CAIB 2 - chapter 4

Question 1

Accident

Answer 1

Must be sudden and accidental
There must be a breakdown

Question 2

Unique features to the Equipment Breakdown Policy

Answer 2

Inspection Service
Claims Investigation
Suspension Clause

Question 3

Identify three exclusions in Equipment Breakdown Policies

Answer 3

Fire/ smoke, War, Nuclear incident, earth movement

Question 4

Identify five common “off premises” coverages

Answer 4

Temporarily location
Building at Newly acquired location
Content at Newly acquired location
Property in transit
Sales representatives

Question 5

Identify three instances when stock or equipment will be considered to be at Temporary locations

Answer 5

When stock or equipment is not on the location specified on the policy
When is not in transit
If it’s not in any location owned, rented or controlled by the Insured

Question 6

Identify three examples of temporary locations

Answer 6

Pre-sale trial, the property is being used at the customer’s location
Repairing, the property is undergoing repair at the premises of others
Property being held for pick up at warehouse or depot

Question 7

Identify two advantages of Purchasing Parcel Post Insurance from a broker than Canada Post

Answer 7

A broker policy (separate policy) is better because it gives you blanket coverage
The claims services are faster, however the deductible is higher.

Question 8

Identify the two limits of insurance found in the sales representative form

Answer 8

Total Limits insured
Maximum limit for any one representative

Question 9

Identify three examples of where this coverage would respond

Answer 9

At the home of the sales representative
At trade show or exhibition
In the sales reps automobile and “otherwise”

Question 10

Identify six Miscellaneous Endorsement Forms

Answer 10

1. Instalment Sales Contract Floater
2. Peak Season Endorsement
3. Replacement Cost Endorsement
4. Inflation Protection
5. Fire department charges
6. Vacancy Permit

Question 11

Identify what is meant by the following terms under Installment Sales Contract Floaters
Single Interest
Dual Interest

Answer 11

Single interest refers to the seller (vendor) only.
Dual interest refers to the seller and the buyer (vendee)

Question 12

Identify the two classes of property insured (Installment Floater)

Answer 12

Property sold under written deferred payment or conditional sales agreement
Property Loaned, leased, rented or sent out on approval or demonstration for a period not exceeding an agreed number of days.

Question 13

When the coverage ceases under the instalment floater form?

Answer 13

When the payments on the property is fully completed.

Question 14

Identify the class of property to which the Peak Season Endorsement Applies

Answer 14

Stock. This endorsement is used when the stock values of the Insured’s business changes seasonally.

Question 15

Identify two advantages that the Peak Season Endorsement provides

Answer 15

This endorsement works as an advance notice feature because it provides means of insuring predictable increases in stock values in advance.
Saves premiums, because the Insured does not have to pay for the coverage not needed over the entire policy period.

Question 16

3 conditions an Insured must meet before any loss will be paid on a Replacement Cost (RC) Basis

Answer 16

The Insured must work with due diligence and dispatch, to the best of their abilities.
Replacement should be on the same site or adjacent site
Payment shall be made on replacement costs basis only after the replacement has been completed and in no event shall exceed that amount actually necessary for such replacement.

Question 17

Identify how the claim will be pay if the Insured doe NOT meet the requirements outlined on the RC endorsement

Answer 17

The Insurer will pay in Actual Cash Value Basis

Question 18

Function of the Inflation Protection Endorsement

Answer 18

This endorsement increases the amount of building insurance during the policy to reflect the increases in business costs.

Question 19

Function of the Fire Department Charges Endorsement

Answer 19

The Insurer will pay any bills if the fire department is called and later the Insured is billed.

Question 20

Identify the two Vacancy Permits Available for Commercial Property

Answer 20

Vacant Permit #1 Allows the property to be vacant during a specified period of time. The higher the risk, the shorter the time period will be.
Vacant Permit #2 will make the Insured a co-insurer to fire losses. In case of fire, the Insurer will only pay their portion, for example 2/3 and the remaining amount is up to the Insured to pay. This reduce the moral hazard and prevents the changes of an Insured deciding to put fire in the building to receive money from the claim.

Question 21

Temporary Location

Answer 21

Location that is not specified on the policy and is not owned by the Insured.

Question 22

Newly acquired location

Answer 22

A location recently acquired by the insured and is covered for 30 days.

Question 23

replacement cost

Answer 23

The cost to repair or replace the property on the same site or adjacent with like kind and quality with no deduction for depreciation

Question 24

Endorsement

Answer 24

A document that changes the terms of the policy

Question 25

Rider

Answer 25

Adds coverage to the policy

Question 26

Media

Answer 26

where data is recorded, example would be cds, dvds backup hard drives

Question 27

Data

Answer 27

the information stored on the media.

Question 28

Loading

Answer 28

Additional rate charged over the fire rate

Question 29

Vacant

Answer 29

Property is empty and lacks human presence and contents for over 30 consecutive days.

Question 30

Unoccupied

Answer 30

Lack of habitual presence of human being for over 30 consecutive days, however their contents are still in the house.

Question 31

adverse selection

Answer 31

When the Insurer sees themselves providing coverages only for the people with high exposure to losses

Question 32

risk classification

Answer 32

classifying a risk according to an established criteria. Based on the probability for loss.

Question 33

soft market

Answer 33

This is a market with intense competition. As a result the rates tend to be low

Question 34

hard market

Answer 34

market characterized by low margin, less competition. Higher rates as the Insurer has little or no way to provide discounts.

Question 35

hazard

Answer 35

a condition that might cause a peril to occur

Question 36

physical hazard

Answer 36

a condition related to the use of tangible property which could cause a peril to occur

Question 37

moral hazard

Answer 37

a condition related to the characteristics of the Insured that could cause a peril to occur. Questionable business practices for example.

Question 38

Morale hazard

Answer 38

attitude of the client

Question 39

accommodation business

Answer 39

The Insurer accepts to provide this coverage as a favor and to accommodate to the broker.

Question 40

supporting business

Answer 40

the existence of other insurance policies with the same Insurer.