Free CAIB 1 Practice Questions: Underwriting and Claims

Use this page to isolate Underwriting and Claims before returning to mixed CAIB 1 practice.

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Sample questions

These are original Finance Prep practice questions aligned to this topic area. They are not official exam questions, copied live-exam content, or exam dumps. Use them for self-assessment, scope review, and deciding what to drill next.

Question 1

Topic: Underwriting and Claims

A homeowner client calls two weeks before renewal and says they “just want the same coverage as last year.” During the call, the broker learns that the client has started renting the basement suite on short-term rental platforms and installed a wood stove in the main dwelling. The current application and expiring policy do not mention either fact. What is the broker’s best action?

• A. Tell the client the short-term rental exposure is covered if the dwelling remains mainly owner-occupied.
• B. Advise the client to wait until after renewal to report the changes so the insurer can issue the policy on time.
• C. Renew the policy as expiring because the client requested the same coverage and the changes occurred before renewal.
• D. Ask follow-up questions, document the new facts, and submit them to the insurer for underwriting review before confirming renewal terms.

Best answer: D

What this tests: Underwriting and Claims

Explanation: Underwriting depends on accurate, current information about the risk. A change in occupancy or use, such as short-term rental activity, and a physical hazard such as a newly installed wood stove can affect eligibility, rating, conditions, exclusions, or required endorsements. A broker should not simply renew as expiring or assure coverage when material facts have changed. The appropriate response is to gather the missing details, document the conversation, explain why the information matters, and present it to the insurer for underwriting review. This supports accurate placement, fair treatment of the client, and the client’s duty to disclose material facts.

• Renewing as expiring ignores material changes that may affect the insurer’s decision to accept or price the risk.
• Assuming the rental exposure is covered creates a coverage assurance the broker is not entitled to make without policy and underwriting confirmation.
• Delaying disclosure until after renewal undermines accurate underwriting and could create serious coverage or contract problems.

The changed use and wood stove are material underwriting facts that must be clarified, documented, and disclosed to the insurer before renewal terms are confirmed.

Question 2

Topic: Underwriting and Claims

A homeowner client phones the brokerage the morning after a windstorm damaged the roof and caused water to enter an upstairs bedroom. The client has taken photos, moved wet bedding away from the leak, and is waiting for a contractor to inspect the roof. The client asks whether they should wait to report the claim until the repair cost is known.

Which broker response best fits the broker’s role in claims reporting and support?

• A. Tell the client the claim is definitely covered because windstorm is commonly insured under homeowner policies.
• B. Submit the claim using estimated facts so the insurer can open the file quickly, then correct the details later if needed.
• C. Advise the client to delay reporting until a contractor confirms the total repair cost and exact cause of damage.
• D. Encourage the client to report the loss promptly, provide the known facts accurately, keep photos and receipts, and update the insurer as more information becomes available.

Best answer: D

What this tests: Underwriting and Claims

Explanation: A broker supports the client by helping them report a claim promptly and accurately. The client does not need to know every final detail before giving notice. Known facts, such as the date, type of loss, property affected, steps taken to prevent further damage, and available photos or receipts, should be provided clearly. Additional estimates or adjuster findings can follow. The broker should not promise coverage, adjust the claim, or encourage guesses. Accurate documentation and timely notice help the insurer investigate and help the client meet policy conditions.

• Waiting for a final contractor estimate can delay notice and may conflict with claim reporting duties.
• Saying the loss is definitely covered goes beyond the broker’s role and ignores policy wording, exclusions, limits, and insurer investigation.
• Using estimated or uncertain facts as if they were known can create inaccurate claim information and should be avoided.

The broker should help the client give timely, accurate notice and preserve useful documentation without delaying the report for a final repair estimate.

Question 3

Topic: Underwriting and Claims

During a homeowner renewal call, a client mentions that they have started storing several propane cylinders in the attached garage for a small side business. The broker recognizes that this could affect the insurer’s decision to continue coverage, charge a different premium, or apply different terms. Which CAIB 1 underwriting concept best matches this information?

