CAIB 2 ACTUAL EXAM SCRIPT 2026
QUESTIONS WITH ANSWERS GRADED A+
◉ Identify 2 ways used to insure commercial property and a brief
explanation of each. Answer: Scheduled coverage: only that property
specifically identified or scheduled on the policy is insured
All Property (formerly POED) a single limit of insurance is provided for
building, stock, and equipment.
◉ Scheduled Coverage. Answer: refers to the policy on which coverage
is provided only on that property which is specifically identified or
scheduled.
◉ All Property. Answer: Refers to policy used to insure building, stock
and equipment under a single limit of insurance
◉ Tenants Improvements. Answer: building improvements, alterations
and betterments made at the expense of or purchased by the insured to a
building occupied by the insured and which are not otherwise insured,
provided the insured is not the actual owner of such building.
◉ Actual cash Value. Answer: the replacement or repair cost less
depreciation
,◉ Replacement value. Answer: represents the costs to repair, replace, or
rebuild the lost or damaged property without deduction for depreciation.
◉ Identify three ways property can be valued. Answer: ACV,
Replacement cost, book value
◉ Which method of valuation has no bearing on the amount of payment
made by the insurer? Answer: Book Value
◉ Explain the basic difference between ACV and Replacement value.
Answer: ACV takes depreciation into consideration whereas
replacement cost does not.
◉ Composite or package polices. Answer: These policies combine,
under one form, a variety of coverages needed by the majority of offices
and small mercantile operations which make up the main street business
district in most communities.
◉ Manuscript policies. Answer: Designed for all risks having a
specialized exposure and for which no standard coverage form exists.
Generally developed by larger brokerage firms.
◉ Reinsurance policies. Answer: Reinsurance involves the insurer
passing off or ceding part of the risk it has assumed to one or more
"other insurers".
,◉ Explain the difference between package and manuscript policies.
Answer: Package policies combine, under one form, a variety of
coverages needed by the majority of offices and small mercantile
operations whereas manuscript policies are designed for risks having a
specialized exposure and for which no standard coverage form exists.
◉ Reinsurance policies. Answer: created when the primary insurer cedes
part of the risk assumed to one or more other insurers; all insurers share
premiums and losses; contract is between primary insurer and re-insurer;
policy controlled by primary insurer and all claims are paid by it.
◉ Subscription policies. Answer: are based on a group of insurers who
have agreed to participate in providing insurance coverages, sharing
both premiums and losses; each agreement is usually negotiated
separately on a form acceptable to all subscribers; lead company issues
policy, collects premium and handles policyholder services including
claims.
◉ Your client recently cancelled an insurance policy which was subject
to a large minimum retained premium. Explain why an insurer would
invoke a minimum retained premium charge on your clients policy?
Answer: The purpose of the minimum retained premium is to ensure that
the costs of underwriting the policy can be recouped at least in part.
, ◉ Identify the three factors considered by the adjuster when determining
the amount of indemnity to be provided by the policy? Answer: ACV,
Insurable interest, amount of insurance
◉ Explain the intent of the waiver of co-insurance clause. Answer:
Recognizing that many insured losses are small, the Waiver of co-
insurance clause eliminates the need for costly inventory to prove
compliance with co-insurance clause.
◉ What is the purpose of the stated amount co-insurance clause.
Answer: The stated amount co-insurance clause provides for the removal
of the standard co-insurance penalty for under-insurance
◉ What requirements fall upon the insured who wants to take advantage
of the stated amount co-insurance clause? Answer: The insured must file
a statement of values with the insurer representing 100% of the value of
all insured property (verified by appraisal or other means acceptable to
the insurer) and the insured must maintain those values througout the
policy term
◉ Your clients have asked you why there are so many exclusions in their
insurance policy. State at least three reasons why exclusions exist and
provide two examples of each. Answer: i)exclude losses which are
generally considered by insurers to be commercially uninsurable
ii)exclude losses which have within them the potential to be catastrophic
iii)exclude losses for which more specialized policy forms have been
developed iv)exclude losses that are wholly or partially in the control of
QUESTIONS WITH ANSWERS GRADED A+
◉ Identify 2 ways used to insure commercial property and a brief
explanation of each. Answer: Scheduled coverage: only that property
specifically identified or scheduled on the policy is insured
All Property (formerly POED) a single limit of insurance is provided for
building, stock, and equipment.
