CAIB 1 PRACTICE EXAM (NEWEST VERSION) | ALL
QUESTIONS AND CORRECT ANSWERS (DETAILED
ANSWERS) | GRADED A+ | VERIFIED ANSWERS |
LATEST EXAM
Insurers are in the business of assuming the financial risks of others which
involves entering into a formal contract. A contract is enforceable at law only
when all legal elements have been observed. Insurance contracts differ from
other formal agreements and are subject to what three additional elements? -
(ANSWER)Insurable Interest
Utmost Good Faith
Indemnity
Explain the meaning and disadvantage of the following approaches: Avoidance of
Risk & Control of Risk - (ANSWER)Avoidance: Avoidance means that all chance of
financial loss has been eliminated or a decision not to do something. The
disadvantage is its not very effective as often the elimination of one exposure
creates another in its place.
Control: taking measures to reduce the frequency and severity of losses. The
disadvantage is that not all losses can be controlled, because equipment will not
work 100% of the time
Identify the three elements that are unique to contracts of insurance: -
(ANSWER)Insurable Interest, Utmost Good Faith, and Indemnity
The Insurance Act restricts payment for an insured loss to those amounts required
to indemnify the Insured. Indicate the amount the Insured is legally entitled to
receive and the measure used to determine this value. - (ANSWER)Entitled to
, receive payment for the actual amount of the loss, no more and no less. The
measure is the value of the object of insurance as it was immediately before the
loss.
Policies insuring against the peril of fire must contain Fire Statutory Conditions.
Indicate the Statutory Condition and the applicable rules: During the policy term
the insured installed a wood burning stove as a secondary heating device. The
application indicates that a gas furnace is used to heat the premises. -
(ANSWER)Material Change. The insured must notify the insurer promptly of any
change that serves to increase the chance of loss. After receiving notification of
the Material Change the insurer has the option to cancel the policy and return the
unearned portion of the premium to the insured; or continue to insure the risk
and advise the insured in writing of the additional premium payable.
All Homeowners policies describe the Basis of Claim Payment for loss or damage
to dwelling building, detached private structures and personal property. Indicate
the basis of settlement and conditions: Water used to extinguish a small fire at
the Insured's home destroyed all electronic media and records kept by the
Insured. - (ANSWER)Cost to reproduce lost or damage media from duplicates or
from originals of the previous generation of the media. The payment for lost
records is the cost of blank books, pages, cards or other materials plus the cost of
actually transcribing or copying such records.
Another option for insuring property values under Homeowners policies is the
"Single Limit" basis. Explain how this basis differs from the usual coverage format
and the advantage that this approach offers: - (ANSWER)Coverages A to D are
combined into one single limit. The advantage is that this approach eliminates the
coverage restriction otherwise applicable to Coverages B, C and D.
QUESTIONS AND CORRECT ANSWERS (DETAILED
ANSWERS) | GRADED A+ | VERIFIED ANSWERS |
LATEST EXAM
Insurers are in the business of assuming the financial risks of others which
involves entering into a formal contract. A contract is enforceable at law only
when all legal elements have been observed. Insurance contracts differ from
other formal agreements and are subject to what three additional elements? -
(ANSWER)Insurable Interest
Utmost Good Faith
Indemnity
Explain the meaning and disadvantage of the following approaches: Avoidance of
Risk & Control of Risk - (ANSWER)Avoidance: Avoidance means that all chance of
financial loss has been eliminated or a decision not to do something. The
disadvantage is its not very effective as often the elimination of one exposure
creates another in its place.
Control: taking measures to reduce the frequency and severity of losses. The
disadvantage is that not all losses can be controlled, because equipment will not
work 100% of the time
Identify the three elements that are unique to contracts of insurance: -
(ANSWER)Insurable Interest, Utmost Good Faith, and Indemnity
The Insurance Act restricts payment for an insured loss to those amounts required
to indemnify the Insured. Indicate the amount the Insured is legally entitled to
receive and the measure used to determine this value. - (ANSWER)Entitled to
, receive payment for the actual amount of the loss, no more and no less. The
measure is the value of the object of insurance as it was immediately before the
loss.
Policies insuring against the peril of fire must contain Fire Statutory Conditions.
Indicate the Statutory Condition and the applicable rules: During the policy term
the insured installed a wood burning stove as a secondary heating device. The
application indicates that a gas furnace is used to heat the premises. -
(ANSWER)Material Change. The insured must notify the insurer promptly of any
change that serves to increase the chance of loss. After receiving notification of
the Material Change the insurer has the option to cancel the policy and return the
unearned portion of the premium to the insured; or continue to insure the risk
and advise the insured in writing of the additional premium payable.
All Homeowners policies describe the Basis of Claim Payment for loss or damage
to dwelling building, detached private structures and personal property. Indicate
the basis of settlement and conditions: Water used to extinguish a small fire at
the Insured's home destroyed all electronic media and records kept by the
Insured. - (ANSWER)Cost to reproduce lost or damage media from duplicates or
from originals of the previous generation of the media. The payment for lost
records is the cost of blank books, pages, cards or other materials plus the cost of
actually transcribing or copying such records.
Another option for insuring property values under Homeowners policies is the
"Single Limit" basis. Explain how this basis differs from the usual coverage format
and the advantage that this approach offers: - (ANSWER)Coverages A to D are
combined into one single limit. The advantage is that this approach eliminates the
coverage restriction otherwise applicable to Coverages B, C and D.
