Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CAIB 2 > Practice Exam > Flashcards

Practice Exam Flashcards

1
Q

Define Fire Resistant

A

The building can withstand a minimum number of hours in a controlled test fire

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Define Non-Combustable

A

All structural members (i.e. floors, roofs and supports) are constructed out of non combustible materials (i.e. steel, iron and concrete)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Define Common Hazard

A

Conditions common to all buildings which influence their loss potential

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Define Detatchment

A

Proximity of your insured building to other commercial buildings

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Define Risk Classification

A

Classifying risk according to their probability of loss

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Define Soft Market

A

Hard competition between insurers, rates low, high interest rates

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Define Hard Market

A

Low profit margins kill competition, strict underwriting, no discounts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Define Tenants Improvements

A

Improvements made by insured, that is not otherwise insured, if the insured is not the owner of the building

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Define Condition

A

A requirement for the insurer to do or not do something

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Define Subrogation

A

Right of the insurer to “step into the shoes” of the insured and sue the responsible party

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Define Material Fact

A

A fact that if the insurer found out, would cause them to either decline to insure or charge a higher premium

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Define Fraudulent

A

Wilfully acting to deceive or cheat

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Define Loading

A

Additional premium charged on top of the fire rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Define Centrifugal Force

A

Inertia that tends to move an object away from the centre around which it revolves

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Define Mechanical Breakdown

A

Failure in the working mechanism of the machinery

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Define Electrical Breakdown

A

Failure in the electrical mechanism

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Define Trade Losses

A

Types of losses expected as part of the operations of a business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Define Wear and Tear

A

Deterioration in value by ordinary and reasonable use

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Define Latent Defect

A

Hidden defect that would not be discovered by reasonable inspection

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Define Media

A

Devices that store data (CD, DVDS, hard drives, etc.)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Define Data

A

Information stored on media

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Define Bailee for Hire

A

Has custody of property of others for purpose other than sale and are compensated

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Define Ordinary Care

A

Legal duty of bailee to exercise the same care as a prudent and diligent owner

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Define Common Carrier

A

They furnish transportation to all members of the public

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Define Contract Carrier

A

Someone that carries for pay goods of certain customers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Define Private Carriers

A

Hauls their own goods or goods entrusted to them as bailees. Including shippers who own or lease their vehicles

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Define Catastrophic Limit

A

Max amount an insurer will pay for in one disaster

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Define Physical Protection

A

Physical barriers to restrict unauthorized access

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Define Electronic Protection

A

Electronic barriers to restrict unauthorized access

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Define Line Security

A

Ability of a phone line to withstand tampering

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Define Securities

A

Instruments or contracts representing money or other property (includes stamps)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Define Robbery

A

Taking of insured property from a custodian by a person who has:
i) Caused or threatened to cause custodian bodily harm
ii) Committed an unlawful act witnessed by a custodian
iii) Taken property from a custodian killed or rendered unconscious

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Define Custodian

A

Insured, partner or any employee authorized to have care/custody of insured property

34
Q

Define Fixed Expenses

A

Expenses that continue during the period of interruption

35
Q

Define Semi-variable experiences

A

Expenses that may or may not continue during the period of interruption

36
Q

Define Gross Profits

A

Net profit + insured standing charges

37
Q

Define Net Profit

A

Gross profit - all expenses

38
Q

Define Ordinary Payroll Expenses

A

Payroll expenses for all employees insured except officers and executives, managers, and contract employees not stopped if the business is interrupted

39
Q

Define Contributing Properties

A

Major supplier (manufacturer or supplier that the insured depends on for goods)

40
Q

Define Recipient Properties

A

Major customer (customers who the insured depends on to purchase products)

41
Q

What are magnet properties and give some examples.

A

Businesses that attract a large number of customers to the area (major retail chains).

42
Q

What is considered a newly acquired location and how are they covered?

A

Location acquired by the insured (covered for 30 days from acquisition)

43
Q

What are 2 common characteristics of business interruption insurance?

A

a) Insures the same perils as the commercial policy
b) Indemnity may continue beyond policy expiry
c) Are contracts of indemnity
d) Pays for expenses necessary to reduce further loss

44
Q

What are 3 ways for a client to insure their property while in transit?

