CAIB 2 Chapter 1 Practice exam 2 With Complete Solution

Identify the company which assumes the greatest portion of an account - ANSWER-Lead Company What is re-insurance - ANSWER-an insurance company 'ceding' part of the risk to a re-insurer What are three considerations used when determining amounts of indemnity? - ANSWER-i) Actual Cash Value of the property as it existed immediately prior to the loss ii) The interest of the insured in the property iii) The amount of insurance as shown on the policy i) Actual Cash Value of the property as it existed prior to the loss ii) The interest of the insured in the property iii) The amount of insurance as shown on the policy Which of the above amounts will be paid in the event of insured losses? - ANSWER-Insureds will receive whichever is the least Why do co-insurance clauses contain waiver provisions? - ANSWER-To waive application of the co-insurance clause when the loss is less than the amounts indicated in the waiver. These waivers are applied because to determine amounts in the co-insurance clause would cause too much work and expense for the insured given the size of the loss What are the provisions of "waiver of co-insurance" clauses? - ANSWER-When losses are less than 2% of the amount of insurance and less than $5,000 the provision of co-insurance clauses will not be applied Will the "waiver of co-insurance clause" apply to the following loss? Loss - $1,200 Policy Limit - $150,000 ACV of Property - $250,000 - ANSWER-Yes What is the purpose of "stated amount" co-insurance clause - ANSWER-to replace the provisions of the standard co-insurance clause with the requirements of the stated amount co-insurance clause What requirements must be met by the insured when co-insurance clauses are replaced by 'stated amount' co-insurance clauses? - ANSWER-i) Insureds must submit a statement of values indicating 100% of all property insured ii) Values indicated on statements of values must be verified by appraisal or other method acceptable to insurer iii) These values must be insured for the duration of the policy period All policies contain exclusions. List five types of exclusions and provide 2 examples of each - ANSWER-i) War - commercially uninsurable ii) Flood & earthquake - may be catastrophic iii) Automobile & Valuable papers - Other forms of insurance may be available iv) Wear and Tear / Mechanical Breakdown - May be expected by the insured and/or in the control of the insured v) Exterior communication towers & buildings under construction - Not 'common' exposures What is a condition? - ANSWER-requires insureds to do or not do something Insurers will not exercise their right of subrogation against certain parties. Explain. - ANSWER-When persons responsible for a loss have an interest in the proceeds of the policy, the insurer will not exercise their right of subrogation against these parties... (eg. bank or other person who lent money to insured and are shown as a loss payable on the policy) Identify stipulations of property protection systems clauses placed upon clients - ANSWER-i) The insured must notify insurer forthwith of any interruption, flaw or defect in any property protection system that comes to their knowledge ii) The insured must notify insurer forthwith of any lapse, cancellation or non-renewal of any maintenance or monitoring contract of any property protection system iii) The insured must notify insurer forthwith when notification of suspension of police service is received regarding response to any property protection systems How are losses paid on... 1) unsold stock 2) sold stock 3) Customer's property upon which work is being performed? - ANSWER-1) unsold stock - losses are paid on the basis of ACV 2) Sold stock - are paid on the basis of selling price less any discounts given to the customer 3) Customer's property upon which work is being performed? These losses are paid on the basis of value of the parts used to repair and the values of the labour. Customers will be paid ACV on the property when initially dropped off for repair What are two types of property receiving 'special basis of settlement'? - ANSWER-i) Tenants improvements ii) records What is a warranty? - ANSWER-A promise made by insureds that certain facts are as represented and will remain so