fire Policy would respond to pay for the following losses. The
building stock and equipment are owned by the insured and are covered under the
policy. State whether covered or not covered.
i. Fire damage to six 15ft canoes being held for sale in the insureds business