A

a) Transportation floater - broad form
b) Transportation floater - limited form
c) Motor cargo rider: for an insured who carries his own goods
d) Trip transit coverage: covers a single trip

45
Q

Your client’s business has been doing well for the last few years and is planning to hire on a lot more staff. To accommodate these extra people, your client is planning to move to a larger office. He mentions to you that he is worried about his computers being damaged during the trip to the new location. Which insurance would you recommend to him?

A

Trip transit coverage

46
Q

What is the definition of warranty?

A

A guarantee that certain facts are true and shall remain true.

47
Q

What is the difference between an endorsement and a rider?

A

a) Endorsement: changes terms of the policy
b) Rider: adds additional coverage

48
Q

What is it called when an underwriter selects those applicants that are most likely to suffer loss?

A

Adverse Selection

49
Q

What is a hazard and what are the 3 types? Define them.

A

a) Hazard = a condition that may cause a peril to occur
b) Physical hazard: a condition relating to use of tangible property that may cause peril to occur
c) Moral hazard: characteristics of the applicant that may cause a peril to occur
d) Morale hazard: attitude of the client

50
Q

What are the 2 general ways property can be covered? Explain them.

A

a) Scheduled coverage: covers only property specifically identified
b) All property: insures building, stock or equipment under a single limit of insurance

51
Q

What is supporting business?

A

a Good business (risks) that a broker gives to an insurer. The insurer will take this into consideration to support a broker’s bid to insure a substandard risk.

52
Q

What is accommodation business?

A

Accommodation business is normally substandard risk that the insurer decides to insure because of their positive relationship with the broker (ie. they have good supporting business).

53
Q

Please explain straight line depreciation in the context of ACV

A

Straight line depreciation assumes that depreciation happens at a constant rate (in a linear fashion).

54
Q

What is the main difference between actual cash value and replacement value?

A

Replacement value doesn’t take depreciation into account

55
Q

Please explain plateau accelerated depreciation in the context of ACV

A

This method of calculation assumes that the rate of depreciation is greatest in the first few years before eventually tapering off.

56
Q

What is the income method of calculating values and for what type(s) of property is it typically used?

A

Income times cap rate. This method is typically used for dilapidated income properties

57
Q

What is the main difference between reinsurance and a subscription policy?

A

Reinsurance = the insurer cedes part of the risk to other insurers. The original insurer is the lead insurer handling policy and claims.

Subscription = a group of insurers agreed to participate in an insurance coverage

58
Q

What does the extra expenses endorsement do and provide some examples of what it would cover?

A

The insurer will pay extra expenses needed to continue the business after a loss.
Covers: overtime salaries, renting a temporary premise, installing phones.

59
Q

When will an insurer pay expediting expenses?

A

When the expenses reduce the overall cost of the claim for the insurer.

60
Q

There are 3 ways property may be valued in the insurance context, which of the following methods entails: repair or replacement of lost or damaged property less the application of any depreciation?

A

Actual Cash Value

61
Q

When a building is over 25 years old, an insurer will typically ask for additional information about these 5 things.

A

Roof
Wiring
Breakers
Plumbing
Heating

62
Q

Your client Bob is an electrician. He was paid $15,000 to do a wiring job for a retail store under construction. 5 months after the job was done, some part of the wiring malfunctioned due to an error one of Bob’s employees made during installation. This caused a fire that damaged the building. In this situation, what would the insurer be prepared to pay for? What would the insurer not pay for?

A

The damages to the building would be covered. The cost to re-wire the building would not be covered. (Faulty workmanship is usually not covered, however, resulting damage is.)

63
Q

What are 3 characteristics of a reinsurance policy?

A

a) All participants share losses and premiums
b) It is a contract between an insurer and their reinsurers
c) Controlled and claims paid by primary insurer

64
Q

When is a subscription policy used?

A

a) When that line of business isn’t covered under a reinsurance treaty
b) To protect reinsurers from the risk
c) The per-claim limit is too big to absorb in 1 loss (rmbr: the lead insurer pays the claim first in reinsurance)
d) A broker wants to spread a good risk among markets (keep their insurer’s happy see: accommodation business)

65
Q

Why is a reinsurance policy typically preferable over a subscription policy?

