Practice Exam for CAIB 1 Latest 2023 with complete
solution
Insurers are in the business of assuming the financial risks of others which involves
entering into a formal contract. A contract is enforceable at law only when all legal
elements have been observed. Insurance contracts differ from other formal agreements
and are subject to what three additional elements?
Insurable Interest
Utmost Good Faith
Indemnity
Explain the meaning and disadvantage of the following approaches: Avoidance of Risk
& Control of Risk
Avoidance: Avoidance means that all chance of financial loss has been eliminated or a
decision not to do something. The disadvantage is its not very effective as often the
elimination of one exposure creates another in its place.
Control: taking measures to reduce the frequency and severity of losses. The
disadvantage is that not all losses can be controlled, because equipment will not work
100% of the time
Identify the three elements that are unique to contracts of insurance:
Insurable Interest, Utmost Good Faith, and Indemnity
The Insurance Act restricts payment for an insured loss to those amounts required to
indemnify the Insured. Indicate the amount the Insured is legally entitled to receive and
the measure used to determine this value.
Entitled to receive payment for the actual amount of the loss, no more and no less. The
measure is the value of the object of insurance as it was immediately before the loss.
Policies insuring against the peril of fire must contain Fire Statutory Conditions. Indicate
the Statutory Condition and the applicable rules: During the policy term the insured
installed a wood burning stove as a secondary heating device. The application indicates
that a gas furnace is used to heat the premises.
Material Change. The insured must notify the insurer promptly of any change that
serves to increase the chance of loss. After receiving notification of the Material Change
the insurer has the option to cancel the policy and return the unearned portion of the
premium to the insured; or continue to insure the risk and advise the insured in writing
of the additional premium payable.
All Homeowners policies describe the Basis of Claim Payment for loss or damage to
dwelling building, detached private structures and personal property. Indicate the basis
of settlement and conditions: Water used to extinguish a small fire at the Insured's home
destroyed all electronic media and records kept by the Insured.
Cost to reproduce lost or damage media from duplicates or from originals of the
previous generation of the media. The payment for lost records is the cost of blank
books, pages, cards or other materials plus the cost of actually transcribing or copying
such records.
Another option for insuring property values under Homeowners policies is the "Single
Limit" basis. Explain how this basis differs from the usual coverage format and the
advantage that this approach offers:
, Coverages A to D are combined into one single limit. The advantage is that this
approach eliminates the coverage restriction otherwise applicable to Coverages B, C
and D.
The Homeowners Comprehensive Form (IBC 1155) is superior to all other Homeowners
policies. State how this policy describes "Insured Perils"
This policy "insures against all risks of direct physical loss or damage subject to the
exclusions and conditions of this form"
Indicate the coverage provided for Emergency Removal Expense under the Mobile
Homeowners Form.
Covered up to 5% of the amount of insurance on the dwelling and covers reasonable
expenses incurred in disconnecting water and power, and towing or transporting costs.
What is the basis of claim payment for loss or damage to the mobile home, detached
private structures and personal property under a Mobile Homeowners Policy?
The basis of claim is Actual Cash Value; payment for loss or damage to personal
property is made on the same basis as under Homeowners Forms.
Identify two (2) other coverages included under C - Personal Property, which are not
found in a Homeowners policy
Improvements or betterments made by or acquired at the expense of the tenant; $500
for damage (excluding fire damage) to the portion of the building occupied by the tenant
resulting from theft or attempted theft; Damage caused to the interior of the building by
vandalism or malicious acts.
Individuals who own one or more units in a multiple unit building have an insurable
interest in the building structure, common elements and personal property. Identify and
briefly explain three coverages that are unique to the Condominium Unit Owners Policy:
Unit Improvements and Betterments: insures the value of improvements and
betterments by the insured, including any building, structure or swimming pool, and
materials and supplies on the premises for use in such improvements or betterments.
Loss Assessment: allows the Insured to claim the amount of an assessment paid due to
a loss to collectively owned property if covered under the Insured's policy.
Unit Additional Protection: covers the Insured's unit, excluding damage to improvements
and betterments, when the Condominium Corporation has no insurance, or it is
inadequate
Insureds often find the limit of insurance for certain personal property items provided by
homeowners and other habitational forms inadequate and opt to insure individual
articles under a Personal Articles Endorsement. The broad coverage combined with the
high value of the articles insured necessitates strict underwriting considerations. Explain
three (3) underwriting requirements applicable to this coverage option.
1. Each article must be separately described and a specific amount set for each.
2. Current valuation of individual jewellery items or furs is usually required when the
value exceeds a certain amount. A bill of sale or recent appraisal is usually sufficient to
meet this underwriting requirement.
3. May require an appraisal from an independent qualified appraiser. An updated
appraisal may be required from time to time.
