CAIB 2 — CAIB New Edition 1.0 Quick Reference

Last revised: June 24, 2026

Compact CAIB 2 quick reference for Insurance Brokers Association of Canada personal lines review: habitational, auto, liability, claims, underwriting, and exam traps.

Exam Identity and Scope

This independent Quick Reference supports candidates preparing for the Insurance Brokers Association of Canada exam CAIB New Edition 1.0 - CAIB 2, exam code CAIB 2.

CAIB 2 is generally tested through applied personal-lines insurance scenarios. Expect questions that require you to select the right form, identify coverage gaps, apply policy conditions, recognize underwriting concerns, and explain claims outcomes. Provincial forms, statutory wording, auto systems, and endorsement numbers can vary, so use this as a compact review aid alongside your official course materials.

Personal Lines Map

Area	Main exposure	Typical product or section	High-yield exam focus
Homeowners	Owner-occupied dwelling, contents, personal liability	Homeowners package	Form selection, named vs open perils, exclusions, special limits, replacement cost
Tenants	Renter’s contents, additional living expense, personal liability	Tenants package	No building coverage, tenant improvements, liability to landlord/others
Condominium unit owners	Contents, unit improvements, assessments, personal liability	Condo unit owners package	Condo corporation vs unit owner policy, loss assessment, deductible assessment
Rented dwellings	Landlord’s building, rental income, premises liability	Dwelling rented to others	Not a homeowners form; tenant’s property excluded
Seasonal/secondary residences	Less frequently occupied dwelling	Seasonal or secondary dwelling form	Theft, water, vacancy, heating, occupancy limitations
Personal auto	Liability, accident benefits, physical damage	Provincial owner’s auto policy plus endorsements	Mandatory vs optional coverages, physical damage perils, use and driver disclosure
Personal liability umbrella	Catastrophic personal liability	Umbrella or excess liability	Underlying limits, drop-down, exclusions
Pleasure craft	Boat hull, equipment, trailer, liability	Watercraft or marine policy	Navigation limits, lay-up warranties, operator/use restrictions
Travel	Emergency medical, cancellation, baggage	Travel insurance	Pre-existing conditions, stability, trip purpose, exclusions

Residential Form Selection

Use the client’s relationship to the property first, then refine for occupancy and special exposures.

    flowchart TD
	    A[Client needs residential coverage] --> B{Does client own and occupy the dwelling?}
	    B -->|Yes| C[Homeowners form]
	    B -->|No| D{Does client rent the dwelling as tenant?}
	    D -->|Yes| E[Tenants package]
	    D -->|No| F{Does client own a condo unit?}
	    F -->|Yes| G[Condo unit owners form]
	    F -->|No| H{Does client own property rented to others?}
	    H -->|Yes| I[Rented dwelling / landlord form]
	    H -->|No| J{Seasonal, vacant, under renovation, mobile, or unusual use?}
	    J -->|Yes| K[Specialized form or endorsement]
	    J -->|No| L[Recheck insurable interest and occupancy]

Client situation	Usually consider	Do not overlook
Owns and lives in house	Homeowners comprehensive, broad, or named perils form	Mortgage clause, home-based business, detached structures, water endorsements
Rents apartment	Tenants package	Additional living expense, tenant improvements, personal liability
Owns condo unit	Condo unit owners form	Improvements/betterments, loss assessment, condo deductible assessment, corporation bylaws
Owns house rented to others	Rented dwelling form	Rental income, landlord’s contents, premises liability, vacancy between tenants
Cottage used seasonally	Seasonal dwelling form or extension	Theft restrictions, heating, water shut-off, road access, detached structures
Vacant home	Vacancy permit or special market	Standard policy vacancy exclusions and material change reporting
Home under major renovation	Renovation endorsement or builder’s risk-style solution	Increased fire/theft/water hazard, contractor insurance, occupancy change
Short-term rental or home sharing	Personal policy endorsement or commercial/specialty product	Business-use exclusion, liability to guests, theft by guests

