CAIB 2 Exam Questions with Correct Answers

CAIB 2 Exam Questions with Correct Answers Scheduled Coverage - Answer-refers to 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 Reinsurance - Answer-involves an Insurer ceding part of the risk it has assumed to one or more other insurers. Subscription - Answer-an insurance policy under which a group of Insurers has agreed to participate in providing policy insurance coverages. Condition - Answer-is something imposed by the Insurer which requires the Insured to do or not to do something. Subrogation - Answer-refers to the right of the Insurer to "step into the shoes" of the party whom it has compensated and sue any party whom the compensated party could have sued. Warranty - Answer-is a promise that certain facts are as they are represented to be and that they will remain so. Material fact - Answer-a fact which if communicated to the Insurer would induce it either to decline the insurance altogether, or not accept it unless a higher premium is paid. Fraudulent - Answer-to act wilfully, and with the specific intent to deceive or cheat Void contract - Answer-a void contract is one which has no "legal or binding force" and as such, "is incapable of being enforced by law." Fire resistive - Answer-building which has met minimum standards in terms of hours it will withstand a specific, carefully controlled test fire. Non-combustible - Answer-all structural members including floors, roofs and their supports are constructed of steel, iron, concrete or other non-combustible materials. Exterior also required to be of non-combustible construction. Falls just short of classifying as fire resistive. Common hazards - Answer-conditions common to all buildings which influence their potential for loss. Detachment - Answer-refers to the proximity of the building insured or containing the property insured to other commercially rated buildings. Adverse selection - Answer-occurs when the applicants for insurance are largely those most likely to suffer a loss. Risk classification - Answer-refers to the grouping or classifying of risks according to established criteria which, in large part, is based on their probability for loss as a class. Soft market - Answer-characterized by intense competition between insurers. As a result, rates tend to be low. Hard market - Answer-occurs when low profit margins force out some of the competition. As a result, insurers use a more disciplined underwriting approach. The insured normally receives little or nothing in the way of rate discounts. Hazard - Answer-is a condition which may cause a peril to occur. Physical hazard - Answer-a condition relating to the use of tangible property which could cause a peril to occur. Moral hazard - Answer-subjective characteristics of the applicant that could cause a peril to occur. Morale hazard - Answer-deal with the attitude of the client Accommodation business - Answer-business which is marginal or substandard but which the insurer agrees to accept as a favour or accommodation to the broker. Supporting business - Answer-the existence of other insurance policies the applicant has with the same insurer. Vacant - Answer-empty"; or - when the normal occupant is absent and the contents have been removed. Unoccupied - Answer-lack of habitual presence of human beings; or - when premises are complete with its contents, except that such person who normally occupies the premises is temporarily away. Loading - Answer-an additional rate charged over and above the fire rate Centrifugal force - Answer-the inertia of a body that tends to move it away from the centre around which it revolves. mechanical breakdown - Answer-"a failure in the working mechanism of the machinery...a functional defect in the moving parts of the equipment which causes the latter to ce