CAIB 2 Practice Test Questions and Correct Answers

Warranty A promise that certain facts are as they are represented to be and that they will remain so Hazard A condition which may cause a peril to occur Latent defect A hidden or concealed defect, which cannot be discovered by reasonable and customary inspection Endorsement Changes the terms or conditions of the insured's policy Messenger The insured or a partner of the insured or any employee who is duly authorized by the insured to have the care and custody of the insured property outside the premises Damage to electrical equipment caused by artificially generated electrical currents is excluded by most property insurance policies. Under the fire policy, which of the following losses would be insured? A) damage time wiring of refigeration equipment by power surge B) fire damage to electrical motor arising after a sudden power surge C) damage to electrical switch due to power surge D) damage to electrical wiring and switches by brown-out or sudden reduction in power B The insurance acts of the common law provinces require that every policy Insuring againsnt the peril of fire also insure: A) lighting damage to electrical devices and appliances B) windstorm C) explosion of natural, coal or manufactured gas D) smoke C All of the following methods used by common carriers to limit liability except one. Pick the exception. A) standard bull of lading B) valued Bill of lading C) enhanced bill of lading D) released bill of lading C All of the following characteristics except one are common to boiler and machinery policies. Pick the exception A) insures objects against accidents B) excludes coverage for mechanical or electrical breakdown C) coverage provided is on a limit per accident basis D) policy contains suspension clause B Insurance policies define certain terms as they relate to coverage. The broadest meaning is given to : A) burglary B) theft C) hold-up D) robbery B Paul sole of foote's shoe distributors inc has resisted all your efforts to add business interruption insurance coverages to his policy. I'm his opinion, building, equipment, and stock coverages provide all the insurance he needs. Other then physical damage to mr. Sole's property, provide 3 examples of sources of business interruption losses which might be used to convince mr. Foote of the need for business interruption insurance. A) failure or breakdown of public utilities B) transportation- related accidents C) physical damage to neighboring premises Gord's glass inc is insured under the commercial building, equipment and stock- broad form policy. During your initial explanation of the coverages provided by this policy, Gord was surprised to learn that even the broadest coverage forms contain exclusions. Insurers have many reasons for excluding coverage for certain perils and property items. Indicate the reason the Insurer might have for excluding each of the following losses: A) loss due to war or arising out of the nuclear energy hazard B) loss due to flood or earthquake C) automobiles and aircraft A) to exclude losses which are generally considered to be "uninsurable" B) to exclude losses which have within them the "potential to be catastrophic" C) to exclude losses for which more specialized coverage forms have been developed Isabelle Handy owns a small restaurant in the downtown area. You recently advised her that local by-laws had been implemented which would affect her in the event of a serious fire loss to her building.