CAIB 2 Full Study Guide
Questions & Answers 100%
Correct!!
The three amounts to be considered when calculating the amount of payment as outlined in the
Indemnity Agreement are: - ANSWER1) the value of the lost or damaged property (ACV)
2) the interest of the insured in the property (ex. financial interest, home, mortgage)
3) the amount of insurance specified on the "Declarations Page" for the loss or damaged property
(least amount|)
Identify the four categories that buildings may fall into: - ANSWERResidential (ex. home)
Non-mercantile (ex. hospitals, nursing homes)
Mercantile (ex. drycleaners, bakeries)
Manufacturing/Industrial (ex. autobody shops)
Three classes of property commercially insured are: - ANSWERbuilding, stock, equipment
Identify the two bases that coverage can be provided on: - ANSWERScheduled
All property
Property of every description
Identify and give an example of each of the five types of property contained in the definition of
Building found in the IBC Commercial Property Broad Form - ANSWER1) Growing plants, trees,
shrubs INSIDE the building used for decorative purposes only when insured is the owner of the
building (ex. cactus)
2) Materials and equipment supplies ON the premises for maintenance (ex. lumbar, glass)
,3) Additions and extensions IN CONTACT with the building (enclosed walk-way between buildings)
4) Permanent fittings and fixtures ATTACHED and FORMING part of the building. (ex. light fixtures,
carpeting)
5) Fixed structures PERTAINING to building and located on the premises (ex. fence)
[GMAPF]
2) merchandise of every description USUAL to insureds business (ex. goods for sale for business)
3) similar property belonging to others which the insured is under obligation to keep insured or for
which he is legally liable for (appliance if appliance store.
[PMS]
Identify the three conditions that need to be present before 'similar property belonging to others'
will be insured under the definition of Stock: - ANSWER1) must be similar to that insured by the
policy
2) the insured must have had an obligation to keep the property insured
3) the insured must be legally liable for it.
Identify and give an example of each of the three types of property contained in the definition of
Equipment found in the IBC Commercial Property Broad Form: - ANSWER1) generally all contents
USUAL to insureds business, other than building or stock (ex. furniture)
2) similar property belonging to others which the insured is under obligation to keep insured or for
which he is legally liable for (ex. shaw cable box)
3) tenants improvements (ex. space rented out or leased, malls)
[GST]
Identify the three ways in which property may be valued: - ANSWERActual Cash Value (ACV)
,Replacement Value
Book Value
Which way is NOT an appropriate means of valuing property for insurance purposes? - ANSWERBook
Value
Identify the one word that can summarize the difference between Actual Cash Value and
Replacement Cost: - ANSWERdepreciation
Who does the onus rest upon to establish the amount of insurance required? - ANSWERthe Insured
Identify the five methods that may be used to determine Actual Cash Value: - ANSWER1) Actual Cash
Value
2) True Value to customer
3) Market Value/Direct Sales Approach
4) Income Approach
5) Formula/Cost Approach Method
Identify the two types of depreciation used in the Formula/Cost Approach, and give an example of a
type of property that would be appropriate using each: - ANSWERStraight Line Depreciation (ex.
buildings)
&
Plateau Accelerated Depreciation (ex. cars, furniture)
A licensed real estate appraiser will generally be consulted to provide an expert opinion when
establishing Market Value/Direct Sales Approach. Identify the three items he or she may consider: -
ANSWERProperty before the loss
Property after the loss
the land
When is the Income Approach method most commonly employed? - ANSWERThis method of
evaluating a loss is commonly used with income producing properties
, The Broad Evidence ties together the previous four methods when establishing actual cash value,
and the courts will take into account many different factors. Identify any three such factors: -
ANSWERMarket Value -assessed valuation
Rental Value -use of building
Location -resale success, replacement value less depreciation {any of these}
Insurers can reduce their amount of exposure on large risks by the use of Reinsurance or
Subscription polies. Outline three rules, or guidelines that apply when reinsurance is used to provide
insurance coverages: - ANSWER1) all insurers share premiums collected and losses incurred
2) the policy is controlled by the primary insurer and all claims are paid by it
3) the contract is between the primary insurer and the reinsurer
Identify four instances when subscription policies may be issued: - ANSWER- the broker wants to
spread a good large line of business among markets
- the line of business is so SPECIALIZED, its not covered by the insurers treaty with its reinsurers
- the type of risk is one which the insurer does not want to expose to its reinsurance treaties
- the limits do not exceed insurers net retention limits but are beyond what it is prepared to pay in a
single claim.
Identify two characteristics shared by all subscription polices: - ANSWER- both share premiums and
losses
- each agreement is usually required to be negotiated separately
Briefly describe the role of the LEAD company in a subscription policy: - ANSWERthe lead company
normally issues the policy and provides all policyholder services, including the handling of claims
Identify from the brokers point of view which method is preferred where the insurers can reduce
their amount of exposures on large risks: - ANSWERReinsurance
Questions & Answers 100%
Correct!!
