CAIB 2 Practice Exam Questions with Answers
Describe warranty - ✔✔A warranty is a promise that certain facts are as they are represented
to be and that they will remain so.
Describe Condition - ✔✔A condition is imposed upon an insured under the policy requires them
to do, or not to do, something.
Material fact - ✔✔A material fact is a fact which, if communicated to the insurer would induce
it either to decline the insurance altogether, or not accept it unless a higher premium is paid.
Reinsurance - ✔✔Reinsurance involves an insurer passing off or ceding part of the risk it has
assumed to on or more other insurers.
When the insured has misrepresented the risk and it can be shown that such misrepresentation
caused or contributed to the loss, the insurer
a. is entitled to void the policy.
b. must pay the loss but it is entitled to terminate the policy immediately upon making such
payment.
c. must pay the loss but it is entitled to subrogate against the insured for the amounts so paid.
d. must pay the loss. - ✔✔A. Is entitled to void the policy.
Which of the following is not an appropriate method to value property for insurance purposes?
a. Replacement value
b. Book value
c. True value
d. Actual cash value - ✔✔b. Book value
,Which definition best describes scheduled coverage?
a. Scheduled coverage is coverage that is very time sensitive.
b. Scheduled coverage will only insure property identified on the policy.
c. Scheduled coverage will only insure buildings identified on the policy.
d. Scheduled coverage will insure all property, whether identified on the policy or not. - ✔✔b.
Scheduled coverage will only insure property identified on the policy.
Only the following party would be subrogated against by the insurer in the event they were
found responsible for a loss under the policy.
a. Mortgagee.
b. Insured's business partners.
c. Insured's parents who provided financing for the business and who are listed as payees on
the policy.
d. Independent contractor performing work on the premises. - ✔✔d. Independent contractor
performing work on the premises.
Identify and explain the two bases that coverage can be provided on. - ✔✔Coverage is provided
as either
a. Scheduled - only the property listed or "scheduled" on the policy is insured
b. All property - all property that is owned by the insured is insured under a single limit of
insurance. This may also insure property at more than one location.
List the three components of equipment found in commercial policies. - ✔✔Equipment includes
a. All contents usual to the insured's business other than building or stock
, b. Similar property belonging to others which the insured is under obligation to keep insured or
is legally liable for
c. Tenant's improvements which are defined as building improvements, alterations and
betterments made at the expense of the insured to a building
What are the three considerations used when determining amounts of indemnity? -
✔✔Indemnity can be
a. Actual cash value of the property as it existed immediately prior to the loss
b. Interest of the insured in the property
c. Amount of insurance as shown on the policy
What are the requirements that must be met by the insured when co-insurance clauses are
replaced with stated amount co-insurance clauses? - ✔✔Co-insurance
a. Insureds must submit a statement of values indicating 100% of all property insured
b. Values indicated on statement of values must be verified by appraisal or other method
accepted by insurer
c. These values must be insured for the duration of the policy
What are the requirements placed upon insureds with a property protection system clause? -
✔✔Property protection
a. The insured must notify the insurer of any flaw, interruption, or defect in any property
protection system that comes to their knowledge
b. The insured must notify the insurer of any lapse, cancellation, or non-renewal of any
maintenance or monitoring contract of any property protection system
c. The insured must notify the insurer of notification of suspension of police service received
regarding response to any property protection system
List the four elements of locked vehicle warranties. - ✔✔Locked vehicle warranty
a. All property must be in a vehicle or in a fully enclosed metal compartment
b. All doors and windows must be securely closed and locked
Describe warranty - ✔✔A warranty is a promise that certain facts are as they are represented
to be and that they will remain so.
Describe Condition - ✔✔A condition is imposed upon an insured under the policy requires them
to do, or not to do, something.
Material fact - ✔✔A material fact is a fact which, if communicated to the insurer would induce
it either to decline the insurance altogether, or not accept it unless a higher premium is paid.
Reinsurance - ✔✔Reinsurance involves an insurer passing off or ceding part of the risk it has
assumed to on or more other insurers.
When the insured has misrepresented the risk and it can be shown that such misrepresentation
caused or contributed to the loss, the insurer
a. is entitled to void the policy.
b. must pay the loss but it is entitled to terminate the policy immediately upon making such
payment.
c. must pay the loss but it is entitled to subrogate against the insured for the amounts so paid.
d. must pay the loss. - ✔✔A. Is entitled to void the policy.
Which of the following is not an appropriate method to value property for insurance purposes?
a. Replacement value
b. Book value
c. True value
d. Actual cash value - ✔✔b. Book value
,Which definition best describes scheduled coverage?
a. Scheduled coverage is coverage that is very time sensitive.
b. Scheduled coverage will only insure property identified on the policy.
c. Scheduled coverage will only insure buildings identified on the policy.
d. Scheduled coverage will insure all property, whether identified on the policy or not. - ✔✔b.
Scheduled coverage will only insure property identified on the policy.
Only the following party would be subrogated against by the insurer in the event they were
found responsible for a loss under the policy.
a. Mortgagee.
b. Insured's business partners.
c. Insured's parents who provided financing for the business and who are listed as payees on
the policy.
d. Independent contractor performing work on the premises. - ✔✔d. Independent contractor
performing work on the premises.
Identify and explain the two bases that coverage can be provided on. - ✔✔Coverage is provided
as either
a. Scheduled - only the property listed or "scheduled" on the policy is insured
b. All property - all property that is owned by the insured is insured under a single limit of
insurance. This may also insure property at more than one location.
List the three components of equipment found in commercial policies. - ✔✔Equipment includes
a. All contents usual to the insured's business other than building or stock
, b. Similar property belonging to others which the insured is under obligation to keep insured or
is legally liable for
c. Tenant's improvements which are defined as building improvements, alterations and
betterments made at the expense of the insured to a building
What are the three considerations used when determining amounts of indemnity? -
✔✔Indemnity can be
a. Actual cash value of the property as it existed immediately prior to the loss
b. Interest of the insured in the property
c. Amount of insurance as shown on the policy
What are the requirements that must be met by the insured when co-insurance clauses are
replaced with stated amount co-insurance clauses? - ✔✔Co-insurance
a. Insureds must submit a statement of values indicating 100% of all property insured
b. Values indicated on statement of values must be verified by appraisal or other method
accepted by insurer
c. These values must be insured for the duration of the policy
What are the requirements placed upon insureds with a property protection system clause? -
✔✔Property protection
a. The insured must notify the insurer of any flaw, interruption, or defect in any property
protection system that comes to their knowledge
b. The insured must notify the insurer of any lapse, cancellation, or non-renewal of any
maintenance or monitoring contract of any property protection system
c. The insured must notify the insurer of notification of suspension of police service received
regarding response to any property protection system
List the four elements of locked vehicle warranties. - ✔✔Locked vehicle warranty
a. All property must be in a vehicle or in a fully enclosed metal compartment
b. All doors and windows must be securely closed and locked
