CAIB 2 STUDY NOTES; CHAPTER 1 EXAM WITH
COMPLETE SOLUTION
1. Residential (homes)
2. Mercantile (hospital)
3. Non-mercantile (stores)
4. Manufacturing/industrial (manufacturing plants) - ANSWERIdentify 4 categories that
buildings may fall into and give an example of each
1. Scheduled basis
2. All property basis - ANSWERIdentify two bases that coverage can be provided
1. Scheduled basis - only property which is specifically identified or scheduled on the
policy is insured
2. All property - All property owned by the insured is covered by a single limit of
insurance. Usually subject to a minimum 90% co-insurance clause - ANSWERBriefly
explain how the scheduled basis and all property is identified
1. Fixed structures; pertaining to the business and located on the property (fencing, yard
signs, lights)
2. Additions and extensions; in contact with the building (enclosed walkways, lean-to
storage)
3. Permanent fittings & fixtures attached to or forming part of the building (heating,
plumbing, carpeting)
4. Materials, equipment, supplies used for maintenance
5. Growing plants, trees, shrubs, flowers; inside the insureds building for decorative
purposes when insured is owner - ANSWERIdentify and give an example of each of the
five types of property contained in the definition of building found in the IBC Commercial
Property Broad Form
1. Such property was inside the building
2. It was being used for decorative purposes
3. The insured was the owner of the building - ANSWERIdentify the three conditions
pertaining to the coverage of growing plants, trees, etc
1. Merchandise of every description usual to the insureds business; goods held for sale
2. Packing, wrapping, & advertising materials; bubble wrap, flyers or catalogues
3. Similar property belonging to others which the insured is under obligation to keep
insured or which he is legally liable; consignment goods or tv repair shop -
ANSWERIdentify and give an example of each of the three types of property contained
in the definition of Stock found in the IBC Commercial Property Broad Form
1. Property lost or damaged must be similar that insured is insured by the policy
, 2. The insured must have had an obligation to keep the property insured
3. The insured must have been legally liable for it - ANSWERIdentify three conditions
that need to be present before "similar property belongings to others" will be insured
under the definition of stock
1. All contents usual to insureds business including furniture, furnishings, fittings other
than building or stock
2. Similar property belonging to others insured under obligation to keep insured for
legally liable
3. Tenants improvements made at the expense of the insured, not otherwise insured,
provided insured is not the owner of the building - ANSWERIdentify and give an
example of each of the three types of property contained in the definition of equipment
found in the IBC Commercial Property Broad Form
1. Actual Cash Value
2. Replacement Value
3. Book Value - ANSWERIdentify the three ways in which property may be valued
Book Value - ANSWERWhich of those identified (ACV, Book Value or Replacement
Value) is not an appropriate means of valuing property for insurance purposes
Depreciation - ANSWERIdentify the one word that can summarize the difference
between Actual Cash Value and Replacement Cost
Insured - ANSWERWho does the onus rest upon to establish the amount of insurance
required?
1. Formula/cost approach method
2. Market value/direct sales approach
3. Income Approach
4. True Value to the owner
5. Broad Evidence Rule - ANSWERIdentify the 5 methods that may be used to
determine actual cash value
1. Straight line depreciation; property depreciated same amount each year
2. Plateau Accelerate depreciation; most useful productivity during early years (office or
restaurant equipment or production machinery - ANSWERIdentify two types of
depreciation used in the formula/cost approach, and give an example of a type of
property that would be appropriate using each
1. Property before the loss
2. Property after the loss
3. The land - ANSWERA licensed real estate appraiser will generally be consulted to
provide an expert opinion when establishing market value/direct sales approach.
Identify the three items he or she may consider
COMPLETE SOLUTION
1. Residential (homes)
2. Mercantile (hospital)
3. Non-mercantile (stores)
4. Manufacturing/industrial (manufacturing plants) - ANSWERIdentify 4 categories that
buildings may fall into and give an example of each
1. Scheduled basis
2. All property basis - ANSWERIdentify two bases that coverage can be provided
1. Scheduled basis - only property which is specifically identified or scheduled on the
policy is insured
2. All property - All property owned by the insured is covered by a single limit of
insurance. Usually subject to a minimum 90% co-insurance clause - ANSWERBriefly
explain how the scheduled basis and all property is identified
1. Fixed structures; pertaining to the business and located on the property (fencing, yard
signs, lights)
2. Additions and extensions; in contact with the building (enclosed walkways, lean-to
storage)
3. Permanent fittings & fixtures attached to or forming part of the building (heating,
plumbing, carpeting)
4. Materials, equipment, supplies used for maintenance
5. Growing plants, trees, shrubs, flowers; inside the insureds building for decorative
purposes when insured is owner - ANSWERIdentify and give an example of each of the
five types of property contained in the definition of building found in the IBC Commercial
Property Broad Form
1. Such property was inside the building
2. It was being used for decorative purposes
3. The insured was the owner of the building - ANSWERIdentify the three conditions
pertaining to the coverage of growing plants, trees, etc
1. Merchandise of every description usual to the insureds business; goods held for sale
2. Packing, wrapping, & advertising materials; bubble wrap, flyers or catalogues
3. Similar property belonging to others which the insured is under obligation to keep
insured or which he is legally liable; consignment goods or tv repair shop -
ANSWERIdentify and give an example of each of the three types of property contained
in the definition of Stock found in the IBC Commercial Property Broad Form
1. Property lost or damaged must be similar that insured is insured by the policy
, 2. The insured must have had an obligation to keep the property insured
3. The insured must have been legally liable for it - ANSWERIdentify three conditions
that need to be present before "similar property belongings to others" will be insured
under the definition of stock
1. All contents usual to insureds business including furniture, furnishings, fittings other
than building or stock
2. Similar property belonging to others insured under obligation to keep insured for
legally liable
3. Tenants improvements made at the expense of the insured, not otherwise insured,
provided insured is not the owner of the building - ANSWERIdentify and give an
example of each of the three types of property contained in the definition of equipment
found in the IBC Commercial Property Broad Form
1. Actual Cash Value
2. Replacement Value
3. Book Value - ANSWERIdentify the three ways in which property may be valued
Book Value - ANSWERWhich of those identified (ACV, Book Value or Replacement
Value) is not an appropriate means of valuing property for insurance purposes
Depreciation - ANSWERIdentify the one word that can summarize the difference
between Actual Cash Value and Replacement Cost
Insured - ANSWERWho does the onus rest upon to establish the amount of insurance
required?
1. Formula/cost approach method
2. Market value/direct sales approach
3. Income Approach
4. True Value to the owner
5. Broad Evidence Rule - ANSWERIdentify the 5 methods that may be used to
determine actual cash value
1. Straight line depreciation; property depreciated same amount each year
2. Plateau Accelerate depreciation; most useful productivity during early years (office or
restaurant equipment or production machinery - ANSWERIdentify two types of
depreciation used in the formula/cost approach, and give an example of a type of
property that would be appropriate using each
1. Property before the loss
2. Property after the loss
3. The land - ANSWERA licensed real estate appraiser will generally be consulted to
provide an expert opinion when establishing market value/direct sales approach.
Identify the three items he or she may consider
