CAIB 3 PRACTICE EXAM 2026 UPDATE
QUESTIONS AND CORRECT VERIFIED
ANSWERS ALREADY GRADED A+
(BRAND NEW VISION)
a) S.E.F. No. 5c Permission to Rent or Lease Endorsement. - ans-extends
coverages to lessor when insured automobiles are rented or
leased to unspecified lessees for periods not in excess of 30 days.
b) S.E.F. No. 5 Permission to Rent or Lease Endorsement - ans-provides
permission for the lessor to rent or lease automobiles on a long
term basis to specified lessees where a separate S.P.F. No. 1
Owner's Form is issued to each lessee.
c) S.E.F. No. 5d Conversion Coverage Endorsement - ans-covers losses
caused by the dishonest acts of the lessee which result in the loss
of the automobile to the lessor. This endorsement can be used
when automobiles are leased on either a short or long term basis.
Motor vehicles that are used in the Insured's business, other than
employees' own vehicles, which are owned or leased long term,
can be insured either individually or on a fleet basis.
a) Indicate the minimum number of vehicles under common ownership or
control that would qualify the Insured for coverage under a fleet policy -
ans-To qualify for a fleet policy four or more vehicles must be
owned or controlled by the Insured.
b) What are the options available for insuring fleet vehicles? - ans-
Vehicles can be insured either on a Scheduled or Blanket Basis.
c) Explain the method of retrospective rating and the main factor upon
which this rating is based - ans-Before the policy is issued both the
,Insurer and the Insured agree that the final premium charged will
fall within an established minimum and maximum range. The
Insured's loss ratio is the main factor that determines the
premium to be charged.
Nearly all businesses have a non-owned automobile liability exposure.
a) Identify the two ways in which this exposure can be insured. - ans-Can
be insured under the S.P.F. No. 6 Standard Non-Owned
Automobile Policy, or under an endorsement to the Commercial
General Liability Policy.
b) Which of these is the most common? - ans-Most commonly, this
exposure is covered in the form of an endorsement to the
Commercial General Liability Policy.
c) Identify the vehicles that would fall under the classification of non-
owned automobiles - ans-vehicles owned by employees, a hired
automobile, or a vehicle operated under contract for the Insured.
a) Indicate if the following businesses are candidates for S.P.F. No. 4
Standard Garage Automobile Policy; state YES or NO.
I. One of the accounts is an up-scale night club that offers a valet service
to its customers so that they don't have to drive around looking for a
parking place for their vehicle.
II. Another is a retailer of car audio and visual systems, which they also
install in their customers' vehicles.
III. A third account is a custom upholstery shop which recovers car seats
and benches brought by customers who are restoring vintage and
collectors' vehicles. - ans-I. YES; II. YES; III. NO
, One of your clients has specialized in buying and selling pre-
owned foreign made vehicles, many of which are models
manufactured in Italy. His dealership peaks at approximately
forty-five vehicles on the lot at any one time and has a very good
turn-over rate. You are discussing the option of insuring the
values of owned vehicles on a Monthly Average Basis under the
S.P.F. No. 4 Standard Garage Automobile Policy.
Explain the provisions of this option - ans-The insured selects an
amount of insurance which represents the maximum value of
owned automobiles at any one time. The insurer charges a
provisional premium. The insured is required to provide the
insurer with monthly reports of values. Should a loss occur and
the required reports have not been filed the insured may be faced
with a penalty, resulting in a payment which is less than the
actual amount of the loss.
The Terms of Sale/Contract between buyers and sellers of ocean
marine cargo sets out the responsibilities of the parties regarding
the shipment and the method of payment for the value of the
cargo. Your client has received a large order from a new buyer in
South Africa for her natural beauty products, which she
manufactures here. She has agreed to ship the order with
payment to be made by Sight Draft. The Terms of Sale/Contract
includes a guarantee of payment for the goods by the buyer.
a) Your client feels secure that the guarantee of payment provides the
necessary protection and sees no need for insuring the cargo. Explain how
you would counter your client's argument against purchasing insurance. -
ans-Even if the seller obtains insurance for the buyer sellers
cannot rely on this insurance to protect their interest; nor should
the seller rely on the guarantee for payment. If the goods are lost
or damaged during transportation there may be little incentive
for the buyer to pay for the goods.
b) A Draft is only one of the methods of payment for goods in international
trade.
