CAIB 2 EXAM NEWEST EXAM QUESTIONS AND
CORRECT ANSWERS WITH DETAILED RATIONALES
CAIB 2 Comprehensive Exam Questions (New Edition 1.0)
1. Under the IBC Commercial Property Broad Form, which of the following is NOT
included in the definition of "Building"?
A. Growing plants inside the building used for decorative purposes when the
insured owns the building
B. Materials and equipment on the premises for maintenance
C. Merchandise held for sale
D. Additions and extensions in contact with the building
Answer: C
Rationale: Merchandise held for sale is classified as "Stock," not "Building." The
definition of Building includes growing plants (decorative, owner-occupied),
maintenance materials, additions/extensions, permanent fittings/fixtures, and
fixed structures pertaining to the building.
2. Which of the following best describes "Scheduled Coverage"?
A. A single limit of insurance covering building, stock, and equipment
B. Coverage provided only on property specifically identified or scheduled on the
policy
C. Coverage that automatically applies to newly acquired locations for 30 days
,D. Coverage that applies to all property of every description
Answer: B
Rationale: Scheduled coverage refers to a policy where coverage is provided only
on property that is specifically identified or scheduled on the policy. All Property
coverage uses a single limit for building, stock, and equipment.
3. In the context of commercial property insurance, what is "Tenants
Improvements"?
A. Improvements made by the landlord to attract tenants
B. Building improvements, alterations, and betterments made at the expense of
or purchased by the insured to a building occupied by the insured
C. Fixtures permanently attached to the building by the owner
D. Stock that a tenant holds on consignment
Answer: B
Rationale: Tenants Improvements are building improvements, alterations, and
betterments made at the expense of or purchased by the insured to a building
occupied by the insured.
4. What is the primary purpose of a deductible in a commercial property policy?
A. To increase the premium
B. To eliminate minor maintenance-type claims
C. To reduce the amount of coverage available
D. To penalize the insured for making claims
,Answer: B
Rationale: The purpose of the deductible is to eliminate minor maintenance-type
claims, which helps keep premiums lower for all insureds.
5. Insurers agree to waive any co-insurance requirement when a loss meets which
of the following conditions?
A. The loss exceeds 10% of the policy limit
B. The loss is 2% or $5,000 (up to), whichever is less
C. The loss involves a total destruction of the property
D. The insured has filed a Statement of Values
Answer: B
Rationale: Insurers agree to "waive" any co-insurance requirement when a loss
meets either of the following conditions: 2% or $5,000 (up to).
6. In order to replace a Co-Insurance Clause with a Stated Amount Co-Insurance
Clause, the client must comply with which of the following?
A. File a Statement of Values with the insurer representing 100% of the value of
all property insured
B. Maintain these values throughout the term
C. Both A and B
D. Neither A nor B
Answer: C
, Rationale: To replace a Co-Insurance Clause with a Stated Amount Co-Insurance
Clause, the client must file a Statement of Values representing 100% of the value
of all property insured and maintain these values throughout the term.
7. Which of the following is an example of a "morale hazard"?
A. A faulty electrical wiring system
B. An insured's indifference to loss because they have insurance
C. A dishonest employee
D. A building located in a flood zone
Answer: B
Rationale: A morale hazard refers to an insured's indifference to loss because they
have insurance, which may lead to carelessness. Moral hazard involves a
dishonest tendency, while physical hazard is a physical condition like faulty wiring.
8. When an underwriter looks at the financial and claims history of the applicant,
they are primarily looking for what type of hazard?
A. Morale hazard
B. Moral hazard
C. Physical hazard
D. Legal hazard
Answer: B
Rationale: When an underwriter reviews financial and claims history, they are
looking for moral hazard, which involves a dishonest tendency or character trait
that increases the likelihood of a loss.
CORRECT ANSWERS WITH DETAILED RATIONALES
CAIB 2 Comprehensive Exam Questions (New Edition 1.0)
1. Under the IBC Commercial Property Broad Form, which of the following is NOT
included in the definition of "Building"?
A. Growing plants inside the building used for decorative purposes when the
insured owns the building
B. Materials and equipment on the premises for maintenance
C. Merchandise held for sale
D. Additions and extensions in contact with the building
Answer: C
Rationale: Merchandise held for sale is classified as "Stock," not "Building." The
definition of Building includes growing plants (decorative, owner-occupied),
maintenance materials, additions/extensions, permanent fittings/fixtures, and
fixed structures pertaining to the building.
2. Which of the following best describes "Scheduled Coverage"?
A. A single limit of insurance covering building, stock, and equipment
B. Coverage provided only on property specifically identified or scheduled on the
policy
C. Coverage that automatically applies to newly acquired locations for 30 days
,D. Coverage that applies to all property of every description
Answer: B
Rationale: Scheduled coverage refers to a policy where coverage is provided only
on property that is specifically identified or scheduled on the policy. All Property
coverage uses a single limit for building, stock, and equipment.
3. In the context of commercial property insurance, what is "Tenants
Improvements"?
A. Improvements made by the landlord to attract tenants
B. Building improvements, alterations, and betterments made at the expense of
or purchased by the insured to a building occupied by the insured
C. Fixtures permanently attached to the building by the owner
D. Stock that a tenant holds on consignment
Answer: B
Rationale: Tenants Improvements are building improvements, alterations, and
betterments made at the expense of or purchased by the insured to a building
occupied by the insured.
4. What is the primary purpose of a deductible in a commercial property policy?
A. To increase the premium
B. To eliminate minor maintenance-type claims
C. To reduce the amount of coverage available
D. To penalize the insured for making claims
,Answer: B
Rationale: The purpose of the deductible is to eliminate minor maintenance-type
claims, which helps keep premiums lower for all insureds.
5. Insurers agree to waive any co-insurance requirement when a loss meets which
of the following conditions?
A. The loss exceeds 10% of the policy limit
B. The loss is 2% or $5,000 (up to), whichever is less
C. The loss involves a total destruction of the property
D. The insured has filed a Statement of Values
Answer: B
Rationale: Insurers agree to "waive" any co-insurance requirement when a loss
meets either of the following conditions: 2% or $5,000 (up to).
6. In order to replace a Co-Insurance Clause with a Stated Amount Co-Insurance
Clause, the client must comply with which of the following?
A. File a Statement of Values with the insurer representing 100% of the value of
all property insured
B. Maintain these values throughout the term
C. Both A and B
D. Neither A nor B
Answer: C
, Rationale: To replace a Co-Insurance Clause with a Stated Amount Co-Insurance
Clause, the client must file a Statement of Values representing 100% of the value
of all property insured and maintain these values throughout the term.
7. Which of the following is an example of a "morale hazard"?
A. A faulty electrical wiring system
B. An insured's indifference to loss because they have insurance
C. A dishonest employee
D. A building located in a flood zone
Answer: B
Rationale: A morale hazard refers to an insured's indifference to loss because they
have insurance, which may lead to carelessness. Moral hazard involves a
dishonest tendency, while physical hazard is a physical condition like faulty wiring.
8. When an underwriter looks at the financial and claims history of the applicant,
they are primarily looking for what type of hazard?
A. Morale hazard
B. Moral hazard
C. Physical hazard
D. Legal hazard
Answer: B
Rationale: When an underwriter reviews financial and claims history, they are
looking for moral hazard, which involves a dishonest tendency or character trait
that increases the likelihood of a loss.