• A. Subrogation right
• B. Proof of loss
• C. Policy deductible
• D. Material fact

Best answer: D

What this tests: Underwriting and Claims

Explanation: A material fact is information that could influence an insurer’s decision to accept a risk, set the premium, impose conditions, apply exclusions, or decline coverage. Brokers should help clients understand that material changes and important risk information must be disclosed at application, renewal, and policy change. Storing propane cylinders for a side business changes the risk presented by the home and could affect underwriting. The broker should not ignore it or wait until a claim occurs; it should be documented and reported to the insurer for underwriting review.

• Subrogation is about an insurer recovering from a responsible third party after paying a loss, not disclosure during underwriting.
• A deductible is the amount the insured bears in a covered loss, not the risk information that must be disclosed.
• A proof of loss is a claims document, not an application or renewal disclosure concept.

A fact that could influence the insurer’s acceptance, rating, or terms of coverage must be disclosed.

Question 4

Topic: Underwriting and Claims

A homeowner reports a basement water loss and tells the broker, “I’m sure I asked for sewer backup coverage at renewal.” The adjuster later advises that the policy does not include the endorsement, and the client disputes that response. The client asks the broker to “clean up the file” before sending anything to the insurer. What is the best action for the broker?

• A. Revise the renewal notes to reflect the client’s current recollection before the file is reviewed.
• B. Keep only the current declarations page because it is the official record of coverage in force at the time of loss.
• C. Wait to document the dispute until the insurer confirms whether it will reconsider the claim response.
• D. Preserve the original renewal notes, coverage-change instructions, emails, claim report details, and insurer communications, and add a dated note of the new conversation without altering earlier records.

Best answer: D

What this tests: Underwriting and Claims

Explanation: When a client reports a loss, asks about a coverage change, or disputes a claim response, the broker should preserve a complete and accurate file. This includes original client instructions, applications or renewal notes, emails and texts, policy change requests, claim report details, insurer and adjuster communications, and dated notes of later conversations. Earlier records should not be altered to match a later recollection. If new information arises, it should be added as a new, dated entry. Good documentation supports fair treatment of customers, helps clarify what was requested or explained, and protects all parties if the coverage issue becomes a complaint or legal matter.

• The declarations page is important, but it does not show all advice, requests, instructions, and communications leading to the coverage position.
• Revising earlier notes undermines file integrity and may create a misleading record.
• Delaying documentation risks losing key details and weakens the broker’s record of the client’s dispute and the broker’s response.

Complete, unaltered documentation protects the client, broker, and insurer by showing what was requested, communicated, reported, and disputed.

Question 5

Topic: Underwriting and Claims

A client applying for a homeowner policy tells the broker that the house has a wood stove installed last winter. The application asks for heating details, installation information, and loss-prevention features. The client says, “It was professionally installed, so just mark it as approved. I need confirmation today that the insurer will accept it.” What is the broker’s best action?

• A. Mark the wood stove as approved because the client says it was professionally installed.
• B. Record the client’s details, request any supporting information needed, submit the facts to the insurer, and avoid promising acceptance.
• C. Tell the client the risk is acceptable if they agree to install any loss-prevention devices later.
• D. Decline the application on behalf of the insurer because wood stoves are a higher-risk heating source.

Best answer: B

What this tests: Underwriting and Claims

Explanation: A broker’s role in underwriting is to obtain complete and accurate information, identify material facts, help the client understand what information is needed, and submit the information to the insurer. The broker should not make the insurer’s underwriting decision or guarantee that coverage will be accepted. A wood stove is a material risk detail for a homeowner application because it can affect eligibility, premium, conditions, or required documentation. The proper response is to document the client’s information, ask for reasonable supporting details such as installation or inspection information if required, and explain that the insurer will decide whether to offer coverage and on what terms.

