CAIB 2 COMPREHENSIVE QUESTIONS AND
COMPLETE SOLUTIONS TEST PAPER
●● Identify 2 ways used to insure commercial property and a brief
explanation of each
Answer: Scheduled coverage: only that property specifically identified
or scheduled on the policy is insured
All Property (formerly POED) a single limit of insurance is provided for
building, stock, and equipment.
●● Scheduled Coverage
Answer: refers to the policy on which coverage is provided only on that
property which is specifically identified or scheduled.
●● All Property
Answer: Refers to policy used to insure building, stock and equipment
under a single limit of insurance
●● Tenants Improvements
Answer: building improvements, alterations and betterments made at the
expense of or purchased by the insured to a building occupied by the
insured and which are not otherwise insured, provided the insured is not
the actual owner of such building.
,●● Actual cash Value
Answer: the replacement or repair cost less depreciation
●● Replacement value
Answer: represents the costs to repair, replace, or rebuild the lost or
damaged property without deduction for depreciation.
●● Identify three ways property can be valued
Answer: ACV, Replacement cost, book value
●● Which method of valuation has no bearing on the amount of payment
made by the insurer?
Answer: Book Value
●● Explain the basic difference between ACV and Replacement value
Answer: ACV takes depreciation into consideration whereas
replacement cost does not.
●● Composite or package polices
Answer: These policies combine, under one form, a variety of coverages
needed by the majority of offices and small mercantile operations which
make up the main street business district in most communities.
,●● Manuscript policies
Answer: Designed for all risks having a specialized exposure and for
which no standard coverage form exists. Generally developed by larger
brokerage firms.
●● Reinsurance policies
Answer: Reinsurance involves the insurer passing off or ceding part of
the risk it has assumed to one or more "other insurers".
●● Explain the difference between package and manuscript policies
Answer: Package policies combine, under one form, a variety of
coverages needed by the majority of offices and small mercantile
operations whereas manuscript policies are designed for risks having a
specialized exposure and for which no standard coverage form exists.
●● Reinsurance policies
Answer: created when the primary insurer cedes part of the risk assumed
to one or more other insurers; all insurers share premiums and losses;
contract is between primary insurer and re-insurer; policy controlled by
primary insurer and all claims are paid by it.
●● Subscription policies
Answer: are based on a group of insurers who have agreed to participate
in providing insurance coverages, sharing both premiums and losses;
each agreement is usually negotiated separately on a form acceptable to
, all subscribers; lead company issues policy, collects premium and
handles policyholder services including claims.
●● Your client recently cancelled an insurance policy which was subject
to a large minimum retained premium. Explain why an insurer would
invoke a minimum retained premium charge on your clients policy?
Answer: The purpose of the minimum retained premium is to ensure that
the costs of underwriting the policy can be recouped at least in part.
●● Identify the three factors considered by the adjuster when
determining the amount of indemnity to be provided by the policy?
Answer: ACV, Insurable interest, amount of insurance
●● Explain the intent of the waiver of co-insurance clause
Answer: Recognizing that many insured losses are small, the Waiver of
co-insurance clause eliminates the need for costly inventory to prove
compliance with co-insurance clause.
●● What is the purpose of the stated amount co-insurance clause
Answer: The stated amount co-insurance clause provides for the removal
of the standard co-insurance penalty for under-insurance
●● What requirements fall upon the insured who wants to take
advantage of the stated amount co-insurance clause?
COMPLETE SOLUTIONS TEST PAPER
●● Identify 2 ways used to insure commercial property and a brief
explanation of each
Answer: Scheduled coverage: only that property specifically identified
or scheduled on the policy is insured
All Property (formerly POED) a single limit of insurance is provided for
building, stock, and equipment.
●● Scheduled Coverage
Answer: refers to the policy on which coverage is provided only on that
property which is specifically identified or scheduled.
●● All Property
Answer: Refers to policy used to insure building, stock and equipment
under a single limit of insurance
●● Tenants Improvements
Answer: building improvements, alterations and betterments made at the
expense of or purchased by the insured to a building occupied by the
insured and which are not otherwise insured, provided the insured is not
the actual owner of such building.
,●● Actual cash Value
Answer: the replacement or repair cost less depreciation
●● Replacement value
Answer: represents the costs to repair, replace, or rebuild the lost or
damaged property without deduction for depreciation.
●● Identify three ways property can be valued
Answer: ACV, Replacement cost, book value
●● Which method of valuation has no bearing on the amount of payment
made by the insurer?
Answer: Book Value
●● Explain the basic difference between ACV and Replacement value
Answer: ACV takes depreciation into consideration whereas
replacement cost does not.
●● Composite or package polices
Answer: These policies combine, under one form, a variety of coverages
needed by the majority of offices and small mercantile operations which
make up the main street business district in most communities.
,●● Manuscript policies
Answer: Designed for all risks having a specialized exposure and for
which no standard coverage form exists. Generally developed by larger
brokerage firms.
●● Reinsurance policies
Answer: Reinsurance involves the insurer passing off or ceding part of
the risk it has assumed to one or more "other insurers".
●● Explain the difference between package and manuscript policies
Answer: Package policies combine, under one form, a variety of
coverages needed by the majority of offices and small mercantile
operations whereas manuscript policies are designed for risks having a
specialized exposure and for which no standard coverage form exists.
●● Reinsurance policies
Answer: created when the primary insurer cedes part of the risk assumed
to one or more other insurers; all insurers share premiums and losses;
contract is between primary insurer and re-insurer; policy controlled by
primary insurer and all claims are paid by it.
●● Subscription policies
Answer: are based on a group of insurers who have agreed to participate
in providing insurance coverages, sharing both premiums and losses;
each agreement is usually negotiated separately on a form acceptable to
, all subscribers; lead company issues policy, collects premium and
handles policyholder services including claims.
●● Your client recently cancelled an insurance policy which was subject
to a large minimum retained premium. Explain why an insurer would
invoke a minimum retained premium charge on your clients policy?
Answer: The purpose of the minimum retained premium is to ensure that
the costs of underwriting the policy can be recouped at least in part.
●● Identify the three factors considered by the adjuster when
determining the amount of indemnity to be provided by the policy?
Answer: ACV, Insurable interest, amount of insurance
●● Explain the intent of the waiver of co-insurance clause
Answer: Recognizing that many insured losses are small, the Waiver of
co-insurance clause eliminates the need for costly inventory to prove
compliance with co-insurance clause.
●● What is the purpose of the stated amount co-insurance clause
Answer: The stated amount co-insurance clause provides for the removal
of the standard co-insurance penalty for under-insurance
●● What requirements fall upon the insured who wants to take
advantage of the stated amount co-insurance clause?
