CAIB 2 Chapter 1 Practice
exam 1 Questions & Answers
100%.
Explain what it means to issue insurance on a scheduled basis - ANSWEROnly the property listed or
scheduled on the policy is insured
Explain what is meant to issue insurance on the basis of Property of Every Description -
ANSWERBuilding, stock and equipment are insured under a single limit of insurance
What are three ways property may be values - ANSWER1) Actual cash value
2) Replacement cost
3) Book vale
ii) Plateau Accelerated depreciation - applies large amounts of depreciation during the first few years,
then depreciation 'plateaus' or levels out (electronics)
Describe the difference between Replacement Value and ACV - ANSWERReplacement Value is
different than ACV because there is no deduction for depreciation
Which method used to value property is the least appropriate for insurance? - ANSWERBook value is
the most inappropriate method of valuing property for insurance purposes because book value is
based on accounting functions only
Explain the traditional meaning of ACV - ANSWERRepair or replacement of lost or damaged property,
less the application of any depreciation
Describe two methods used to determine depreciation using Formula/Cost Approach Method -
ANSWERi) Straight Line Depreciation - applies depreciation based on the normal life expectancy of
the buildings (building with 50 years expectancy and was 25 years at time of loss; worth 50%)
exam 1 Questions & Answers
100%.
Explain what it means to issue insurance on a scheduled basis - ANSWEROnly the property listed or
scheduled on the policy is insured
Explain what is meant to issue insurance on the basis of Property of Every Description -
ANSWERBuilding, stock and equipment are insured under a single limit of insurance
What are three ways property may be values - ANSWER1) Actual cash value
2) Replacement cost
3) Book vale
ii) Plateau Accelerated depreciation - applies large amounts of depreciation during the first few years,
then depreciation 'plateaus' or levels out (electronics)
Describe the difference between Replacement Value and ACV - ANSWERReplacement Value is
different than ACV because there is no deduction for depreciation
Which method used to value property is the least appropriate for insurance? - ANSWERBook value is
the most inappropriate method of valuing property for insurance purposes because book value is
based on accounting functions only
Explain the traditional meaning of ACV - ANSWERRepair or replacement of lost or damaged property,
less the application of any depreciation
Describe two methods used to determine depreciation using Formula/Cost Approach Method -
ANSWERi) Straight Line Depreciation - applies depreciation based on the normal life expectancy of
the buildings (building with 50 years expectancy and was 25 years at time of loss; worth 50%)
