CAIB 2 Chapter 1-7 Review Exam
Questions With 100% Solved Solutions
Guarantee pass
Identify the company which assumes the greatest portion of an account? (Ch. 1) -
CORRECT ANSWER-Lead company
What is "reinsurance" (Ch. 1) - CORRECT ANSWER-Reinsurance is when an
insurance company "cedes" part of the risk to a reinsurer.
What are three considerations used when determining amounts of indemnity? (ch 1) -
CORRECT ANSWER-1. Actual cash value of property as it existed immediately prior to
loss. 2. The interest of the insured in the property. 3. The amount of insurance as shown
on the policy.
Why do co-insurance clauses contain waiver provisions? (Ch. 1) - CORRECT
ANSWER-To waive application of the co-insurance clause when the less is less than
amounts indicated on the waiver.
What are the provisions of "waiver of co-insurance" clauses? (Ch.1) - CORRECT
ANSWER-When losses are less than 2% of the amount of insurance and less than
$5000 the provisions of co-insurance clauses will not be applied.
Will the "waiver of co-insurance" apply to the following loss: Loss - $1200.00 Policy
Limit - $150,000 ACV of Property - $250,000. (Ch.1) - CORRECT ANSWER-Yes.
(Amount of insurance x .02)
What is the purpose of "stated amount" co-insurance clauses? (Ch.1) - CORRECT
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 insured when co-insurance clauses are replaced by
"stated amount" co-insurance clauses? (Ch.1) - CORRECT ANSWER-1. Insureds must
,submit a statement of values indicating all property insured. 2. Values indicated on
statement must be verified by appraiser. 3. These values must be insured for duration of
policy.
All policies contain exclusions. List 5 types of exclusions and give two examples of
each. (Ch.1) - CORRECT ANSWER-1. Commercially uninsurable ex. War, nuclear.
2. Maybe be catastrophic ex. Flood, Earthquake.
3. Other forms of insurance may be available. Ex. Automobiles, Valuable papers.
4. May be expected by the insured and/or in control of the insured. Ex. Wear and tear,
mechanical breakdown.
5. Not common exposures. Ex. Buildings under construction, exterior communication
towers.
What is a condition? (Ch.1) - CORRECT ANSWER-A condition requires insureds to do
or not do something.
Insureds will not exercise its right of subrogation against certain parties. Explain. (Ch.1)
- CORRECT 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...(bank or other person who lent money to insured and are shown as loss
payable on policy)
Identify 3 stipulations of property protection system clauses placed upon clients. (Ch.1) -
CORRECT ANSWER-1. Insureds must notify insurer of any interruption/defect in any
property protection system that comes to their knowledge.
2. The insured must notify insurer of any lapse/cancellation/non renewal or any
maintenance or monitoring contract.
,3. Insured must notify insurer when notification or 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) customers property upon which
work is being performed? (Ch.1) - CORRECT ANSWER-1) unsold stock- actual cash
value.
2) sold stock- paid on basis of sale price less discounts given to customer.
3) customers property upon which work is being performed - these losses are paid on
the basis of value of the parts used in repair and value of labour. Customers will be paid
in ACV or periphery when initially dropped off for repair.
What are two types of property receiving "special basis of settlement?" (Ch.1) -
CORRECT ANSWER-1. Tenants improvements. 2. Records.
What is "warranty"? (Ch.1) - CORRECT ANSWER-A warranty is a promise made by
insureds that certain facts are as represented and will remain so.
Describe the 4 elements of "locked vehicle warranties" (ch.1) - CORRECT ANSWER-1.
All property must be in vehicle or fully enclosed metal compartment.
2. All doors and windows of vehicle must be closed/locked.
3. Force must be used to gain access to vehicle containing property insured.
4. Visible signs of use of force are present on the vehicle containing property insured.
What is a material fact? (Ch.1) - CORRECT ANSWER-A material fact is a fact which if
known by the insurer, would induce it to charge a higher premium, add conditions to
coverage, or decline the account all together.
, What are 4 facts considered "material" relative to the personal information about the
client? (Ch.1) - CORRECT ANSWER-1. Previous claims.
2. Number of loss payables/mortgages.
3. Previous declinations/cancellations from other insurers.
4. Fear of persons harbouring ill will against the insured.
What rights do insurers have when misinformation occurs? (Ch.1) - CORRECT
ANSWER-Insurers may void the policy on which the misinformation was linked.
What does "notice of authorities" require an insured to do? (Ch.1) - CORRECT
ANSWER-Any loss involving criminal activity must be reported to authorities.
What does "sue and labor" mean? (Ch.1) - CORRECT ANSWER-Insureds must take all
steps reasonable to recover lost or damaged property.
What does "pair and set" mean? (Ch.1) - CORRECT ANSWER-When losses involve
property in pair/set the remaining item still holds value and this amount would be
deducted from loss.
What does "parts" mean? (Ch.1) - CORRECT ANSWER-When losses involve property
which are a part of a set only the lost or damaged part will be replaced.
What are three advantages of using a fact-find survey? (Ch.2) - CORRECT ANSWER-
1. Assists brokers when identifying potential losses.
2. Assists brokers not to sell coverages client does not need.
3. Assists brokers in collecting information needed by insurance companies.
What are three benefits of commercial checklists and which is most important to
brokers? (Ch.2) - CORRECT ANSWER-1. Assists brokers when identifying potential
losses.