◉ Scheduled Coverage. Answer: refers to the policy on which coverage
is provided only on that property which is specifically identified or
scheduled.
◉ All Property. Answer: Refers to policy used to insure building, stock
and equipment under a single limit of insurance
◉ Tenants Improvements. Answer: building improvements, alterations
and betterments made at the expense of or purchased by the insured to a
building occupied by the insured and which are not otherwise insured,
provided the insured is not the actual owner of such building.
◉ Actual cash Value. Answer: the replacement or repair cost less
depreciation
,◉ Replacement value. Answer: represents the costs to repair, replace, or
rebuild the lost or damaged property without deduction for depreciation.
◉ Identify three ways property can be valued. Answer: ACV,
Replacement cost, book value
◉ Which method of valuation has no bearing on the amount of payment
made by the insurer? Answer: Book Value
◉ Explain the basic difference between ACV and Replacement value.
Answer: ACV takes depreciation into consideration whereas
replacement cost does not.
◉ Composite or package polices. Answer: These policies combine,
under one form, a variety of coverages needed by the majority of offices
and small mercantile operations which make up the main street business
district in most communities.
◉ Manuscript policies. Answer: Designed for all risks having a
specialized exposure and for which no standard coverage form exists.
Generally developed by larger brokerage firms.
◉ Reinsurance policies. Answer: Reinsurance involves the insurer
passing off or ceding part of the risk it has assumed to one or more
"other insurers".
,◉ Explain the difference between package and manuscript policies.
Answer: Package policies combine, under one form, a variety of
coverages needed by the majority of offices and small mercantile
operations whereas manuscript policies are designed for risks having a
specialized exposure and for which no standard coverage form exists.
◉ Reinsurance policies. Answer: created when the primary insurer cedes
part of the risk assumed to one or more other insurers; all insurers share
premiums and losses; contract is between primary insurer and re-insurer;
policy controlled by primary insurer and all claims are paid by it.
◉ Subscription policies. Answer: are based on a group of insurers who
have agreed to participate in providing insurance coverages, sharing
both premiums and losses; each agreement is usually negotiated
separately on a form acceptable to all subscribers; lead company issues
policy, collects premium and handles policyholder services including
claims.
◉ Your client recently cancelled an insurance policy which was subject
to a large minimum retained premium. Explain why an insurer would
invoke a minimum retained premium charge on your clients policy?
Answer: The purpose of the minimum retained premium is to ensure that
the costs of underwriting the policy can be recouped at least in part.
, ◉ Identify the three factors considered by the adjuster when determining
the amount of indemnity to be provided by the policy? Answer: ACV,
Insurable interest, amount of insurance
◉ Explain the intent of the waiver of co-insurance clause. Answer:
Recognizing that many insured losses are small, the Waiver of co-
insurance clause eliminates the need for costly inventory to prove
compliance with co-insurance clause.
◉ What is the purpose of the stated amount co-insurance clause.
Answer: The stated amount co-insurance clause provides for the removal
of the standard co-insurance penalty for under-insurance
◉ What requirements fall upon the insured who wants to take advantage
of the stated amount co-insurance clause? Answer: The insured must file
a statement of values with the insurer representing 100% of the value of
all insured property (verified by appraisal or other means acceptable to
the insurer) and the insured must maintain those values througout the
policy term
◉ Your clients have asked you why there are so many exclusions in their
insurance policy. State at least three reasons why exclusions exist and
provide two examples of each. Answer: i)exclude losses which are
generally considered by insurers to be commercially uninsurable
ii)exclude losses which have within them the potential to be catastrophic
iii)exclude losses for which more specialized policy forms have been
developed iv)exclude losses that are wholly or partially in the control of
