CAIB 2 Exam with Complete Solutions
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 - correct Answer-B. 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 - correct Answer-D. 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 - correct Answer-D. Mysterious disappearance
Under a commercial property insurance policy, which of the following would be
considered equipment?
A. Photocopier leased from ideal copiers
B. Advertising brochures promoting next months end sales
C. Customers shoes kept on premises overnight for repair
D. Shoes held on consignment - correct Answer-A. Photocopier leased from ideal
copiers
The consequential loss assumption clauses is defined to insured:
A. Damage caused to refrigerator or cooling equipment
B. Damage caused by freezing due to power failure
C. Loss to stock due to loss of temperature
D. Contamination of stock due to rupture of supply piping - correct Answer-C. Loss to
stock due to loss of temperature
,The coverages provided by the coverages provided by the contractors equipment floater
would insured which of the following losses?
A. Damage caused to front end loader due to freezing
B. Cracking of engine block on caterpillar due to freezing
C. Fire damage to contractors plans, blueprints, design or specifications
D. Sinking of caterpillar while operating over muskeg - correct Answer-A. Damage
caused to front end loader due to freezing
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 - correct Answer-D. Removal of the safe from
the premises
The insurance industry relies on the classifications developed by the following body
when determining the appropriateness of the protection provided to property by
safes,vaults and other:
A. IAO
B. ULC
C. IBC
D. Canada Safety Council - correct Answer-B. ULC
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 - correct Answer-A. 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 - correct Answer-C. 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 - correct Answer-A. Penalties charged by the insured by suppliers for
late payment on the account
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 - correct Answer-A.
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 - correct Answer-A. 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 - correct Answer-1. 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
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 - correct Answer-B. 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 - correct Answer-D. 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 - correct Answer-D. Mysterious disappearance
Under a commercial property insurance policy, which of the following would be
considered equipment?
A. Photocopier leased from ideal copiers
B. Advertising brochures promoting next months end sales
C. Customers shoes kept on premises overnight for repair
D. Shoes held on consignment - correct Answer-A. Photocopier leased from ideal
copiers
The consequential loss assumption clauses is defined to insured:
A. Damage caused to refrigerator or cooling equipment
B. Damage caused by freezing due to power failure
C. Loss to stock due to loss of temperature
D. Contamination of stock due to rupture of supply piping - correct Answer-C. Loss to
stock due to loss of temperature
,The coverages provided by the coverages provided by the contractors equipment floater
would insured which of the following losses?
A. Damage caused to front end loader due to freezing
B. Cracking of engine block on caterpillar due to freezing
C. Fire damage to contractors plans, blueprints, design or specifications
D. Sinking of caterpillar while operating over muskeg - correct Answer-A. Damage
caused to front end loader due to freezing
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 - correct Answer-D. Removal of the safe from
the premises
The insurance industry relies on the classifications developed by the following body
when determining the appropriateness of the protection provided to property by
safes,vaults and other:
A. IAO
B. ULC
C. IBC
D. Canada Safety Council - correct Answer-B. ULC
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 - correct Answer-A. 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 - correct Answer-C. 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 - correct Answer-A. Penalties charged by the insured by suppliers for
late payment on the account
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 - correct Answer-A.
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 - correct Answer-A. 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 - correct Answer-1. 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