Discuss the difference between Common Law and Statute Law:
solution
Insurers are in the business of assuming the financial risks of others which involves
entering into a formal contract. A contract is enforceable at law only when all legal
elements have been observed. Insurance contracts differ from other formal agreements
and are subject to what three additional elements?
Insurable Interest
Utmost Good Faith
Indemnity
Explain the meaning and disadvantage of the following approaches: Avoidance of Risk
& Control of Risk
Avoidance: Avoidance means that all chance of financial loss has been eliminated or a
decision not to do something. The disadvantage is its not very effective as often the
elimination of one exposure creates another in its place.
Control: taking measures to reduce the frequency and severity of losses. The
disadvantage is that not all losses can be controlled, because equipment will not work
100% of the time
Identify the three elements that are unique to contracts of insurance:
Insurable Interest, Utmost Good Faith, and Indemnity
The Insurance Act restricts payment for an insured loss to those amounts required to
indemnify the Insured. Indicate the amount the Insured is legally entitled to receive and
the measure used to determine this value.
Entitled to receive payment for the actual amount of the loss, no more and no less. The
measure is the value of the object of insurance as it was immediately before the loss.
Policies insuring against the peril of fire must contain Fire Statutory Conditions. Indicate
the Statutory Condition and the applicable rules: During the policy term the insured
installed a wood burning stove as a secondary heating device. The application indicates
that a gas furnace is used to heat the premises.
Material Change. The insured must notify the insurer promptly of any change that
serves to increase the chance of loss. After receiving notification of the Material Change
the insurer has the option to cancel the policy and return the unearned portion of the
premium to the insured; or continue to insure the risk and advise the insured in writing
of the additional premium payable.
All Homeowners policies describe the Basis of Claim Payment for loss or damage to
dwelling building, detached private structures and personal property. Indicate the basis
of settlement and conditions: Water used to extinguish a small fire at the Insured's home
destroyed all electronic media and records kept by the Insured.
Cost to reproduce lost or damage media from duplicates or from originals of the
previous generation of the media. The payment for lost records is the cost of blank
books, pages, cards or other materials plus the cost of actually transcribing or copying
such records.
Another option for insuring property values under Homeowners policies is the "Single
Limit" basis. Explain how this basis differs from the usual coverage format and the
advantage that this approach offers:
, Coverages A to D are combined into one single limit. The advantage is that this
approach eliminates the coverage restriction otherwise applicable to Coverages B, C
and D.
The Homeowners Comprehensive Form (IBC 1155) is superior to all other Homeowners
policies. State how this policy describes "Insured Perils"
This policy "insures against all risks of direct physical loss or damage subject to the
exclusions and conditions of this form"
Indicate the coverage provided for Emergency Removal Expense under the Mobile
Homeowners Form.
Covered up to 5% of the amount of insurance on the dwelling and covers reasonable
expenses incurred in disconnecting water and power, and towing or transporting costs.
What is the basis of claim payment for loss or damage to the mobile home, detached
private structures and personal property under a Mobile Homeowners Policy?
The basis of claim is Actual Cash Value; payment for loss or damage to personal
property is made on the same basis as under Homeowners Forms.
Identify two (2) other coverages included under C - Personal Property, which are not
found in a Homeowners policy
Improvements or betterments made by or acquired at the expense of the tenant; $500
for damage (excluding fire damage) to the portion of the building occupied by the tenant
resulting from theft or attempted theft; Damage caused to the interior of the building by
vandalism or malicious acts.
Individuals who own one or more units in a multiple unit building have an insurable
interest in the building structure, common elements and personal property. Identify and
briefly explain three coverages that are unique to the Condominium Unit Owners Policy:
Unit Improvements and Betterments: insures the value of improvements and
betterments by the insured, including any building, structure or swimming pool, and
materials and supplies on the premises for use in such improvements or betterments.
Loss Assessment: allows the Insured to claim the amount of an assessment paid due to
a loss to collectively owned property if covered under the Insured's policy.
Unit Additional Protection: covers the Insured's unit, excluding damage to improvements
and betterments, when the Condominium Corporation has no insurance, or it is
inadequate
Insureds often find the limit of insurance for certain personal property items provided by
homeowners and other habitational forms inadequate and opt to insure individual
articles under a Personal Articles Endorsement. The broad coverage combined with the
high value of the articles insured necessitates strict underwriting considerations. Explain
three (3) underwriting requirements applicable to this coverage option.
1. Each article must be separately described and a specific amount set for each.
2. Current valuation of individual jewellery items or furs is usually required when the
value exceeds a certain amount. A bill of sale or recent appraisal is usually sufficient to
meet this underwriting requirement.
3. May require an appraisal from an independent qualified appraiser. An updated
appraisal may be required from time to time.
Discuss the difference between Common Law and Statute Law:
