Canadian Accredited Insurance Broker (CAIB) Two Practice Exam

What type of losses does the waiver of co-insurance typically apply to in commercial property policies?

1. Is less than $1000 or Is less than 1% of the amount of insurance

2. Is less than $2500 or Is less than 1.5% of the amount of insurance

3. Is less than $5000 or Is less than 2% of the amount of insurance

4. Is less than $10000 or Is less than 3% of the amount of insurance

The correct answer is: Is less than $5000 or Is less than 2% of the amount of insurance

The waiver of co-insurance in commercial property policies typically applies to losses that are less than $5,000 or less than 2% of the amount of insurance. This provision is designed to alleviate the burden on policyholders for smaller claims, thereby encouraging them to file claims without the fear of financial penalties associated with underinsurance. By establishing this threshold, insurers provide a safety net for minor losses, making it easier for businesses to manage their cash flow and operational stability following a loss. The two-tier measurement—either a fixed amount or a percentage—gives flexibility in different scenarios of property value and loss severity, ensuring that the waiver applies appropriately based on the specifics of each claim. The other options present different thresholds that do not align with common practices for waiving co-insurance within commercial property policies, which typically maintain a focus on moderate loss amounts to manage risk effectively.