QUESTIONS AND CORRECT VERIFIED
ANSWERS ALREADY GRADED A+
(BRAND NEW VISION)
a) S.E.F. No. 5c Permission to Rent or Lease Endorsement. - ans-extends
coverages to lessor when insured automobiles are rented or
leased to unspecified lessees for periods not in excess of 30 days.
b) S.E.F. No. 5 Permission to Rent or Lease Endorsement - ans-provides
permission for the lessor to rent or lease automobiles on a long
term basis to specified lessees where a separate S.P.F. No. 1
Owner's Form is issued to each lessee.
c) S.E.F. No. 5d Conversion Coverage Endorsement - ans-covers losses
caused by the dishonest acts of the lessee which result in the loss
of the automobile to the lessor. This endorsement can be used
when automobiles are leased on either a short or long term basis.
Motor vehicles that are used in the Insured's business, other than
employees' own vehicles, which are owned or leased long term,
can be insured either individually or on a fleet basis.
a) Indicate the minimum number of vehicles under common ownership or
control that would qualify the Insured for coverage under a fleet policy -
ans-To qualify for a fleet policy four or more vehicles must be
owned or controlled by the Insured.
b) What are the options available for insuring fleet vehicles? - ans-
Vehicles can be insured either on a Scheduled or Blanket Basis.
c) Explain the method of retrospective rating and the main factor upon
which this rating is based - ans-Before the policy is issued both the
,Insurer and the Insured agree that the final premium charged will
fall within an established minimum and maximum range. The
Insured's loss ratio is the main factor that determines the
premium to be charged.
Nearly all businesses have a non-owned automobile liability exposure.
a) Identify the two ways in which this exposure can be insured. - ans-Can
be insured under the S.P.F. No. 6 Standard Non-Owned
Automobile Policy, or under an endorsement to the Commercial
General Liability Policy.
b) Which of these is the most common? - ans-Most commonly, this
exposure is covered in the form of an endorsement to the
Commercial General Liability Policy.
c) Identify the vehicles that would fall under the classification of non-
owned automobiles - ans-vehicles owned by employees, a hired
automobile, or a vehicle operated under contract for the Insured.
a) Indicate if the following businesses are candidates for S.P.F. No. 4
Standard Garage Automobile Policy; state YES or NO.
I. One of the accounts is an up-scale night club that offers a valet service
to its customers so that they don't have to drive around looking for a
parking place for their vehicle.
II. Another is a retailer of car audio and visual systems, which they also
install in their customers' vehicles.
III. A third account is a custom upholstery shop which recovers car seats
and benches brought by customers who are restoring vintage and
collectors' vehicles. - ans-I. YES; II. YES; III. NO
, One of your clients has specialized in buying and selling pre-
owned foreign made vehicles, many of which are models
manufactured in Italy. His dealership peaks at approximately
forty-five vehicles on the lot at any one time and has a very good
turn-over rate. You are discussing the option of insuring the
values of owned vehicles on a Monthly Average Basis under the
S.P.F. No. 4 Standard Garage Automobile Policy.
Explain the provisions of this option - ans-The insured selects an
amount of insurance which represents the maximum value of
owned automobiles at any one time. The insurer charges a
provisional premium. The insured is required to provide the
insurer with monthly reports of values. Should a loss occur and
the required reports have not been filed the insured may be faced
with a penalty, resulting in a payment which is less than the
actual amount of the loss.
The Terms of Sale/Contract between buyers and sellers of ocean
marine cargo sets out the responsibilities of the parties regarding
the shipment and the method of payment for the value of the
cargo. Your client has received a large order from a new buyer in
South Africa for her natural beauty products, which she
manufactures here. She has agreed to ship the order with
payment to be made by Sight Draft. The Terms of Sale/Contract
includes a guarantee of payment for the goods by the buyer.
a) Your client feels secure that the guarantee of payment provides the
necessary protection and sees no need for insuring the cargo. Explain how
you would counter your client's argument against purchasing insurance. -
ans-Even if the seller obtains insurance for the buyer sellers
cannot rely on this insurance to protect their interest; nor should
the seller rely on the guarantee for payment. If the goods are lost
or damaged during transportation there may be little incentive
for the buyer to pay for the goods.
b) A Draft is only one of the methods of payment for goods in international
trade.
