Canadian Accredited Insurance Broker (CAIB) Two Practice Exam

Which three exclusions are common in Equipment Breakdown Policies?

1. Data loss, fire and smoke, and war-related losses

2. Flood, technical errors, and fire damage

3. War-related losses, fire and smoke, and delay or interruption

4. Environmental issues, fire, and technical failure

The correct answer is: War-related losses, fire and smoke, and delay or interruption

In Equipment Breakdown Policies, the exclusions commonly focus on losses that are outside the typical scope of equipment breakdown or that are already covered by other types of insurance. The correct choice identifies exclusions that align well with the specific structure and intentions of these policies. War-related losses are typically excluded because they fall under catastrophic events that larger insurance policies or war risk policies address separately. Fire and smoke are also commonly excluded, since they can be covered under property insurance policies or fire insurance, thus preventing overlap and redundancy within coverage. Delay or interruption is included as an exclusion related to business interruption that might arise due to equipment breakdown but does not specifically pertain to the physical damage to the equipment itself. These exclusions help define the parameters of coverage and ensure that Equipment Breakdown Policies focus specifically on insuring the risk of equipment failures rather than events that are more broadly managed by other forms of insurance.