Habitational Coverage Structure

Coverage area	What it usually protects	Exam distinction
Dwelling building	House, attached structures, permanently installed fixtures	Replacement cost depends on conditions and adequate limit
Detached private structures	Garage, shed, fences, other private-use structures	Business/farming use may be limited or excluded
Personal property	Contents owned, worn, or used by insureds	Special limits apply to high-theft or high-value classes
Additional living expense	Increased costs to maintain normal standard of living after insured loss	Triggered by insured damage, not inconvenience alone
Fair rental value	Lost rent from part rented to others after insured loss	Subject to policy wording and insured peril
Personal liability	Legal liability for bodily injury or property damage to others	Not a substitute for auto, business, professional, or intentional acts coverage
Voluntary medical payments	Limited medical payments without proving legal liability	Not the same as liability damages
Voluntary property damage	Limited payment for damage caused to others’ property without legal liability	Often useful for goodwill but limited by wording

Residential Policy Forms: Peril Basis

Form type	Dwelling coverage	Personal property coverage	Best shorthand	Common trap
Comprehensive	Open perils, subject to exclusions	Open perils, subject to exclusions	Broadest standard homeowners form	“All risks” does not mean every possible loss
Broad	Open perils on dwelling	Named perils on contents	Hybrid form	Contents are not on the same basis as the building
Basic / Named perils	Named perils only	Named perils only	Limited coverage	Loss must fit an insured peril
Tenants	Usually contents, ALE, liability	Per form wording	Renter’s package	No coverage for landlord’s building
Condo unit owners	Contents, unit improvements, assessments, liability	Per form wording	Complements condo corporation policy	Corporation policy does not cover all unit-owner exposures
Rented dwelling	Landlord’s building and rental exposure	Limited landlord contents if included	Landlord property form	Tenant must insure their own property

Named Perils vs Open Perils

Concept	Meaning	Exam wording clue
Named perils	Policy covers only listed causes of loss	“Is this peril named?”
Open perils	Policy covers direct physical loss unless excluded	“Is this loss excluded?”
Direct physical loss	Tangible damage to insured property	Pure financial loss usually needs separate coverage
Fortuity	Insurance responds to accidental, uncertain events	Wear, tear, maintenance, gradual deterioration are not fortuitous
Proximate cause	Dominant effective cause of loss	Used when multiple events contribute

High-Yield Residential Exclusions and Limitations

Exposure	Why it matters	Broker/exam response
Vacancy	Vacant property has increased theft, vandalism, water, and fire risk	Identify vacancy definition and permit/endorsement need
Unoccupancy	Temporarily away but intending to return	Less severe than vacancy, but heating/water conditions may apply
Sewer backup	Often excluded or limited unless endorsed	Offer/confirm endorsement where available
Overland water/flood	Standard coverage may exclude or require separate endorsement	Distinguish sewer backup, surface water, flood, groundwater
Earthquake	Usually excluded unless endorsed	Review deductible, masonry, contents, ALE treatment
Wear and tear	Maintenance issue, not sudden accidental loss	Explain non-fortuitous loss
Faulty workmanship/design	Often excluded, but resulting damage may be treated differently	Separate cost to correct defect from resulting insured damage
Intentional or criminal acts	Insurance does not reward deliberate loss	Watch for innocent co-insured wording issues
Business use	Personal policies are limited for business property and liability	Endorse or place commercial coverage
Short-term rental	May be treated as business or material change	Disclose and obtain proper form
High-value property	Jewelry, watches, collectibles, bicycles, money, securities, watercraft may be limited	Schedule articles or use floater
Motorized vehicles	Property and liability coverage usually limited	Auto, recreational vehicle, or specialty policy needed
Animals	Property value and liability issues may be limited/excluded	Disclose breeds, bite history, business use
Pollution/contamination	Usually excluded or tightly limited	Do not assume cleanup is covered
Data/electronic media	Physical device vs data value distinction	Confirm cyber/data limitations