A

Subscription policies are negotiated separately with each participating insurer

66
Q

What parties cannot be subrogated against?

A

A named insured or insureds partner

67
Q

What are the bills of lading and explain them.

A

a) Standard bill of lading: used to reflect the amount a common carrier would be liable for under tariffs
b) Valued bill: requested by the owner when the value of goods exceeds the standard bill’s value
c) Released bill: release a carrier from any liability

68
Q

What are the types of protection and describe them.

A

a) Perimeter protection: methods to secure access to premises when business is closed
b) Area protection: protects areas within the building where valuable property is stored
c) Point protection: protects individual items (i.e. safes, vaults, chests, expensive equipment)

69
Q

Briefly explain the coverages provided by burglary insurance.

A

Unlawful taking of property by a person unlawfully entering or leaving the premises leaving evidence of forced entry

70
Q

Identify the 3 exposures insured by bylaws endorsement

A

a) Increased cost of construction
b) Loss of value in the undamaged portion of the building
c) Cost of demolition of undamaged portion and debris removal

71
Q

All of the following is true about Equipment Breakdown insurance except one, pick it out:

a) Excludes coverage for losses to boilers and machinery
b) Insurer can suspend coverage on any object found to be in dangerous condition or poorly maintained
c) Insures objects against accidents
d) Limits apply to each accident

A

A

72
Q

What obligation, if any, is placed on the broker by the presence of the by-laws exclusion in most commercial property policies?

A

The broker should ask the client if they know of any by-laws that might increase costs of reinstating property after an insured loss

73
Q

List 3 reasons why insurers may exclude certain perils and property items

A

a) Losses that are considered uninsurable (ie. war or nuclear energy)
b) Exclude losses that have potential to become catastrophic (ie. flood or earthquake)
c) Exclude losses covered by more specialized coverage forms (ie. automobile or plane)

74
Q

In Canada, the Insurance Act requires that every policy covering fire also cover…

A

Lighting & explosion of natural, coal or manufactured gas

75
Q

Which of the following methods are not used by common carriers to limit liability (there are more than 1)?

a) Appraised bill of lading
b) Standard bill of lading
c) Variable bill of lading
d) Released bill of lading

A

A & C

76
Q

The insured is planning an advertising program to mail out brochures to customers with every order. Bobby had 5000 brochures that were delivered to his warehouse. Under what category would these brochures be covered under?

A

Stock

77
Q

In crime insurance policies, there are different definitions related to the wrongful taking of insured property. Which term has the broadest meaning?

A

Theft

78
Q

Other than physical damage to property, give 3 examples of sources of business interruption losses:

A

a) Failure of public utilities
b) Transportation related accidents
c) Physical damage to a neighbouring premises
d) Physical damage to major supplier or customer
e) Actions of civil authority
f) Strikes, employee, lockouts

79
Q

What is the period of indemnity provided under the gross earnings endorsement form

A

Starts from time of loss until the reinstatement of damaged property

80
Q

By-laws requiring a building be rebuilt after a loss should be discussed with clients. What are 2 types of changes which might be required by such by-laws?

A

a) Required use of improved construction materials
b) Installation of fire suppression systems
c) Installation of wheelchair ramps
d) Minimum/maximums of height and floor area

81
Q

Discuss the coverage provided by the profits form as it relates to period of indemnity and due diligence and dispatch.

A

a) Period of indemnity: starts from time of loss and continues until income restored to pre-loss levels (as if the loss hasn’t occurred)
b) Due diligence and dispatch: Insured is required to do everything they reasonably can to ensure the physical damage is reinstated after a loss. As opposed to the gross earnings form where everyone involved must exercise due diligence and dispatch.

82
Q

Name some advantages and disadvantages of a Package Policy Approach

A

Pro:
- Simplicity of Application Form
- Costs of insurance to consumer are determined on the spot
- coverages provide adequate protection for most small commercial businesses
- broad coverages provided eliminate many of the claims problems common to more limited policy forms

Cons:
- one size does not fit all
- no standard package policy forms

CAIB 2 (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions