CAIB 2 Questions &
Answers(RATED A)
Your client, a retail fashion store, has just rented a business premises in a mall. Before opening your
business, she plans to install new wall to wall carpeting and install wall paneling. These values would
be insured under the amount provided for:
A. Stock
B. Equipment
C. Building
D. Business Interruption - ANSWERB. Equipment
While the law permits the insurer to surrogate against the party responsible for the loss, the insurer
agrees not to exercise that right in respect to certain parties under the policy. Which of the following
parties would be surrogates agains in the event of their responsibility?
A. insureds business partner
B. Mortgagee
C. Parents who provide financing
D. Independent contractor - ANSWERD. Independent contractor
The commercial building, equipment and stock (broad form policy) insures all of the following
except:
A. Theft or attempted theft
B. Rupture of freezing
C. Collapse
D. Mysterious disappearance - ANSWERD. Mysterious disappearance
,All of the following statements except one are true when the insureds business has been interrupted
by order of civil authority. Pick the exception:
A. Insured's building must have suffered physical damage
B. Coverage is limited to a maximum of two weeks
C. Insured is entitled to recover lost income even through there has been no actual damage to the
insured property
D. Order must have been given as a direct result of damage to neighbouring premises by a peril
insured against on the insureds own premises - ANSWERA. Insureds business must have suffered
physical damage
Accommodation business is best described as:
A. A specialized type of insurance risk which included hotels, motels, apartment buildings and rental
property
B. A risk which can be insured only under a subscription policy
C. A risk which is substandard or marginal, but which, because of its relationship with the broker, the
insurer agrees to to underwrite
D. A risk which is normally acceptable to the insurer but which cannot be bound by the broker
without the insurers consent - ANSWERC. A risk which is substandard or marginal, but which,
because of its relationship with the broker, the insurer agrees to underwrite
The accounts receivable form would not provide payment for:
A. Penalties charged the insured by suppliers for late payment of account
B. Sum charged by insureds accountant to reconstruct lost records
C. Sums charged by collector agency to collect amounts due to insured
D. Sums due from customers which the insured is unable to collect asa direct result of the loss of
records - ANSWERA. Penalties charged by the insured by suppliers for late payment on the account
The safe burglary rider would insure one of the following losses:
A. Money taken from locked cash drawer
B. Money and securities taken from an unlocked safe
C. Money and securities taken from a locked safe by the burglar who knew its combination
D. Removal of the safe from the premises - ANSWERD. Removal of the safe from the premises
, The coverages provided by the contractors equipment floater would insure which of the following
losses:
A. Damage caused to the front end loader due to its falling off the trailer being used to transport it to
the job site
B. Cracking of the engine block on caterpillar due to freezing
C. Fire damage to contractors plans, blueprints, designs or specs - ANSWERA. Damage caused to the
front end loader due to its falling off the trailer being used to transport it to the job site
All of the following statements regarding commercial crime insurance policy are true except one. Pick
the exception:
A. When there is an existing policy in force, broker has the right to bind the insurer for any interim
increase in coverage limits
B. Insurer must provide the insured with 30 days notice when it intents to cancel the policy, except
when cancellation is for non-payment of premium
C. All losses under the policy will be paid in Canadian funds
D. Insured is required to maintain adequate records to substantiate the amount of the loss under the
policy - ANSWERA. When there is an existing policy in force, broker has the right to bind the insurer
for any interim increase in coverage limits
The insurance policy issued to Adanac Shoes LTD. Provides for the settlement of all losses on an
actual cash value basis. Generally, this has come to be understood as the replacement cost or repair
cost of lost or damaged property less any deprivation. However, the Adanac's must be advised that
ACV can be measured in terms of "money value", Explain:
1. Straight Line Depreciation
2. Plateau Acceleration Depreciation
3. Income approach - ANSWER1. Straight line depreciation is based on the number of years that the
building could have reasonable been expected to be functional.
2. Plateau Acceleration Deception is commonly used in the adjustment of losses to older property
3. Income approach is commonly used with income producing properties
Courtney Holdings Owns 36 revenue properties in various cities across Canada. Although the
company normally insured to full values of all such property there is a concern that an increase in
inflation rates could cause the amounts of insurance to fall below the co-insurance percentage
required to be maintained under the policy. To avoid the potential of a penalty being applied at the
time of loss, it is your recommendation that the co-insurance clause be rep[laced with the stated
amount co-insurance clause. Identify the underwriting conditions that must be satisfied by the
Answers(RATED A)
Your client, a retail fashion store, has just rented a business premises in a mall. Before opening your
business, she plans to install new wall to wall carpeting and install wall paneling. These values would
be insured under the amount provided for:
A. Stock
B. Equipment
C. Building
D. Business Interruption - ANSWERB. Equipment
While the law permits the insurer to surrogate against the party responsible for the loss, the insurer
agrees not to exercise that right in respect to certain parties under the policy. Which of the following
parties would be surrogates agains in the event of their responsibility?