Property Valuation and Settlement

Core Valuation Terms

Term	Practical meaning	Exam trap
Replacement cost	Cost to repair or replace with like kind and quality, without depreciation if conditions met	Usually requires actual repair/replacement
Actual cash value	Value after depreciation or other valuation factors	Not the same as original purchase price
Market value	Real estate sale value including land/location	Not the correct basis for rebuilding insurance
Stated amount	Agreed or stated limit, subject to wording	Not always a valued policy guarantee
Functional replacement cost	Replaces with functionally equivalent modern materials/design	Useful for older or obsolete construction
Guaranteed replacement cost	May exceed stated limit if policy conditions are met	Conditions and exclusions are critical
Deductible	Insured’s retained amount per loss or occurrence	Applies before or after some limits depending on wording
Special limit	Sub-limit for a class of property	Scheduling may be needed even when total contents limit is high

Co-insurance / Insurance-to-Value Formula

Co-insurance or replacement-cost conditions test whether the insured carried enough insurance compared with required value.

\[ \text{Required Insurance} = \text{Replacement Cost Value} \times \text{Required Percentage} \]\[ \text{Recovery Before Deductible} = \min\left( \frac{\text{Insurance Carried}}{\text{Required Insurance}} \times \text{Loss}, \text{Policy Limit}, \text{Loss} \right) \]\[ \text{Final Payment} = \max(\text{Recovery Before Deductible} - \text{Deductible}, 0) \]

Scenario clue	Likely issue
Dwelling insured below reconstruction cost	Possible replacement cost or co-insurance penalty
Client uses tax assessment or market price as limit	Underinsurance risk
Older home with unique features	Functional replacement or appraisal issue
Contents not replaced	ACV may apply until replacement
Pair or set damaged	Settlement may consider reduced value of pair/set, subject to wording
Obsolete materials	Like kind and quality vs modern equivalent issue

Special Residential Situations

Condominium Unit Owners

Exposure	Condo corporation policy	Unit owner policy
Building shell/common elements	Usually primary	May respond only in limited or contingent ways
Standard unit components	Defined by bylaws/standard unit description	Unit owner may need coverage for upgrades beyond standard
Improvements and betterments	Usually not fully covered by corporation	Key unit-owner coverage
Personal property	No	Yes
Personal liability	Corporation has its own liability	Unit owner needs personal liability
Loss assessment	Corporation may assess owners after covered loss or liability	Unit policy may cover eligible assessments
Corporation deductible assessment	Corporation may pass deductible to unit owner	Unit policy may need specific deductible assessment coverage
Additional living expense	Corporation policy generally not enough for unit owner	Unit owner policy usually needed

Tenants

Exposure	Coverage point
Tenant’s personal property	Covered under tenants package, not landlord policy
Additional living expense	Important after insured loss makes unit unfit
Tenant improvements	Improvements made or paid for by tenant may need coverage
Liability to third parties	Personal liability section responds if legally liable and not excluded
Damage to rented premises	Review tenant legal liability/property damage wording
Roommates	Each may need own policy unless specifically insured

Rented Dwellings and Landlords

Exposure	Coverage point
Building	Insured by landlord under rented dwelling form
Tenant contents	Not covered by landlord
Rental income	Fair rental value/rental income coverage may be needed
Premises liability	Landlord needs liability for property ownership
Vacancy between tenants	Report material change and check vacancy wording
Illegal activities by tenant	Underwriting and coverage concern
Multiple units/boarders	May change eligibility and rating

Personal Liability Quick Reference

Liability concept	Meaning	Exam focus
Bodily injury	Injury, sickness, disease, or death of a third party	Must fit policy definition
Property damage	Damage to or loss of use of tangible property	Damage to property owned by insured is not third-party liability
Occurrence	Accident or continuous/repeated exposure causing injury/damage	Timing affects which policy responds
Legal liability	Insured must be legally responsible	Voluntary payments are different
Defence costs	Insurer may defend covered suits	Defence may be in addition to or within limits depending on wording
Intentional acts	Expected or intended injury/damage excluded	Negligence vs intentional harm matters
Business liability	Usually excluded or limited	Home business endorsement/commercial CGL may be needed
Auto liability	Excluded from homeowners liability	Auto policy responds
Watercraft liability	Limited by size, horsepower, ownership, or use	Separate watercraft policy may be required
Professional liability	Excluded from personal liability	E&O/professional policy needed

Personal Auto Coverage

Auto insurance is highly province-specific. For CAIB 2, focus on the function of each coverage and the effect of disclosed vehicle use, drivers, ownership, and endorsements.

