CAIB 2 EXAM 2025 UPDATE/PRACTICE QUESTIONS AND
CORRECT VERIFIED ANSWERS (complete solutions) ASSURED
SUCCESS/GRADED A+!!!
Subrogation - CORRECT ANSWER-refers to the right of the Insurer to "step into
the shoes" of the party whom it has compensated and sue any party whom the
compensated party could have sued.
Warranty - CORRECT ANSWER-is a promise that certain facts are as they are
represented to be and that they will remain so.
Material fact - CORRECT ANSWER-a fact which if communicated to the Insurer
would induce it either to decline the insurance altogether, or not accept it unless
a higher premium is paid.
Fraudulent - CORRECT ANSWER-to act wilfully, and with the specific intent to
deceive or cheat
Scheduled Coverage - CORRECT ANSWER-refers to policy on which coverage is
provided only on that property which is specifically identified or scheduled.
,All Property - CORRECT ANSWER-refers to policy used to insure building, stock
and equipment under a single limit of insurance.
Reinsurance - CORRECT ANSWER-involves an Insurer ceding part of the risk it
has assumed to one or more other insurers.
Subscription - CORRECT ANSWER-an insurance policy under which a group of
Insurers has agreed to participate in providing policy insurance coverages.
Condition - CORRECT ANSWER-is something imposed by the Insurer which
requires the Insured to do or not to do something.
Tenants Improvements - CORRECT ANSWER-building improvements, alterations
and betterments made at the expense of or purchased by the insured to a
building occupied by the insured and which are not otherwise insured, provided
the insured is not the actual owner of such building
Actual cash value - CORRECT ANSWER-the replacement or repair cost less
depreciation
Replacement value - CORRECT ANSWER-represents the costs to repair, replace
or rebuild the lost or damaged property without deduction for depreciation
Void contract - CORRECT ANSWER-a void contract is one which has no "legal or
binding force" and as such, "is incapable of being enforced by law."
,Fire resistive - CORRECT ANSWER-building which has met minimum standards
in terms of hours it will withstand a specific, carefully controlled test fire.
Non-combustible - CORRECT ANSWER-all structural members including floors,
roofs and their supports are constructed of steel, iron, concrete or other non-
combustible materials. Exterior also required to be of non-combustible
construction. Falls just short of classifying as fire resistive.
Common hazards - CORRECT ANSWER-conditions common to all buildings
which influence their potential for loss.
Detachment - CORRECT ANSWER-refers to the proximity of the building insured
or containing the property insured to other commercially rated buildings.
Adverse selection - CORRECT ANSWER-occurs when the applicants for insurance
are largely those most likely to suffer a loss.
Risk classification - CORRECT ANSWER-refers to the grouping or classifying of
risks according to established criteria which, in large part, is based on their
probability for loss as a class.
Soft market - CORRECT ANSWER-characterized by intense competition between
insurers. As a result, rates tend to be low.
, Hard market - CORRECT ANSWER-occurs when low profit margins force out
some of the competition. As a result, insurers use a more disciplined underwriting
approach. The insured normally receives little or nothing in the way of rate
discounts.
Hazard - CORRECT ANSWER-is a condition which may cause a peril to occur.
Physical hazard - CORRECT ANSWER-a condition relating to the use of tangible
property which could cause a peril to occur.
Moral hazard - CORRECT ANSWER-subjective characteristics of the applicant
that could cause a peril to occur.
Morale hazard - CORRECT ANSWER-deal with the attitude of the client
Accommodation business - CORRECT ANSWER-business which is marginal or
substandard but which the insurer agrees to accept as a favour or
accommodation to the broker.
Supporting business - CORRECT ANSWER-the existence of other insurance
policies the applicant has with the same insurer.
Vacant - CORRECT ANSWER-empty"; or - when the normal occupant is absent
and the contents have been removed.
CORRECT VERIFIED ANSWERS (complete solutions) ASSURED
SUCCESS/GRADED A+!!!
Subrogation - CORRECT ANSWER-refers to the right of the Insurer to "step into
the shoes" of the party whom it has compensated and sue any party whom the
compensated party could have sued.
Warranty - CORRECT ANSWER-is a promise that certain facts are as they are
represented to be and that they will remain so.
Material fact - CORRECT ANSWER-a fact which if communicated to the Insurer
would induce it either to decline the insurance altogether, or not accept it unless
a higher premium is paid.
Fraudulent - CORRECT ANSWER-to act wilfully, and with the specific intent to
deceive or cheat
Scheduled Coverage - CORRECT ANSWER-refers to policy on which coverage is
provided only on that property which is specifically identified or scheduled.
,All Property - CORRECT ANSWER-refers to policy used to insure building, stock
and equipment under a single limit of insurance.
Reinsurance - CORRECT ANSWER-involves an Insurer ceding part of the risk it
has assumed to one or more other insurers.
Subscription - CORRECT ANSWER-an insurance policy under which a group of
Insurers has agreed to participate in providing policy insurance coverages.
Condition - CORRECT ANSWER-is something imposed by the Insurer which
requires the Insured to do or not to do something.
Tenants Improvements - CORRECT ANSWER-building improvements, alterations
and betterments made at the expense of or purchased by the insured to a
building occupied by the insured and which are not otherwise insured, provided
the insured is not the actual owner of such building
Actual cash value - CORRECT ANSWER-the replacement or repair cost less
depreciation
Replacement value - CORRECT ANSWER-represents the costs to repair, replace
or rebuild the lost or damaged property without deduction for depreciation
Void contract - CORRECT ANSWER-a void contract is one which has no "legal or
binding force" and as such, "is incapable of being enforced by law."
,Fire resistive - CORRECT ANSWER-building which has met minimum standards
in terms of hours it will withstand a specific, carefully controlled test fire.
Non-combustible - CORRECT ANSWER-all structural members including floors,
roofs and their supports are constructed of steel, iron, concrete or other non-
combustible materials. Exterior also required to be of non-combustible
construction. Falls just short of classifying as fire resistive.
Common hazards - CORRECT ANSWER-conditions common to all buildings
which influence their potential for loss.
Detachment - CORRECT ANSWER-refers to the proximity of the building insured
or containing the property insured to other commercially rated buildings.
Adverse selection - CORRECT ANSWER-occurs when the applicants for insurance
are largely those most likely to suffer a loss.
Risk classification - CORRECT ANSWER-refers to the grouping or classifying of
risks according to established criteria which, in large part, is based on their
probability for loss as a class.
Soft market - CORRECT ANSWER-characterized by intense competition between
insurers. As a result, rates tend to be low.
, Hard market - CORRECT ANSWER-occurs when low profit margins force out
some of the competition. As a result, insurers use a more disciplined underwriting
approach. The insured normally receives little or nothing in the way of rate
discounts.
Hazard - CORRECT ANSWER-is a condition which may cause a peril to occur.
Physical hazard - CORRECT ANSWER-a condition relating to the use of tangible
property which could cause a peril to occur.
Moral hazard - CORRECT ANSWER-subjective characteristics of the applicant
that could cause a peril to occur.
Morale hazard - CORRECT ANSWER-deal with the attitude of the client
Accommodation business - CORRECT ANSWER-business which is marginal or
substandard but which the insurer agrees to accept as a favour or
accommodation to the broker.
Supporting business - CORRECT ANSWER-the existence of other insurance
policies the applicant has with the same insurer.
Vacant - CORRECT ANSWER-empty"; or - when the normal occupant is absent
and the contents have been removed.
