CAIB 2 -Terms and Definitions Questions and
Answers
Scheduled Coverage - ANSWER-refers to policy on which coverage is provided only on
that property which is specifically identified or scheduled
All Property - ANSWER-refers to policy used to insure building, equipment and stock
under a single limit of Insurance
Tenants Improvement - ANSWER-building improvements, alteration and betterments
made at expense of or purchased by the insured to a building occupied by the insured
and which are not otherwise insured, provided the insured is not actual owner of such
building
Actual Cash Value - ANSWER-the replacement or repair cost less depreciation
Replacement Value - ANSWER-represents the costs to repair, replace or rebuild the
lost or damaged property without deduction for depreciation
Reinsurance - ANSWER-involves an insurer to cede part of the risk it has assumed to
one or more other insurer
Subscription - ANSWER-an insurance policy under which a group of insurers has
agreed to participate in providing policy insurance coverages
Condition - ANSWER-is something that imposed by the insurer that requires the insured
to do or not to do something
Subrogation - ANSWER-refers to the right of the insurer to "step into the shoes" of the
party whom it has compensated and sue any party whom the compensated party could
have sued
Warranty - ANSWER-is a promise that the certain facts are as they are represented to
be and that they will remain so.
Material Fact - ANSWER-a fact which if communicated to the Insurer would effect it
ether to decline the insurance all together, or not accept it unless higher premium is
paid
Fraudulent - ANSWER-to act wilfully and with specific intent to deceive or cheat
Void contract - ANSWER-is the one which has no "legal or binding force" and as such ,
"is incapable of being enforced by law"
, Fire Resistive - ANSWER-building which has met minimum standards in terms of hours
it will withstand a specific, carefully controlled fire
Non-combustible - ANSWER-all structural members including floors, roofs and their
supports are constructed of steel, iron, concrete or other non-combustible materials
Common Hazards - ANSWER-conditions common to all building which influence their
potential for loss
Detachment - ANSWER-refers to the proximity of the building insured or containing the
property insured to other commercially rated buildings
Adverse Selection - ANSWER-occurs when the applicants for insurance are largely
those most likely to suffer a loss
Risk Classification - ANSWER-refers to the grouping or classifying of risks according to
established criteria, which in large part, is based on their probability for loss as a class
Soft Market - ANSWER-characterized by intense competition between insurers. As a
result, rates tend to be low
Hard Market - ANSWER-occurs when low profits margins force out of the competition,
as a result, insurers use a more disciplined underwriting approach which gives to the
insured little or nothing in the way of rate discounts
Hazard - ANSWER-is a condition which may cause a peril to occur
Physical Hazard - ANSWER-a condition relating to the use of tangible property which
could cause a peril to occur
Moral Hazard - ANSWER-subjective characteristics of the applicant that could cause a
peril to occur
Morale Hazard - ANSWER-deals with the attitude of the client
Accommodation Business - ANSWER-business which is marginal or substandard but
which the insurers agrees to accept as a favour or accommodation to the broker
Supporting Business - ANSWER-the existence of other insurance policies the applicant
has with the same insurer
Centrifugal Force - ANSWER-the inertia of a body that tends to move it away from the
centre around which it revolves
Mechanical Breakdown - ANSWER-a failure in the working mechanism of the
machinery. A functional defect in the moving parts of the equipment which causes the
latter to cease functioning or to function improperly.
Answers
Scheduled Coverage - ANSWER-refers to policy on which coverage is provided only on
that property which is specifically identified or scheduled
All Property - ANSWER-refers to policy used to insure building, equipment and stock
under a single limit of Insurance
Tenants Improvement - ANSWER-building improvements, alteration and betterments
made at expense of or purchased by the insured to a building occupied by the insured
and which are not otherwise insured, provided the insured is not actual owner of such
building
Actual Cash Value - ANSWER-the replacement or repair cost less depreciation
Replacement Value - ANSWER-represents the costs to repair, replace or rebuild the
lost or damaged property without deduction for depreciation
Reinsurance - ANSWER-involves an insurer to cede part of the risk it has assumed to
one or more other insurer
Subscription - ANSWER-an insurance policy under which a group of insurers has
agreed to participate in providing policy insurance coverages
Condition - ANSWER-is something that imposed by the insurer that requires the insured
to do or not to do something
Subrogation - ANSWER-refers to the right of the insurer to "step into the shoes" of the
party whom it has compensated and sue any party whom the compensated party could
have sued
Warranty - ANSWER-is a promise that the certain facts are as they are represented to
be and that they will remain so.
Material Fact - ANSWER-a fact which if communicated to the Insurer would effect it
ether to decline the insurance all together, or not accept it unless higher premium is
paid
Fraudulent - ANSWER-to act wilfully and with specific intent to deceive or cheat
Void contract - ANSWER-is the one which has no "legal or binding force" and as such ,
"is incapable of being enforced by law"
, Fire Resistive - ANSWER-building which has met minimum standards in terms of hours
it will withstand a specific, carefully controlled fire
Non-combustible - ANSWER-all structural members including floors, roofs and their
supports are constructed of steel, iron, concrete or other non-combustible materials
Common Hazards - ANSWER-conditions common to all building which influence their
potential for loss
Detachment - ANSWER-refers to the proximity of the building insured or containing the
property insured to other commercially rated buildings
Adverse Selection - ANSWER-occurs when the applicants for insurance are largely
those most likely to suffer a loss
Risk Classification - ANSWER-refers to the grouping or classifying of risks according to
established criteria, which in large part, is based on their probability for loss as a class
Soft Market - ANSWER-characterized by intense competition between insurers. As a
result, rates tend to be low
Hard Market - ANSWER-occurs when low profits margins force out of the competition,
as a result, insurers use a more disciplined underwriting approach which gives to the
insured little or nothing in the way of rate discounts
Hazard - ANSWER-is a condition which may cause a peril to occur
Physical Hazard - ANSWER-a condition relating to the use of tangible property which
could cause a peril to occur
Moral Hazard - ANSWER-subjective characteristics of the applicant that could cause a
peril to occur
Morale Hazard - ANSWER-deals with the attitude of the client
Accommodation Business - ANSWER-business which is marginal or substandard but
which the insurers agrees to accept as a favour or accommodation to the broker
Supporting Business - ANSWER-the existence of other insurance policies the applicant
has with the same insurer
Centrifugal Force - ANSWER-the inertia of a body that tends to move it away from the
centre around which it revolves
Mechanical Breakdown - ANSWER-a failure in the working mechanism of the
machinery. A functional defect in the moving parts of the equipment which causes the
latter to cease functioning or to function improperly.