A. insureds business partner
B. Mortgagee
C. Parents who provide financing
D. Independent contractor - ANSWERD. Independent contractor
The commercial building, equipment and stock (broad form policy) insures all of the following
except:
A. Theft or attempted theft
B. Rupture of freezing
C. Collapse
D. Mysterious disappearance - ANSWERD. Mysterious disappearance
,All of the following statements except one are true when the insureds business has been interrupted
by order of civil authority. Pick the exception:
A. Insured's building must have suffered physical damage
B. Coverage is limited to a maximum of two weeks
C. Insured is entitled to recover lost income even through there has been no actual damage to the
insured property
D. Order must have been given as a direct result of damage to neighbouring premises by a peril
insured against on the insureds own premises - ANSWERA. Insureds business must have suffered
physical damage
Accommodation business is best described as:
A. A specialized type of insurance risk which included hotels, motels, apartment buildings and rental
property
B. A risk which can be insured only under a subscription policy
C. A risk which is substandard or marginal, but which, because of its relationship with the broker, the
insurer agrees to to underwrite
D. A risk which is normally acceptable to the insurer but which cannot be bound by the broker
without the insurers consent - ANSWERC. A risk which is substandard or marginal, but which,
because of its relationship with the broker, the insurer agrees to underwrite
The accounts receivable form would not provide payment for:
A. Penalties charged the insured by suppliers for late payment of account
B. Sum charged by insureds accountant to reconstruct lost records
C. Sums charged by collector agency to collect amounts due to insured
D. Sums due from customers which the insured is unable to collect asa direct result of the loss of
records - ANSWERA. Penalties charged by the insured by suppliers for late payment on the account
The safe burglary rider would insure one of the following losses:
A. Money taken from locked cash drawer
B. Money and securities taken from an unlocked safe
C. Money and securities taken from a locked safe by the burglar who knew its combination
D. Removal of the safe from the premises - ANSWERD. Removal of the safe from the premises
, The coverages provided by the contractors equipment floater would insure which of the following
losses:
A. Damage caused to the front end loader due to its falling off the trailer being used to transport it to
the job site
B. Cracking of the engine block on caterpillar due to freezing
C. Fire damage to contractors plans, blueprints, designs or specs - ANSWERA. Damage caused to the
front end loader due to its falling off the trailer being used to transport it to the job site
All of the following statements regarding commercial crime insurance policy are true except one. Pick
the exception:
A. When there is an existing policy in force, broker has the right to bind the insurer for any interim
increase in coverage limits
B. Insurer must provide the insured with 30 days notice when it intents to cancel the policy, except
when cancellation is for non-payment of premium
C. All losses under the policy will be paid in Canadian funds
D. Insured is required to maintain adequate records to substantiate the amount of the loss under the
policy - ANSWERA. When there is an existing policy in force, broker has the right to bind the insurer
for any interim increase in coverage limits
The insurance policy issued to Adanac Shoes LTD. Provides for the settlement of all losses on an
actual cash value basis. Generally, this has come to be understood as the replacement cost or repair
cost of lost or damaged property less any deprivation. However, the Adanac's must be advised that
ACV can be measured in terms of "money value", Explain:
1. Straight Line Depreciation
2. Plateau Acceleration Depreciation
3. Income approach - ANSWER1. Straight line depreciation is based on the number of years that the
building could have reasonable been expected to be functional.
2. Plateau Acceleration Deception is commonly used in the adjustment of losses to older property
3. Income approach is commonly used with income producing properties
Courtney Holdings Owns 36 revenue properties in various cities across Canada. Although the
company normally insured to full values of all such property there is a concern that an increase in
inflation rates could cause the amounts of insurance to fall below the co-insurance percentage
required to be maintained under the policy. To avoid the potential of a penalty being applied at the
time of loss, it is your recommendation that the co-insurance clause be rep[laced with the stated
amount co-insurance clause. Identify the underwriting conditions that must be satisfied by the