• Accepting the client’s statement without supporting details may result in inaccurate or incomplete disclosure of a material fact.
• Declining the risk on the insurer’s behalf exceeds the broker’s authority unless the insurer has already given a binding rule or decision.
• Promising acceptance subject to later loss-prevention steps improperly substitutes the broker’s judgment for the insurer’s underwriting decision.

The broker gathers and accurately communicates material facts, while the insurer decides whether to accept the risk and on what terms.

Question 6

Topic: Underwriting and Claims

A client calls the brokerage on Friday afternoon to add collision and comprehensive coverage to a vehicle that currently carries liability only. During the call, the client says the vehicle was damaged in a parking lot the previous evening but has not been inspected yet. The client asks the broker to add the coverage immediately and “sort out the date later.” What is the best action for the broker?

• A. Refer the new damage information to the insurer before adding the physical damage coverage.
• B. Add the coverage immediately because the client is already insured for liability on the same vehicle.
• C. Add the coverage effective today but note that any previous damage is excluded from the change.
• D. Tell the client to submit a claim after the coverage is added so the adjuster can decide what is payable.

Best answer: A

What this tests: Underwriting and Claims

Explanation: A broker must not bind, renew, or change coverage when a material fact has surfaced that could affect the insurer’s underwriting decision, unless the broker has authority and the insurer’s rules allow it. Existing vehicle damage is material when adding physical damage coverage because it affects the nature and condition of the risk and could create a dispute about whether a later claim was pre-existing. The broker should document the client’s statement, explain that accurate disclosure is required, and refer the matter to the insurer for instructions before adding collision or comprehensive coverage.

• Existing liability coverage does not automatically justify adding new physical damage coverage when the risk condition has materially changed.
• A broker should not create an informal exclusion or backdate arrangement without insurer authority.
• Sending the matter to claims after adding coverage puts coverage and documentation duties in the wrong order.

Known prior damage is material underwriting information that must be disclosed to the insurer before coverage is changed.

Question 7

Topic: Underwriting and Claims

A client reports a kitchen fire loss and asks the broker to “make sure the adjuster knows we need temporary accommodation tonight.” The broker records the date and time of the call, the client’s instructions, the emergency contact details, what was sent to the insurer, and that no coverage or settlement amount was promised. Which CAIB 1 claims-support concept is best illustrated?

• A. Subrogation recovery
• B. Claim communication documentation
• C. Underwriting file review
• D. Proof of loss preparation

Best answer: B

What this tests: Underwriting and Claims

Explanation: In claims support, a broker should document important communications promptly and accurately. The record should include what the client reported, any instructions received, what was communicated to the insurer or adjuster, time-sensitive needs, and any expectations discussed. Good documentation helps protect the client, the brokerage, and the insurer by reducing misunderstandings and showing that the broker acted within the proper role. The broker may help report the claim and explain the process, but should not guarantee coverage, liability, settlement timing, or payment amounts.

• A proof of loss is a formal claim document requested by an insurer, not the general record of calls, instructions, and expectations.
• Subrogation recovery involves an insurer pursuing a responsible third party after paying a loss.
• An underwriting file review relates to risk selection and policy issuance, not documenting claim communications after a loss.

The broker is creating a clear record of claim communications, instructions, and expectations without promising coverage.

Question 8

Topic: Underwriting and Claims

A client asks a broker to submit a homeowners application immediately because their renewal is due tomorrow. During the call, the client mentions that the basement was recently renovated after a prior water loss, but says, “Don’t include that unless the insurer asks, because I need the premium to stay low.” The broker has not yet confirmed the repair details or any water mitigation measures. What is the best action for the broker?

• A. Submit the application without the prior water loss because the client has instructed the broker not to include it unless asked directly.
• B. Decline to assist the client further because any prior loss makes the risk unacceptable for homeowners insurance.
• C. Submit the application with a general note that the basement was renovated, but leave out the prior water loss until the insurer requests claim history.
• D. Explain that accurate material information must be disclosed, gather the missing details, document the discussion, and submit the application only with complete and accurate underwriting information.

