CAIB 2 CHAPTER 1 PRACTICE EXAM 1 LATEST 2026 UPDATED
QUESTIONS AND VERIFIED 100% SOLUTIONS (2026/2027) |A+
GRADED |GUARANTEED PASS
Explain the traditional meaning of ACV - Answers -Repair or replacement of lost or damaged
property, less the application of any depreciation
Describe two methods used to determine depreciation using Formula/Cost Approach Method -
Answers -i) Straight Line Depreciation - applies depreciation based on the normal life
expectancy of the buildings (building with 50 years expectancy and was 25 years at time of loss;
worth 50%)
ii) Plateau Accelerated depreciation - applies large amounts of depreciation during the first few
years, then depreciation 'plateaus' or levels out (electronics)
Describe the difference between Replacement Value and ACV - Answers -Replacement Value is
different than ACV because there is no deduction for depreciation
Which method used to value property is the least appropriate for insurance? - Answers -Book
value is the most inappropriate method of valuing property for insurance purposes because
book value is based on accounting functions only
Explain what it means to issue insurance on a scheduled basis - Answers -Only the property
listed or scheduled on the policy is insured
1|Page
QUESTIONS AND VERIFIED 100% SOLUTIONS (2026/2027) |A+
GRADED |GUARANTEED PASS
Explain the traditional meaning of ACV - Answers -Repair or replacement of lost or damaged
property, less the application of any depreciation
Describe two methods used to determine depreciation using Formula/Cost Approach Method -
Answers -i) Straight Line Depreciation - applies depreciation based on the normal life
expectancy of the buildings (building with 50 years expectancy and was 25 years at time of loss;
worth 50%)
ii) Plateau Accelerated depreciation - applies large amounts of depreciation during the first few
years, then depreciation 'plateaus' or levels out (electronics)
Describe the difference between Replacement Value and ACV - Answers -Replacement Value is
different than ACV because there is no deduction for depreciation
Which method used to value property is the least appropriate for insurance? - Answers -Book
value is the most inappropriate method of valuing property for insurance purposes because
book value is based on accounting functions only
Explain what it means to issue insurance on a scheduled basis - Answers -Only the property
listed or scheduled on the policy is insured
1|Page