Questions With 100% Solved Solutions
Guarantee pass
Identify the company which assumes the greatest portion of an account? (Ch. 1) -
CORRECT ANSWER-Lead company
What is "reinsurance" (Ch. 1) - CORRECT ANSWER-Reinsurance is when an
insurance company "cedes" part of the risk to a reinsurer.
What are three considerations used when determining amounts of indemnity? (ch 1) -
CORRECT ANSWER-1. Actual cash value of property as it existed immediately prior to
loss. 2. The interest of the insured in the property. 3. The amount of insurance as shown
on the policy.
Why do co-insurance clauses contain waiver provisions? (Ch. 1) - CORRECT
ANSWER-To waive application of the co-insurance clause when the less is less than
amounts indicated on the waiver.
What are the provisions of "waiver of co-insurance" clauses? (Ch.1) - CORRECT
ANSWER-When losses are less than 2% of the amount of insurance and less than
$5000 the provisions of co-insurance clauses will not be applied.
Will the "waiver of co-insurance" apply to the following loss: Loss - $1200.00 Policy
Limit - $150,000 ACV of Property - $250,000. (Ch.1) - CORRECT ANSWER-Yes.
(Amount of insurance x .02)
What is the purpose of "stated amount" co-insurance clauses? (Ch.1) - CORRECT
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 insured when co-insurance clauses are replaced by
"stated amount" co-insurance clauses? (Ch.1) - CORRECT ANSWER-1. Insureds must
,submit a statement of values indicating all property insured. 2. Values indicated on
statement must be verified by appraiser. 3. These values must be insured for duration of
policy.
All policies contain exclusions. List 5 types of exclusions and give two examples of
each. (Ch.1) - CORRECT ANSWER-1. Commercially uninsurable ex. War, nuclear.
2. Maybe be catastrophic ex. Flood, Earthquake.
3. Other forms of insurance may be available. Ex. Automobiles, Valuable papers.
4. May be expected by the insured and/or in control of the insured. Ex. Wear and tear,
mechanical breakdown.
5. Not common exposures. Ex. Buildings under construction, exterior communication
towers.
What is a condition? (Ch.1) - CORRECT ANSWER-A condition requires insureds to do
or not do something.
Insureds will not exercise its right of subrogation against certain parties. Explain. (Ch.1)
- CORRECT 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...(bank or other person who lent money to insured and are shown as loss
payable on policy)
Identify 3 stipulations of property protection system clauses placed upon clients. (Ch.1) -
CORRECT ANSWER-1. Insureds must notify insurer of any interruption/defect in any
property protection system that comes to their knowledge.
2. The insured must notify insurer of any lapse/cancellation/non renewal or any
maintenance or monitoring contract.
,3. Insured must notify insurer when notification or 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) customers property upon which
work is being performed? (Ch.1) - CORRECT ANSWER-1) unsold stock- actual cash
value.
2) sold stock- paid on basis of sale price less discounts given to customer.
3) customers property upon which work is being performed - these losses are paid on
the basis of value of the parts used in repair and value of labour. Customers will be paid
in ACV or periphery when initially dropped off for repair.
What are two types of property receiving "special basis of settlement?" (Ch.1) -
CORRECT ANSWER-1. Tenants improvements. 2. Records.
What is "warranty"? (Ch.1) - CORRECT ANSWER-A warranty is a promise made by
insureds that certain facts are as represented and will remain so.
Describe the 4 elements of "locked vehicle warranties" (ch.1) - CORRECT ANSWER-1.
All property must be in vehicle or fully enclosed metal compartment.
2. All doors and windows of vehicle must be closed/locked.
3. Force must be used to gain access to vehicle containing property insured.
4. Visible signs of use of force are present on the vehicle containing property insured.
What is a material fact? (Ch.1) - CORRECT ANSWER-A material fact is a fact which if
known by the insurer, would induce it to charge a higher premium, add conditions to
coverage, or decline the account all together.
, What are 4 facts considered "material" relative to the personal information about the
client? (Ch.1) - CORRECT ANSWER-1. Previous claims.
2. Number of loss payables/mortgages.
3. Previous declinations/cancellations from other insurers.
4. Fear of persons harbouring ill will against the insured.
What rights do insurers have when misinformation occurs? (Ch.1) - CORRECT
ANSWER-Insurers may void the policy on which the misinformation was linked.
What does "notice of authorities" require an insured to do? (Ch.1) - CORRECT
ANSWER-Any loss involving criminal activity must be reported to authorities.
What does "sue and labor" mean? (Ch.1) - CORRECT ANSWER-Insureds must take all
steps reasonable to recover lost or damaged property.
What does "pair and set" mean? (Ch.1) - CORRECT ANSWER-When losses involve
property in pair/set the remaining item still holds value and this amount would be
deducted from loss.
What does "parts" mean? (Ch.1) - CORRECT ANSWER-When losses involve property
which are a part of a set only the lost or damaged part will be replaced.
What are three advantages of using a fact-find survey? (Ch.2) - CORRECT ANSWER-
1. Assists brokers when identifying potential losses.
2. Assists brokers not to sell coverages client does not need.
3. Assists brokers in collecting information needed by insurance companies.
What are three benefits of commercial checklists and which is most important to
brokers? (Ch.2) - CORRECT ANSWER-1. Assists brokers when identifying potential
losses.
