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Practice Exam for CAIB 1 (Questions and Answers).
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Practice Exam for CAIB 1 (Questions and Answers).
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Practice Exam for CAIB 1 (Questions andAnswers)
Insurers are in the business of assuming the financial risks of others which involves
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nentering into a formal contract. A contract is enforceable at law only when all legal
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nelements have been observed. Insurance contracts differ from other formal agreements
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nand are subject to what three additional elements? - ANS-Insurable Interest
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Utmost Good Faith n n
Indemnity
Explain the meaning and disadvantage of the following approaches: Avoidance of Risk
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& Control of Risk - ANS-Avoidance: Avoidance means that all chance of financial loss
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has been eliminated or a decision not to do something. The disadvantage is its not very
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effective as often the elimination of one exposure creates another in its place.
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Control: taking measures to reduce the frequency and severity of losses. The
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disadvantage is that not all losses can be controlled, because equipment will not work
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100% of the time
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Identify the three elements that are unique to contracts of insurance: - ANS-Insurable
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nInterest, Utmost Good Faith, and Indemnity
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The Insurance Act restricts payment for an insured loss to those amounts required to
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indemnify the Insured. Indicate the amount the Insured is legally entitled to receive and
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the measure used to determine this value. - ANS-Entitled to receive payment for the
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actual amount of the loss, no more and no less. The measure is the value of the object
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of insurance as it was immediately before the loss.
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Policies insuring against the peril of fire must contain Fire Statutory Conditions. Indicate
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the Statutory Condition and the applicable rules: During the policy term the insured
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installed a wood burning stove as a secondary heating device. The application
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indicates that a gas furnace is used to heat the premises. - ANS-Material Change. The
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insured must notify the insurer promptly of any change that serves to increase the
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chance of loss. After receiving notification of the Material Change the insurer has the
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option to cancel the policy and return the unearned portion of the premium to the
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insured; or continue to insure the risk and advise the insured in writing of the additional
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premium payable.
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All Homeowners policies describe the Basis of Claim Payment for loss or damage to
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dwelling building, detached private structures and personal property. Indicate the basis
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of settlement and conditions: Water used to extinguish a small fire at the Insured's
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home destroyed all electronic media and records kept by the Insured. - ANS-Cost to
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, n reproduce lost or damage media from duplicates or from originals of the previous
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n generation of the media. The payment for lost records is the cost of blank books,
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n pages, cards or other materials plus the cost of actually transcribing or copying such
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n records.
Another option for insuring property values under Homeowners policies is the "Single
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Limit" basis. Explain how this basis differs from the usual coverage format and the
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advantage that this approach offers: - ANS-Coverages A to D are combined into one
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single limit. The advantage is that this approach eliminates the coverage restriction
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otherwise applicable to Coverages B, C and D.
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The Homeowners Comprehensive Form (IBC 1155) is superior to all other Homeowners
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policies. State how this policy describes "Insured Perils" - ANS-This policy "insures
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against all risks of direct physical loss or damage subject to the exclusions and
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conditions of this form"
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Indicate the coverage provided for Emergency Removal Expense under the Mobile
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nHomeowners Form. - ANS-Covered up to 5% of the amount of insurance on the n n n n n n n n n n n n n
ndwelling and covers reasonable expenses incurred in disconnecting water and power,
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nand towing or transporting costs.
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What is the basis of claim payment for loss or damage to the mobile home, detached
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private structures and personal property under a Mobile Homeowners Policy? - ANS-
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The basis of claim is Actual Cash Value; payment for loss or damage to personal
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property is made on the same basis as under Homeowners Forms.
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Identify two (2) other coverages included under C - Personal Property, which are not
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nfound in a Homeowners policy - ANS-Improvements or betterments made by or
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nacquired at the expense of the tenant; $500 for damage (excluding fire damage) to the
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nportion of the building occupied by the tenant resulting from theft or attempted theft;
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nDamage caused to the interior of the building by vandalism or malicious acts.
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Individuals who own one or more units in a multiple unit building have an insurable
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ninterest in the building structure, common elements and personal property. Identify and
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nbriefly explain three coverages that are unique to the Condominium Unit Owners Policy:
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n- ANS-Unit Improvements and Betterments: insures the value of improvements and
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nbetterments by the insured, including any building, structure or swimming pool, and
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nmaterials and supplies on the premises for use in such improvements or betterments.
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Loss Assessment: allows the Insured to claim the amount of an assessment paid due to
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a loss to collectively owned property if covered under the Insured's policy.
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Unit Additional Protection: covers the Insured's unit, excluding damage to improvements
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and betterments, when the Condominium Corporation has no insurance, or it is
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inadequate
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