CAIB 2 Practice Exam Questions with Answers
Scheduled Property - ✔✔Property is individually listed and only the property listed is insured.
All Property Basis - ✔✔All Property owned by the insured is covered by a single limit of
insurance.
Examples of Equipment... - ✔✔Cash Register used in insureds business, Portable wall dividers
seperating work areas in the office, wallpaper and wall-to-wall floor coverings installed in rent
office by tentant.
Examples of Building... - ✔✔Two bundles of shingles which were left over after the roof was
reshingled and which are being stored in the insureds basement. Pyramid cedar tree in
common area of the interior of a local mall.
Examples of Stock... - ✔✔Plastic bags used by business to package customers purchases.
Customers furnishings held on consignment sale basis by local furniture stores. Sales brochures.
What 3 ways can property be valued? - ✔✔ACV, Replacement Value, and Book Value.
Two ways to insure commercial property are: - ✔✔Scheduled or All Property Basis.
What are the classes of property insured by commercial property insurance? - ✔✔Building,
Equipment, Stock
5 Different ways to calculate ACV? - ✔✔Formula/Cost Approach Method.- Most commonly
used. Determine the replacement cost and then the depreciation by either using straight line or
plateau accelerated depreciation.
Market Value/Direct Sales Approach- A licenses real estate appraiser will be consulted to give a
fair market value of the house and land.
,Income Approach- Used with income producing property. The net annual rental income is
determined and a capitalization factor applied to it to produce and ACV.
True Value To The Owner- When insureds claim the other 3 methods have failed to consider
their special circumstances. The building needs to be replaced but at a different value then
what's been appraised.
Broad Evidence Rule- Ties together all 4 of the above approaches. Takes into account many
different factors.
A Minimum Retained Premium - ✔✔is kept by the insurer when a policy is canceled to ensure
the costs of underwriting the policy can be recouped, at least in part.
Three factors considered by the adjustor when determining the amount of indemnity to be
provided by the policy? - ✔✔1. The value of the lost or damaged property as determined in
clause 15.
2. The interest of the insured in the property.
3. The amount of insurance specified on the declaration page for the lost or damaged property.
Tenants Improvements - ✔✔Building improvements , alternation, and betterments made at the
expense of the insured to a building occupied by the insured and which are not otherwise
insured, provided the insured is not the owner of the building.
Actual Cash Value - ✔✔Repair or replace lost or damaged property, less the application of any
depreciation.
replacement value - ✔✔Represents the costs to repair, replace or rebuild the lost or damaged
property without deduction for depreciation
Package Policy - ✔✔Insurance policy that combines coverage from two or more types of
insurance (such as property and liability) into one policy. AKA Composite Policies
, Manuscript Policies - ✔✔are designed for risks having a specialized exposure and for which no
standard coverage form exists.
Reinsurance - ✔✔A form of insurance whereby one insurance company (the reinsurer) in
consideration of a premium paid to it, agrees to indemnify another insurance company (the
ceding company) for part or all of its liabilities from insurance policies it has issued.
Subscription Policy - ✔✔A single policy covering a risk that is divided among a number of
insurers; the policy is issued by the "lead" company (usually the one with the largest
percentage) and signed by all participating companies.
Condition - ✔✔imposed upon an insured under the policy requires them to do or not to do
something.
Statutory Condition - ✔✔Imposed by law.
Additional Conditions - ✔✔Imposed by insurers
Subrogation - ✔✔The process by which an insurer can, after it has paid a loss under the policy,
recover the amount paid from any party (other than the insured) who caused the loss or is
otherwise legally liable for the loss.
Warrenty - ✔✔a written guarantee from the manufacturer or distributor that states the
conditions under which the product can be returned, replaced, or repaired.
Material Fact - ✔✔In insurance, a fact that would affect the insurer's decision to provide or
maintain insurance or to settle a claim. Higher premium possibly.
Fraudulent - ✔✔To act wilfully, and with the specific intent to deceive or cheat to cause
financial loss to another, or bring about some financial gain to oneself.
