CAIB 2 - Checkpoints Exam Questions
With Complete Answers Rated A+
Identify 3 classes of property insured by commercial property insurance policies -
CORRECT ANSWER-Building, Equipment, Stock
Identify 2 ways used to insure commercial property and a brief explanation of each -
CORRECT 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 - CORRECT ANSWER-refers to the policy on which coverage is
provided only on that property which is specifically identified or scheduled.
All Property - CORRECT ANSWER-Refers to policy used to insure building, stock and
equipment under a single limit of insurance
Tenants Improvements - CORRECT 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 - CORRECT ANSWER-the replacement or repair cost less
depreciation
Replacement value - CORRECT 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 - CORRECT ANSWER-ACV, Replacement
cost, book value
,Which method of valuation has no bearing on the amount of payment made by the
insurer? - CORRECT ANSWER-Book Value
Explain the basic difference between ACV and Replacement value - CORRECT
ANSWER-ACV takes depreciation into consideration whereas replacement cost does
not.
Composite or package polices - CORRECT 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 - CORRECT 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 - CORRECT 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 - CORRECT
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 - CORRECT 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 - CORRECT 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? - CORRECT 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? - CORRECT ANSWER-ACV, Insurable interest,
amount of insurance
Explain the intent of the waiver of co-insurance clause - CORRECT 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 - CORRECT 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? - CORRECT ANSWER-The insured must file a statement
of values with the insurer representing 100% of the value of all insured property (verified
by appraisal or other means acceptable to the insurer) and the insured must maintain
those values througout the policy term
Your clients have asked you why there are so many exclusions in their insurance policy.
State at least three reasons why exclusions exist and provide two examples of each. -
CORRECT ANSWER-i)exclude losses which are generally considered by insurers to be
commercially uninsurable ii)exclude losses which have within them the potential to be
catastrophic iii)exclude losses for which more specialized policy forms have been
developed iv)exclude losses that are wholly or partially in the control of the insured
v)exclude losses which are not common to a large number of insureds but which
represent an increased potential for loss which is deserving of an additional premium
charge. See resource guide 1.5
Identify two situations where a breach of a policy condition will not result in denial of
coverage by the insurer? - CORRECT ANSWER-i) when the loss was not caused or
contributed to by the breach ii)when the breach occurred in a portion of the premises
over which the insured has no control
, Explain the provisions of the reinstatement clause - CORRECT ANSWER-The amount
of insurance is automatically reinstated immediately following a loss. In other words, the
reinstatement clause provides that insureds shall have as much insurance after a loss
as they did before.
When the insurer has paid a claim under the policy, it retains the right to subrogate
against the party responsible for the loss. Explain the extent to which the insurer is
subrogated to the rights of the insured. - CORRECT ANSWER-The insurer is entitled to
seek recovery of all amounts for which the at-fault party might be liable, including those
not covered by the policy.
Identify those persons or entities against whom the insurer agrees not to exercise its
right of subrogation - CORRECT ANSWER-The rights of subrogation are waived
against any firm, corporation, individual, or other parties of interest with respect to which
insurance is provided by this policy.
Identify three types of property protection systems to which this clause applies -
CORRECT ANSWER-Sprinkler or other fire extinguishing systems, fire detection
system, intrusion detection system
State the three obligations placed upon insureds by the property protections clause -
CORRECT ANSWER-Insureds must notify the insurer immediately/without delay when:
there is any interruption to, flaw or defect to the system of which they are aware, when
any contract providing monitoring or maintenance services to such systems has been
cancelled or not renewed, when police in response to any of the above systems has
been suspended.
State the two settlement options provided by the policy when there has been a loss to
tenants improvements. - CORRECT ANSWER-Settlement will be made on an ACV
basis when the lost or damaged property is reinstated with due diligence and dispatch.
When the property is not reinstated with due diligence and happiness, the amount of the
settlement is based upon the original cost of the improvements and betterments
factored against time remaining on the lease.
