CAIB 2 Full Study Guide Questions & Answers 100% Correct
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Course
CAIB 2
Institution
CAIB 2
The three amounts to be considered when calculating the amount of payment as outlined in the Indemnity Agreement are: - ANSWER1) the value of the lost or damaged property (ACV)
2) the interest of the insured in the property (ex. financial interest, home, mortgage)
3) the amount of insurance s...
CAIB 2 Full Study Guide
Questions & Answers 100%
Correct
The three amounts to be considered when calculating the amount of payment as outlined in the
Indemnity Agreement are: - ANSWER1) the value of the lost or damaged property (ACV)
2) the interest of the insured in the property (ex. financial interest, home, mortgage)
3) the amount of insurance specified on the "Declarations Page" for the loss or damaged property
(least amount|)
Identify the four categories that buildings may fall into: - ANSWERResidential (ex. home)
Non-mercantile (ex. hospitals, nursing homes)
Mercantile (ex. drycleaners, bakeries)
Manufacturing/Industrial (ex. autobody shops)
Three classes of property commercially insured are: - ANSWERbuilding, stock, equipment
Identify the two bases that coverage can be provided on: - ANSWERScheduled
All property
Property of every description
Identify and give an example of each of the five types of property contained in the definition of
Building found in the IBC Commercial Property Broad Form - ANSWER1) Growing plants, trees,
shrubs INSIDE the building used for decorative purposes only when insured is the owner of the
building (ex. cactus)
2) Materials and equipment supplies ON the premises for maintenance (ex. lumbar, glass)
,3) Additions and extensions IN CONTACT with the building (enclosed walk-way between buildings)
4) Permanent fittings and fixtures ATTACHED and FORMING part of the building. (ex. light fixtures,
carpeting)
5) Fixed structures PERTAINING to building and located on the premises (ex. fence)
[GMAPF]
2) merchandise of every description USUAL to insureds business (ex. goods for sale for business)
3) similar property belonging to others which the insured is under obligation to keep insured or for
which he is legally liable for (appliance if appliance store.
[PMS]
Identify the three conditions that need to be present before 'similar property belonging to others'
will be insured under the definition of Stock: - ANSWER1) must be similar to that insured by the
policy
2) the insured must have had an obligation to keep the property insured
3) the insured must be legally liable for it.
Identify and give an example of each of the three types of property contained in the definition of
Equipment found in the IBC Commercial Property Broad Form: - ANSWER1) generally all contents
USUAL to insureds business, other than building or stock (ex. furniture)
2) similar property belonging to others which the insured is under obligation to keep insured or for
which he is legally liable for (ex. shaw cable box)
3) tenants improvements (ex. space rented out or leased, malls)
[GST]
Identify the three ways in which property may be valued: - ANSWERActual Cash Value (ACV)
,Replacement Value
Book Value
Insurers can reduce their amount of exposure on large risks by the use of Reinsurance or
Subscription polies. Outline three rules, or guidelines that apply when reinsurance is used to provide
insurance coverages: - ANSWER1) all insurers share premiums collected and losses incurred
2) the policy is controlled by the primary insurer and all claims are paid by it
3) the contract is between the primary insurer and the reinsurer
Identify four instances when subscription policies may be issued: - ANSWER- the broker wants to
spread a good large line of business among markets
- the line of business is so SPECIALIZED, its not covered by the insurers treaty with its reinsurers
- the type of risk is one which the insurer does not want to expose to its reinsurance treaties
- the limits do not exceed insurers net retention limits but are beyond what it is prepared to pay in a
single claim.
Identify two characteristics shared by all subscription polices: - ANSWER- both share premiums and
losses
- each agreement is usually required to be negotiated separately
Briefly describe the role of the LEAD company in a subscription policy: - ANSWERthe lead company
normally issues the policy and provides all policyholder services, including the handling of claims
Identify from the brokers point of view which method is preferred where the insurers can reduce
their amount of exposures on large risks: - ANSWERReinsurance
What is the purpose of a Minimum Retained Premium? - ANSWERto ensure the costs of underwriting
the policy can be recouped, at least in part.
, Identify the three amounts to be considered when calculating the amount of payment as outlined in
the Indemnity Agreement: - ANSWER- the value of the lost or damaged property (ACV)
- the interest of the insured in the property (ex. financial interest, home, mortgage)
- the amount of insurance specified on the "Declaration's Page" for the lost or damaged property
(least amount)
What is the purpose of the deductible? - ANSWERto eliminate minor maintenance types of claims
- maintains these values throughout the term
Identify the two types of exclusions found in property policies - ANSWERproperties excluded
perils exluded
Identify five reasons why exclusions exist and give an example for each: - ANSWER-some perils are
uninsurable (war, nuclear energy)
-potential to be catastrophic (earthquake, flood)
-exclude losses for which more specialized policy forms have been developed ( such as automobiles,
aircraft)
-wholly or partially in control of the insured (ex. application of heat, scratching)
-exclude losses which are not common to a large number of insureds, but represent an increased
potential for loss so an additional premium may be charged (building in course of construction,
satellite receivers)
Identify three 'permissions' allowed in a commercial property policy: - ANSWER- for other insurance
concurrent with this form (2 insurances)
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