Core Auto Coverages

Coverage	What it does	Key distinction
Third party liability	Pays sums the insured is legally liable to pay for bodily injury or property damage arising from automobile use	Limits matter; personal umbrella may require minimum underlying limits
Accident benefits / no-fault benefits	Pays defined benefits to eligible injured persons regardless of fault	Benefits and terminology vary by province
Uninsured automobile	Protects against injury/damage caused by uninsured or unidentified motorists, subject to wording	Not the same as underinsured motorist protection
Direct compensation-property damage	Where applicable, insured claims against own insurer for vehicle damage caused by another motorist	Does not replace collision in every scenario
Collision or upset	Covers damage from collision with another object or upset/rollover	Optional physical damage coverage
Comprehensive	Covers non-collision physical damage per wording, such as theft, fire, vandalism, glass, wind, hail	Broader than specified perils but excludes collision/upset
Specified perils	Covers only listed physical damage perils	Narrower than comprehensive
All perils	Combines collision/upset and comprehensive-style protection, subject to exclusions	Still not “everything”; exclusions apply

Auto Physical Damage Peril Comparison

Loss example	Collision/upset	Comprehensive	Specified perils	All perils
Vehicle hits another car	Usually yes	No	No	Usually yes
Vehicle rolls over	Usually yes	No	No	Usually yes
Theft of vehicle	No	Usually yes	Usually yes	Usually yes
Fire	No	Usually yes	Usually yes	Usually yes
Hail or windstorm	No	Usually yes	Usually yes	Usually yes
Vandalism	No	Usually yes	Not always	Usually yes
Glass breakage	Often comprehensive unless caused by collision	Usually yes	Not always	Usually yes
Damage while transported by ferry/train/truck	Depends on wording	Often addressed	Often listed	Usually yes

Auto Underwriting Decision Points

Question to ask	Why it matters
Who owns or leases the vehicle?	Named insured, lessor/lienholder, insurable interest
Who are all regular drivers?	Rating, eligibility, misrepresentation risk
What is the vehicle used for?	Commuting, business, delivery, rideshare, farm, pleasure
Where is it garaged?	Territory, theft, commuting, rating
Any young/new drivers?	Rating, disclosure, occasional vs principal driver
Any modifications?	Value, performance, underwriting acceptability
Any commercial signage/tools/passengers?	Personal auto may be inappropriate
Is the vehicle rented or borrowed?	Non-owned auto endorsement or credit card coverage gaps
Is there travel outside Canada?	Territory and proof of insurance issues
Is replacement cost desired for a new vehicle?	Waiver of depreciation / depreciation protection endorsement

Common Auto Endorsement Functions

Endorsement function	When it is needed
Increased liability limit	Higher exposure or umbrella requirement
Family protection / underinsured motorist	At-fault third party has inadequate insurance
Loss of use	Rental vehicle or transportation after covered physical damage loss
Legal liability for damage to non-owned autos	Renting or borrowing vehicles
Waiver of depreciation	Newer vehicle total or partial loss settlement
Lessor/lienholder protection	Leased or financed vehicle
Permission for business use	Use beyond ordinary personal/commuting
Restricted driver or excluded driver	Underwriting control; must be clearly explained
Ride-sharing/delivery permission	App-based passenger or delivery use; personal policy may exclude

Personal Umbrella Liability

Feature	Exam point
Excess liability	Pays above underlying personal liability or auto liability limits
Underlying insurance requirement	Insured must maintain required primary limits
Drop-down coverage	Some umbrellas may respond to certain claims not covered by underlying policies, subject to self-insured retention
Worldwide personal liability	Often broader territory, but wording controls
Exclusions	Business, professional, intentional, aircraft/watercraft, and auto limitations remain important
Claims-made vs occurrence	Personal umbrellas are commonly occurrence-based, but always read wording
Best candidate	High net worth, high public exposure, rental/secondary properties, young drivers, pools, boats