The three amounts to be considered when calculating the amount of payment as outlined in the
Indemnity Agreement are: - ANSWER1) the value of the lost or damaged property (ACV)
2) the interest of the insured in the property (ex. financial interest, home, mortgage)
3) the amount of insurance specified on the "Declarations Page" for the loss or damaged property
(least amount|)
Identify the four categories that buildings may fall into: - ANSWERResidential (ex. home)
Non-mercantile (ex. hospitals, nursing homes)
Mercantile (ex. drycleaners, bakeries)
Manufacturing/Industrial (ex. autobody shops)
Three classes of property commercially insured are: - ANSWERbuilding, stock, equipment
Identify the two bases that coverage can be provided on: - ANSWERScheduled
All property
Property of every description
Identify and give an example of each of the five types of property contained in the definition of
Building found in the IBC Commercial Property Broad Form - ANSWER1) Growing plants, trees,
shrubs INSIDE the building used for decorative purposes only when insured is the owner of the
building (ex. cactus)
2) Materials and equipment supplies ON the premises for maintenance (ex. lumbar, glass)
,3) Additions and extensions IN CONTACT with the building (enclosed walk-way between buildings)
4) Permanent fittings and fixtures ATTACHED and FORMING part of the building. (ex. light fixtures,
carpeting)
5) Fixed structures PERTAINING to building and located on the premises (ex. fence)
[GMAPF]
2) merchandise of every description USUAL to insureds business (ex. goods for sale for business)
3) similar property belonging to others which the insured is under obligation to keep insured or for
which he is legally liable for (appliance if appliance store.
[PMS]
Identify the three conditions that need to be present before 'similar property belonging to others'
will be insured under the definition of Stock: - ANSWER1) must be similar to that insured by the
policy
2) the insured must have had an obligation to keep the property insured
3) the insured must be legally liable for it.
Identify and give an example of each of the three types of property contained in the definition of
Equipment found in the IBC Commercial Property Broad Form: - ANSWER1) generally all contents
USUAL to insureds business, other than building or stock (ex. furniture)
2) similar property belonging to others which the insured is under obligation to keep insured or for
which he is legally liable for (ex. shaw cable box)
3) tenants improvements (ex. space rented out or leased, malls)
[GST]
Identify the three ways in which property may be valued: - ANSWERActual Cash Value (ACV)
,Replacement Value
Book Value
Which way is NOT an appropriate means of valuing property for insurance purposes? - ANSWERBook
Value
Identify the one word that can summarize the difference between Actual Cash Value and
Replacement Cost: - ANSWERdepreciation
Who does the onus rest upon to establish the amount of insurance required? - ANSWERthe Insured
Identify the five methods that may be used to determine Actual Cash Value: - ANSWER1) Actual Cash
Value
2) True Value to customer
3) Market Value/Direct Sales Approach
4) Income Approach
5) Formula/Cost Approach Method
Identify the two types of depreciation used in the Formula/Cost Approach, and give an example of a
type of property that would be appropriate using each: - ANSWERStraight Line Depreciation (ex.
buildings)
&
Plateau Accelerated Depreciation (ex. cars, furniture)
A licensed real estate appraiser will generally be consulted to provide an expert opinion when
establishing Market Value/Direct Sales Approach. Identify the three items he or she may consider: -
ANSWERProperty before the loss
Property after the loss
the land
When is the Income Approach method most commonly employed? - ANSWERThis method of
evaluating a loss is commonly used with income producing properties
, The Broad Evidence ties together the previous four methods when establishing actual cash value,
and the courts will take into account many different factors. Identify any three such factors: -
ANSWERMarket Value -assessed valuation
Rental Value -use of building
Location -resale success, replacement value less depreciation {any of these}
Insurers can reduce their amount of exposure on large risks by the use of Reinsurance or
Subscription polies. Outline three rules, or guidelines that apply when reinsurance is used to provide
insurance coverages: - ANSWER1) all insurers share premiums collected and losses incurred
2) the policy is controlled by the primary insurer and all claims are paid by it
3) the contract is between the primary insurer and the reinsurer
Identify four instances when subscription policies may be issued: - ANSWER- the broker wants to
spread a good large line of business among markets
- the line of business is so SPECIALIZED, its not covered by the insurers treaty with its reinsurers
- the type of risk is one which the insurer does not want to expose to its reinsurance treaties
- the limits do not exceed insurers net retention limits but are beyond what it is prepared to pay in a
single claim.
Identify two characteristics shared by all subscription polices: - ANSWER- both share premiums and
losses
- each agreement is usually required to be negotiated separately
Briefly describe the role of the LEAD company in a subscription policy: - ANSWERthe lead company
normally issues the policy and provides all policyholder services, including the handling of claims
Identify from the brokers point of view which method is preferred where the insurers can reduce
their amount of exposures on large risks: - ANSWERReinsurance