Best answer: D

What this tests: Underwriting and Claims

Explanation: Underwriting depends on accurate material facts. A prior water loss, recent renovations, and mitigation measures can affect eligibility, pricing, deductibles, exclusions, or required endorsements. If information is withheld or softened, the client may face a declined claim, cancellation, or other policy consequences. The broker also risks failing professional duties around accuracy, disclosure, documentation, and fair treatment. The insurer needs reliable information to decide whether and how to accept the risk. Accurate underwriting also protects the wider insurance pool because premiums and terms are based on the true exposure, not on hidden or misstated risks.

• Following the client’s instruction to omit the loss ignores the broker’s duty to disclose material facts accurately.
• A vague renovation note is incomplete because it hides the underwriting significance of the prior water loss.
• Refusing service solely because there was a prior loss is premature; the insurer may still consider the risk with proper details.

Accurate disclosure protects the client from coverage problems, supports the broker’s duty, allows the insurer to price the risk properly, and helps keep the insurance pool fair.

Question 9

Topic: Underwriting and Claims

A homeowner had a small kitchen fire while away for work. They cleaned out the damaged cabinets and appliances before an adjuster inspected the loss, then contacted the broker three weeks later to ask about opening a claim. Which CAIB 1 concept is most directly involved?

• A. Duties after loss under the policy conditions
• B. A material change in risk during the policy term
• C. Subrogation against a responsible third party
• D. Indemnity as the basis of settlement

Best answer: A

What this tests: Underwriting and Claims

Explanation: Property policies commonly include conditions that apply after a loss. The insured is expected to give notice promptly, protect the property from further damage, and cooperate with the insurer’s investigation. Altering or disposing of damaged property before inspection can make it harder for the insurer to confirm the cause, extent, and value of the loss. A broker should encourage timely reporting, document the client’s facts, advise the client not to discard evidence unless necessary for safety or mitigation, and avoid promising coverage or settlement. The issue is not mainly how the amount will be calculated; it is whether the insured has complied with claim-related policy conditions.

• Subrogation concerns the insurer’s right to recover from a responsible third party after paying a covered loss.
• Indemnity explains the goal of restoring the insured financially, but it does not address delayed notice or disposal of damaged property.
• A material change in risk concerns a significant change in the insured risk during the policy term, not conduct after a loss occurs.

Prompt reporting and preserving damaged property for insurer inspection are typical duties after a loss.

Question 10

Topic: Underwriting and Claims

A homeowner client calls after a windstorm damaged shingles and allowed rainwater into the upstairs bedroom. The client says, “My neighbour told me storm damage is always covered, so can you confirm the insurer will pay before I report it?” The broker has not reviewed the current policy wording, endorsements, deductible, or detailed loss facts.

Which response best fits the broker’s role in this claim communication?

• A. Confirm that windstorm losses are covered because storm damage is normally insured under homeowner policies.
• B. Explain that coverage depends on the policy wording, applicable conditions, full loss facts, and the insurer’s claim review, then help the client report the loss promptly.
• C. Advise the client that the loss is excluded unless the policy has a special water damage endorsement.
• D. Tell the client to delay reporting until a contractor confirms the exact cause and repair cost.

Best answer: B

What this tests: Underwriting and Claims

Explanation: A broker should avoid guaranteeing that a claim will be paid before the insurer reviews the claim. Even when a type of loss sounds commonly insured, coverage depends on the exact policy wording, exclusions, limits, deductibles, conditions, endorsements, and the facts of the loss. The broker’s proper role is to explain that process, gather and document relevant information, and help the client report the claim promptly. Clear communication protects the client from relying on an unsupported coverage promise and supports fair treatment of customers.

• Confirming payment based on a general idea of windstorm coverage overstates the broker’s authority and ignores policy wording and facts.
• Delaying the report may conflict with policy conditions requiring prompt notice and can prejudice the claim process.
• Assuming an exclusion or endorsement requirement is also premature without reviewing the policy and loss details.

This response communicates clearly without promising coverage and keeps the broker within the proper role of assisting with reporting and documentation.

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