Scheduled Property - ✔✔Property is individually listed and only the property listed is insured.
All Property Basis - ✔✔All Property owned by the insured is covered by a single limit of
insurance.
Examples of Equipment... - ✔✔Cash Register used in insureds business, Portable wall dividers
seperating work areas in the office, wallpaper and wall-to-wall floor coverings installed in rent
office by tentant.
Examples of Building... - ✔✔Two bundles of shingles which were left over after the roof was
reshingled and which are being stored in the insureds basement. Pyramid cedar tree in
common area of the interior of a local mall.
Examples of Stock... - ✔✔Plastic bags used by business to package customers purchases.
Customers furnishings held on consignment sale basis by local furniture stores. Sales brochures.
What 3 ways can property be valued? - ✔✔ACV, Replacement Value, and Book Value.
Two ways to insure commercial property are: - ✔✔Scheduled or All Property Basis.
What are the classes of property insured by commercial property insurance? - ✔✔Building,
Equipment, Stock
5 Different ways to calculate ACV? - ✔✔Formula/Cost Approach Method.- Most commonly
used. Determine the replacement cost and then the depreciation by either using straight line or
plateau accelerated depreciation.
Market Value/Direct Sales Approach- A licenses real estate appraiser will be consulted to give a
fair market value of the house and land.
,Income Approach- Used with income producing property. The net annual rental income is
determined and a capitalization factor applied to it to produce and ACV.
True Value To The Owner- When insureds claim the other 3 methods have failed to consider
their special circumstances. The building needs to be replaced but at a different value then
what's been appraised.
Broad Evidence Rule- Ties together all 4 of the above approaches. Takes into account many
different factors.
A Minimum Retained Premium - ✔✔is kept by the insurer when a policy is canceled to ensure
the costs of underwriting the policy can be recouped, at least in part.
Three factors considered by the adjustor when determining the amount of indemnity to be
provided by the policy? - ✔✔1. The value of the lost or damaged property as determined in
clause 15.
2. The interest of the insured in the property.
3. The amount of insurance specified on the declaration page for the lost or damaged property.
Tenants Improvements - ✔✔Building improvements , alternation, and betterments made at the
expense of the insured to a building occupied by the insured and which are not otherwise
insured, provided the insured is not the owner of the building.
Actual Cash Value - ✔✔Repair or replace lost or damaged property, less the application of any
depreciation.
replacement value - ✔✔Represents the costs to repair, replace or rebuild the lost or damaged
property without deduction for depreciation
Package Policy - ✔✔Insurance policy that combines coverage from two or more types of
insurance (such as property and liability) into one policy. AKA Composite Policies
, Manuscript Policies - ✔✔are designed for risks having a specialized exposure and for which no
standard coverage form exists.
Reinsurance - ✔✔A form of insurance whereby one insurance company (the reinsurer) in
consideration of a premium paid to it, agrees to indemnify another insurance company (the
ceding company) for part or all of its liabilities from insurance policies it has issued.
Subscription Policy - ✔✔A single policy covering a risk that is divided among a number of
insurers; the policy is issued by the "lead" company (usually the one with the largest
percentage) and signed by all participating companies.
Condition - ✔✔imposed upon an insured under the policy requires them to do or not to do
something.
Statutory Condition - ✔✔Imposed by law.
Additional Conditions - ✔✔Imposed by insurers
Subrogation - ✔✔The process by which an insurer can, after it has paid a loss under the policy,
recover the amount paid from any party (other than the insured) who caused the loss or is
otherwise legally liable for the loss.
Warrenty - ✔✔a written guarantee from the manufacturer or distributor that states the
conditions under which the product can be returned, replaced, or repaired.
Material Fact - ✔✔In insurance, a fact that would affect the insurer's decision to provide or
maintain insurance or to settle a claim. Higher premium possibly.
Fraudulent - ✔✔To act wilfully, and with the specific intent to deceive or cheat to cause
financial loss to another, or bring about some financial gain to oneself.