Outline the basis of settlement when there is a loss to an insureds records. - CORRECT
ANSWER-Manual records- settlement limited to "blank value" only plus costs to copy or
transcribe
With Complete Answers Rated A+
Identify 3 classes of property insured by commercial property insurance policies -
CORRECT ANSWER-Building, Equipment, Stock
Identify 2 ways used to insure commercial property and a brief explanation of each -
CORRECT 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 - CORRECT ANSWER-refers to the policy on which coverage is
provided only on that property which is specifically identified or scheduled.
All Property - CORRECT ANSWER-Refers to policy used to insure building, stock and
equipment under a single limit of insurance
Tenants Improvements - CORRECT 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 - CORRECT ANSWER-the replacement or repair cost less
depreciation
Replacement value - CORRECT 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 - CORRECT ANSWER-ACV, Replacement
cost, book value
,Which method of valuation has no bearing on the amount of payment made by the
insurer? - CORRECT ANSWER-Book Value
Explain the basic difference between ACV and Replacement value - CORRECT
ANSWER-ACV takes depreciation into consideration whereas replacement cost does
not.
Composite or package polices - CORRECT 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 - CORRECT 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 - CORRECT 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 - CORRECT
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 - CORRECT 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 - CORRECT 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? - CORRECT 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? - CORRECT ANSWER-ACV, Insurable interest,
amount of insurance
Explain the intent of the waiver of co-insurance clause - CORRECT 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 - CORRECT 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? - CORRECT ANSWER-The insured must file a statement
of values with the insurer representing 100% of the value of all insured property (verified
by appraisal or other means acceptable to the insurer) and the insured must maintain
those values througout the policy term
Your clients have asked you why there are so many exclusions in their insurance policy.
State at least three reasons why exclusions exist and provide two examples of each. -
CORRECT ANSWER-i)exclude losses which are generally considered by insurers to be
commercially uninsurable ii)exclude losses which have within them the potential to be
catastrophic iii)exclude losses for which more specialized policy forms have been
developed iv)exclude losses that are wholly or partially in the control of the insured
v)exclude losses which are not common to a large number of insureds but which
represent an increased potential for loss which is deserving of an additional premium
charge. See resource guide 1.5
Identify two situations where a breach of a policy condition will not result in denial of
coverage by the insurer? - CORRECT ANSWER-i) when the loss was not caused or
contributed to by the breach ii)when the breach occurred in a portion of the premises
over which the insured has no control
, Explain the provisions of the reinstatement clause - CORRECT ANSWER-The amount
of insurance is automatically reinstated immediately following a loss. In other words, the
reinstatement clause provides that insureds shall have as much insurance after a loss
as they did before.
When the insurer has paid a claim under the policy, it retains the right to subrogate
against the party responsible for the loss. Explain the extent to which the insurer is
subrogated to the rights of the insured. - CORRECT ANSWER-The insurer is entitled to
seek recovery of all amounts for which the at-fault party might be liable, including those
not covered by the policy.
Identify those persons or entities against whom the insurer agrees not to exercise its
right of subrogation - CORRECT ANSWER-The rights of subrogation are waived
against any firm, corporation, individual, or other parties of interest with respect to which
insurance is provided by this policy.
Identify three types of property protection systems to which this clause applies -
CORRECT ANSWER-Sprinkler or other fire extinguishing systems, fire detection
system, intrusion detection system
State the three obligations placed upon insureds by the property protections clause -
CORRECT ANSWER-Insureds must notify the insurer immediately/without delay when:
there is any interruption to, flaw or defect to the system of which they are aware, when
any contract providing monitoring or maintenance services to such systems has been
cancelled or not renewed, when police in response to any of the above systems has
been suspended.
State the two settlement options provided by the policy when there has been a loss to
tenants improvements. - CORRECT ANSWER-Settlement will be made on an ACV
basis when the lost or damaged property is reinstated with due diligence and dispatch.
When the property is not reinstated with due diligence and happiness, the amount of the
settlement is based upon the original cost of the improvements and betterments
factored against time remaining on the lease.
Outline the basis of settlement when there is a loss to an insureds records. - CORRECT
ANSWER-Manual records- settlement limited to "blank value" only plus costs to copy or
transcribe