Pleasure Craft and Travel

Pleasure Craft

Exposure	Coverage point
Hull	Physical damage to boat, motor, equipment
Trailer	May need specific listing or separate coverage
Liability	Protection for injury/damage to others from ownership/use
Navigation territory	Coverage may apply only in specified waters
Lay-up warranty	Boat must be out of use during lay-up period if required
Operators	Age, licensing, experience, and permitted operators matter
Racing/commercial use	Often excluded unless endorsed
Personal effects	May be limited; homeowners overlap is not enough

Travel Insurance

Coverage	Key distinction
Emergency medical	Covers eligible emergency treatment while travelling
Trip cancellation	Loss before departure for insured reasons
Trip interruption	Loss after trip starts for insured reasons
Baggage/personal effects	Limited, often secondary to other insurance
Accidental death/dismemberment	Fixed benefit, not medical reimbursement
Pre-existing condition exclusion	Stability period and medical history are central
Travel advisory exclusion	Government advisories can affect coverage
High-risk activities	Adventure sports, alcohol/drug involvement, or reckless acts may be excluded

Underwriting and Risk Assessment

COPE for Habitational Risks

COPE factor	What to review	Examples of red flags
Construction	Materials, age, roof, wiring, plumbing, heating	Knob-and-tube/aluminum wiring, old roof, wood stove, oil tank
Occupancy	Who lives there and how used	Vacancy, rooming house, short-term rental, business use
Protection	Fire hydrant, fire hall, alarms, sprinklers	Remote location, no monitored alarms, poor access
Exposure	Nearby hazards and environment	Brush/forest, flood plain, neighbouring commercial risk

Personal Lines Hazards

Hazard type	Meaning	Example
Physical hazard	Tangible condition increasing chance/severity of loss	Damaged stairs, poor wiring, unfenced pool
Moral hazard	Dishonesty or intent to profit from insurance	Fraudulent claim history
Morale hazard	Carelessness because insurance exists	Failure to maintain heat while away
Legal hazard	Laws or legal environment increasing claim cost	High litigation exposure
Catastrophe hazard	Loss affecting many insureds	Wildfire, windstorm, earthquake, flood

Material Facts to Document

Line	Material facts
Homeowners	Occupancy, renovations, business use, heating, prior losses, mortgagee, alarms, high-value property
Tenants	Address, roommates, contents value, pets, business use, prior losses
Condo	Unit improvements, bylaws, corporation deductible, assessments, parking/storage, rentals
Landlord	Number of units, tenant type, vacancy, rental income, maintenance, prior losses
Auto	Drivers, use, garaging, claims/convictions, ownership, modifications, annual distance
Watercraft	Operator, horsepower, value, navigation, storage, lay-up, racing/commercial use
Travel	Age, health, trip dates, destination, trip cost, pre-existing conditions

Claims Workflow

    flowchart LR
	    A[Loss occurs] --> B[Insured gives prompt notice]
	    B --> C[Protect property and prevent further damage]
	    C --> D[Broker/insurer confirms policy, peril, limits, exclusions]
	    D --> E[Adjuster investigates facts and quantum]
	    E --> F[Proof of loss / documentation]
	    F --> G{Covered loss?}
	    G -->|Yes| H[Settlement, repair, replacement, or defence]
	    G -->|No or partly| I[Explain denial or limitation]
	    H --> J[Salvage, subrogation, file closure]
	    I --> J

Claims duty	Practical meaning
Prompt notice	Report loss as soon as practicable
Protect property	Take reasonable steps to prevent further damage
Do not abandon property	Insurer has rights to inspect/salvage
Provide inventory/proof	Support ownership, value, and cause of loss
Cooperate	Assist investigation and defence
Do not admit liability	Liability admissions can prejudice insurer
Preserve evidence	Photos, receipts, damaged parts, police/fire reports
Mitigate loss	Reasonable temporary repairs may be required

