CAIB 2 FULL STUDY GUIDE QUESTIONS WITH CORRECT ANSWERS ALL VERIFIED BY AN EXPERT A+ GRADED (LATEST UPDATE)

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CAIB 2 FULL STUDY GUIDE
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QUESTIONS WITH CORRECT
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ANSWERS ALL VERIFIED BY
AN EXPERT A+ GRADED
(LATEST UPDATE)

,The three amounts to be considered when calculating the amount of payment as outlined in the
Indemnity Agreement are: - ANS 1) 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|)




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Identify the four categories that buildings may fall into: - ANS Residential (ex. home)
Non-mercantile (ex. hospitals, nursing homes)
Mercantile (ex. drycleaners, bakeries)




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Manufacturing/Industrial (ex. autobody shops)

Three classes of property commercially insured are: - ANS building, stock, equipment




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Identify the two bases that coverage can be provided on: - ANS
All property
Property of every description
Scheduled
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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 - ANS 1) 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)
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3) Additions and extensions IN CONTACT with the building (enclosed walk-way between
buildings)
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4) Permanent fittings and fixtures ATTACHED and FORMING part of the building. (ex. light
fixtures, carpeting)
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5) Fixed structures PERTAINING to building and located on the premises (ex. fence)

[GMAPF]

Identify the three conditions pertaining to the coverage for growing plants, trees, etc. - ANS -
such property was INSIDE the building
- was being used for decorative purposes
- insured was the owner of the building

,Identify and give an example of the three types of property contained in the definition of Stock
found in the IBC Commercial Property Broad Form: - ANS 1) packing, wrapping and
advertising materials (ex. bubble plastic, Styrofoam)

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.




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[PMS]

Identify the three conditions that need to be present before 'similar property belonging to others'




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will be insured under the definition of Stock: - ANS 1) must be similar to that insured by the
policy
2) the insured must have had an obligation to keep the property insured




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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: - ANS 1) generally all
contents USUAL to insureds business, other than building or stock (ex. furniture)
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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]
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Identify the three ways in which property may be valued: - ANS Actual Cash Value (ACV)
Replacement Value
Book Value
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Which way is NOT an appropriate means of valuing property for insurance purposes? - ANS
Book Value
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Identify the one word that can summarize the difference between Actual Cash Value and
Replacement Cost: - ANS depreciation

Who does the onus rest upon to establish the amount of insurance required? - ANS the
Insured

Identify the five methods that may be used to determine Actual Cash Value: - ANS 1) Actual
Cash Value
2) True Value to customer
3) Market Value/Direct Sales Approach

, 4) Income Approach
5) Formula/Cost Approach Method

Identify the two types of depreciation used in the Formula/Cost Approach, and give an example
of a type of property that would be appropriate using each: - ANS Straight Line Depreciation
(ex. buildings)
&
Plateau Accelerated Depreciation (ex. cars, furniture)

A licensed real estate appraiser will generally be consulted to provide an expert opinion when




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establishing Market Value/Direct Sales Approach. Identify the three items he or she may
consider: - ANS Property before the loss
Property after the loss




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the land

When is the Income Approach method most commonly employed? - ANS This method of




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evaluating a loss is commonly used with income producing properties

The Broad Evidence ties together the previous four methods when establishing actual cash
value, and the courts will take into account many different factors. Identify any three such
factors: - ANS Market Value -assessed valuation
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Rental Value -use of building
Location -resale success, replacement value less depreciation {any of these}

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: - ANS 1) all insurers share premiums collected and losses
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incurred

2) the policy is controlled by the primary insurer and all claims are paid by it
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3) the contract is between the primary insurer and the reinsurer
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Identify four instances when subscription policies may be issued: - ANS - 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.