CAIB 2 Practice Exam Questions with correct Answers

Waivers of Co-insurance clause are common on commercial property policies. What types of losses are applicable to this waiver of co-insurance? - Answer- Is less than $5000 or Is less than 2% of the amount of insurance. (72,00 x 2%=1440) Identify 3 reasons why exclusions exist on commercial property policy. - Answer- losses which are generally considered by insurers to be commercially insurable: 1. Deliberate acts of violence -war, rebellion 2. losses which are considered catastrophic, Earthquake, snow slides, landslides 3. more specialized policy forms exist - Auto, aircraft Commercial property policies may provide coverage from theft while property is an automobiles. What warranty will be included in commercial property policies when theft coverage is provided for property in automobiles? - Answer- 1. Vehicle containing the property insured be equipped with a fully enclosed body or compartment 2. The doors are securely locked and the widow closed 3. Access or entry to the vehicle mu have been gained through the use of force Statutory Conditions or Commercial Property conditions Policy conditions. What are 3 additional conditions contained in a number of commercial property for and explain the effect of each? - Answer- 1. Pair and Set - the undamaged property still has value will be deducted from claim payment 2. No benefit to Bailee - bailee must take care of the property of the other with ordinary Care 3. Sue and Labour - insured must take all reasonable action to recover stolen property Identify three things that a Survey does? - Answer- 1. Assist in identification of losses or exposures 2. Helps to determine the coverages needed 3. Develops other underwriting information need by the insurer. What benefits would a checklist have in relation to the survey? - Answer- 1. Alerts broker to possible losses or exposures 2. Ensures that needed coverages are not forgotten or ignored 3. Helps to reduce the potential for errors and omissions claim Identify the two types of depreciation used in the Formula/Cost approach and give an example for each: - Answer- Straight line depreciation - is based on the number of years something could have reasonably been expected to function. A building that is 30 year old but can be used for another 30 years is 50% depreciated. Plateau accelerated depreciation- A property which is mostly productive in its early years. The greats depreciation will happen in the first few years. Once that certain age is reached the depreciation plateaus, example office equipment When is the Income Approach method most commonly employed? - Answer- When a run down building is used for a business which is making a profit. The net annual rental income is determined and a capitalization factor applied to it to produce actual cash value amount. Identify three reasons why a Subscription Policy may be used: - Answer- 1. The line of business is so specialized as to not be covered the insurer's treaty with its reinsurers 2. They type of risk is on which the insurer does not want to expose to reinsurance treaties 3. The limits do not exceed the insurer's net retention limits but are beyond what it is prepared to pay in a single claim Identify the three amounts to be considered when calculating the amount of payment as outlined in the Indemnity agreement and of the three amounts which one is payable? - Answer- 1. Actual Cash Value 2. Insured's financial interest 3. Amount of insurance Which ever amount is lowest. Insurers agree to 'waive' any co-insurance requirement when a loss meets either of the following conditions (2): - Answer- is under 2% of insured amount or is under $5000 Insurers have many reasons for excluding coverage for certain perils and property items. Indicate the reason the insurer might have for excluding each of the following losses: - Answer- Loss due to war or arising out of the nuclear energy hazard -Considered uninsurable Loss due to flood or earthquake -has the potential to be catastrophic Automobiles and aircraft - more specialized policies exist for these items Identify three types of Property Protection Systems: Identify three obligations placed upon Insureds who have installed any such systems: - Answer- -Sprinkler systems or other fire extinguishing systems -Alarm systems fire detection systems -intrusion detection systems must notify insurer if contact lapsed or expired or cancelled must notify insurer if policy service/response has been suspended must notify insurer if any fault/defect with system Identify the four conditions of the Locked Vehicle Warranty: - Answer- must be in the enclosed part of the vehicle Window closed and doors must be securely locked Access or entry to the vehicle must have been gained through used force There must be visible evidence which confirmed force was used to gain entry into the body or the compartment of the vehicle Identify three Additional Conditions contained in a number of commercial property form and explain the effect of each. - Answer- -NO Benefit to bailee - bailee must take care of the property of others with ordinary care -Sue and labour- insured must take all reasonable action to recover stolen property -Pair and sets- the undamaged property still has value and that value will deducted form claim payment Identify three things that a Survey does: - Answer- -Assists to identify loss exposures -Help eliminate the purchases of coverage the business does NOT need -Assists in the developments of underwriting information needed by the insurer Identify five areas of information that may be required when a building is over 25 years of age: - Answer- heating wiring Over-current protection Plumbing roof Identify five hazards common to all commercial buildings which may influence their potential for loss: - Answer- Geography (electrical service ) Occupancy protection construction Heathing Identify three businesses that may contain 'special hazards': - Answer- churches Bakerier Service stations Identify six types of Physical Hazards: - Answer- -Type of building construction -Occupancy -house keeping -External exposures -geography -protection Identify three types of Moral Hazard: - Answer- -associated -financial condition -moral character Identify two types of Morale Hazard? - Answer- indifference to loss Poor management Identify four types of the seven 'internal sources of information' available to an underwriter: - Answer- -claims reports -inspection reports -field representative -underwriting guides and manuals Identify the four parameters within which an underwriter makes a decision about a particular risk: - Answer- to accept the risk (on the base presented) to decline the risk To accept but with higher deductible to accept the risk with an increased rate Identify what information is required by law to appear on all insurance policies: (6) - Answer- policy period policy number name of the insured Names of loss payee coverages provided (Summary of insurance coverages and amounts for which the insurer may be liable Premium Identify two extensions of coverage required by law to be in a Fire policy: - Answer- lighting Explosion of coal or, natural or manufactured gas Why would Building Damage by Theft extension be of value to a tenant? - Answer- If the insured is a tenant and liable for damage caused to the building The insured is not the owner of the building and the broad policy covers Beside theft of attempted theft, identify other damage covered by the extensions: - Answer- Vandalism and malicious acts committed on the same occasion Identify the four coverages provided by most package policies: - Answer- -commercial property -commercial liability -Business interruption -Crime insurance Identify six features of a risk that will generally qualify it for rate credit - Answer- -Monitored alarm -Fire resistive construction -fire protection rating -constructed after 1945 -no basement -sole occupant Briefly explain the functions of: A. Endorsements B. Riders C. Separate policy - Answer- -Endorsements - change to the terms of the policy -Riders-Adds coverage to the existing policy -Separate policies-insures speciality items Identify the two bases on which glass can be insured under a Glass Rider? - Answer- -blanket -scheduled