Statutory and Policy Conditions

Condition area	Exam significance
Misrepresentation	False or withheld material facts may affect coverage
Material change	Insured must report changes material to the risk
Termination/cancellation	Insurer and insured cancellation rights differ; notice rules vary
Requirements after loss	Notice, proof of loss, inventory, cooperation
Fraud	Fraudulent claims can void recovery and create broader consequences
Appraisal	Dispute mechanism for amount of loss, not coverage
Salvage	Insurer may take damaged property after settlement
Subrogation	Insurer may pursue responsible third party after paying insured
Other insurance	Determines contribution when more than one policy applies
Mortgage clause	Protects mortgagee’s interest; may create rights independent of insured’s acts
Pair and set	Loss to one item may affect value of the set
Sue and labour / mitigation	Insured must act reasonably to reduce loss

Broker Practice Points Tested in Scenarios

Broker action	Why it matters
Ask complete risk questions	Avoid underinsurance, misclassification, and E&O exposure
Explain major exclusions	Especially water, vacancy, business use, auto use, and high-value property
Offer relevant endorsements	Document offer and acceptance/refusal
Confirm binding authority	Broker must know when coverage is actually bound
Issue binder accurately	Binder should match agreed coverage, limits, deductibles, conditions
Follow up on subjectivities	Photos, inspections, repairs, appraisals, signed applications
Document advice	Protects client and broker when coverage is declined
Review renewals	Occupancy, values, drivers, renovations, and use change over time
Handle certificates carefully	Evidence of insurance is not an endorsement unless policy changed
Respect privacy and consent	Personal information must be collected and shared appropriately

Common CAIB 2 Scenario Traps

Scenario clue	Likely correct analysis
Client says “full coverage”	No such technical term; identify specific coverages and exclusions
Home insured for purchase price	Rebuilding cost may be higher or lower than market value
Jewelry stolen from vehicle	Contents may be covered but special limits/exclusions may apply
Basement water after storm	Distinguish sewer backup, overland water, groundwater, seepage
House empty for sale	Vacancy issue, not ordinary unoccupancy
Friend pays rent for basement room	Occupancy and rental exposure may be material
Client runs daycare from home	Business liability/property gap; special underwriting needed
Condo corporation charges deductible to owner	Need deductible assessment or loss assessment wording
Tenant assumes landlord policy covers belongings	False; tenant needs own policy
Student away at school	Check definition of insured and location limits
Vehicle used for food delivery	Personal auto may exclude or require endorsement
Occasional driver becomes principal driver	Rating and material change issue
Borrowed rental car damaged	Need non-owned auto physical damage or rental coverage
New car total loss	Standard ACV may apply unless depreciation waiver exists
Umbrella requested but auto limits are low	Underlying limit requirement issue
Boat used outside navigation limits	Warranty/territory breach concern
Travel claim after known illness	Pre-existing condition/stability exclusion issue
Insured starts repairs before inspection	Mitigation is allowed, but evidence must be preserved

Compact Last-Week Review Checklist

Match each client to the correct personal-lines form: homeowner, tenant, condo, landlord, seasonal, auto, umbrella, watercraft, travel.
For every property question, ask: Is the property insured? Is the peril insured? Is there an exclusion, condition, deductible, or special limit?
For every liability question, ask: Is the insured legally liable? Is the activity personal, auto, business, professional, intentional, or excluded?
For every auto question, identify: owner, drivers, use, province-specific compulsory coverages, optional physical damage, and endorsements.
Memorize the difference between open perils, named perils, comprehensive, broad, and basic forms.
Practise co-insurance and replacement-cost settlement questions until the sequence is automatic.
Review vacancy, material change, misrepresentation, proof of loss, subrogation, salvage, and appraisal.
Build a habit of explaining not just whether coverage exists, but why the policy wording leads to that result.

Next Step

Use this Quick Reference as a checklist while working through CAIB 2 scenario questions. For each missed practice question, tag the error as form selection, peril/exclusion, valuation, liability, auto, underwriting, or claims condition, then drill that category until the decision rule is clear.

Scenario Guide

Introduction to Commercial Property Insurance