CAIB 2 Practice Exam Questions with Answers
What are magnet properties and give some examples - ✔✔Businesses that attract a large
number of customers to the area
ex. major retail chain
What is considered a newly acquired location and how are they covered? - ✔✔Location acquire
by the insured, covered for 30 days from acquisition
What are 2 common characteristics of business interruption insurance? - ✔✔1. insures same
perils as commercial policy
2. indemnity may continue beyond policy expiry
3. are contracts of indemnity
4. pays for expenses necessary to reduce further loss
What are 3 ways for a client to insure their property while in transit? - ✔✔1. transportation
floater- broad form
2. transportation floater- limited form
3. motor cargo rider: for an insured who carries his own goods
4. trip transit coverage: covers a single trip
Your client's business has been doing well for the last few years and is planning to hire on a lot
more staff. to accommodate these extra people, your client is planning to move to a larger
office. They mention to you that they're worried about their computers being damaged during
the trip to the new office. Which insurance would you recommend him? - ✔✔Trip transit
coverage
What is the difference between an endorsement and a rider? - ✔✔endorsement: changes the
terms of the policy
rider: adds additional coverage
, What is it called when an UW selects those applicant that are most likely to suffer loss? -
✔✔Adverse selection
What is a hazard and what are 3 types? define them - ✔✔Hazard: a condition that may cause a
peril to occur
Physical hazard: a condition relating to use of tangible property that may cause peril to occur
moral hazard: characteristics of the applicant that may cause a peril to occur
morale hazard: attitude of the client
What are 2 general ways property can be covered? explain them. - ✔✔Scheduled coverage:
covers only property specifically identified
All property: insures building, stock or equipment under a single limit of insurance
What is a supporting business? - ✔✔good business (risks) that a broker gives to insurer. The
insurer will take this into consideration to support a broker's bid to insure a substandard risk
What is accommodation business? - ✔✔normally substandard risk that the insurer decides to
take because of their positive relationship with the broker (ie they have good supporting
business)
Please explain straight line depreciation in the context of ACV - ✔✔assumes that depreciation
happens at a constant rate (linear)
What is the main difference between ACV and RC - ✔✔Replacement value does not take
depreciation into consideration
Please explain plateau accelerated depreciation in the context of ACV - ✔✔this method of
calculation assumes that the rate of depreciation is greatest in the first few years before
eventually tapering off
What are magnet properties and give some examples - ✔✔Businesses that attract a large
number of customers to the area
ex. major retail chain
What is considered a newly acquired location and how are they covered? - ✔✔Location acquire
by the insured, covered for 30 days from acquisition
What are 2 common characteristics of business interruption insurance? - ✔✔1. insures same
perils as commercial policy
2. indemnity may continue beyond policy expiry
3. are contracts of indemnity
4. pays for expenses necessary to reduce further loss
What are 3 ways for a client to insure their property while in transit? - ✔✔1. transportation
floater- broad form
2. transportation floater- limited form
3. motor cargo rider: for an insured who carries his own goods
4. trip transit coverage: covers a single trip
Your client's business has been doing well for the last few years and is planning to hire on a lot
more staff. to accommodate these extra people, your client is planning to move to a larger
office. They mention to you that they're worried about their computers being damaged during
the trip to the new office. Which insurance would you recommend him? - ✔✔Trip transit
coverage
What is the difference between an endorsement and a rider? - ✔✔endorsement: changes the
terms of the policy
rider: adds additional coverage
, What is it called when an UW selects those applicant that are most likely to suffer loss? -
✔✔Adverse selection
What is a hazard and what are 3 types? define them - ✔✔Hazard: a condition that may cause a
peril to occur
Physical hazard: a condition relating to use of tangible property that may cause peril to occur
moral hazard: characteristics of the applicant that may cause a peril to occur
morale hazard: attitude of the client
What are 2 general ways property can be covered? explain them. - ✔✔Scheduled coverage:
covers only property specifically identified
All property: insures building, stock or equipment under a single limit of insurance
What is a supporting business? - ✔✔good business (risks) that a broker gives to insurer. The
insurer will take this into consideration to support a broker's bid to insure a substandard risk
What is accommodation business? - ✔✔normally substandard risk that the insurer decides to
take because of their positive relationship with the broker (ie they have good supporting
business)
Please explain straight line depreciation in the context of ACV - ✔✔assumes that depreciation
happens at a constant rate (linear)
What is the main difference between ACV and RC - ✔✔Replacement value does not take
depreciation into consideration
Please explain plateau accelerated depreciation in the context of ACV - ✔✔this method of
calculation assumes that the rate of depreciation is greatest in the first few years before
eventually tapering off
