Canadian Accredited Insurance Broker (CAIB) One Practice Exam

Which natural phenomena are covered under the basic form of insurance coverage?

1. Flooding and earthquakes

2. Explosion and lightning

3. Theft and vandalism

4. Fire and hailstorms

The correct answer is: Explosion and lightning

The basic form of insurance coverage typically includes risks like explosions and lightning. This coverage is foundational in many insurance policies, specifically designed to protect against common and significant risks that can cause considerable damage to property. Explosions can result from various sources, including gas leaks or issues with machinery, while lightning poses a threat as it can cause fires or direct damage to structures and electrical systems. The inclusion of these natural phenomena reflects the understanding that they represent prevalent hazards that can lead to significant loss, making them essential components of basic coverage. In contrast, while flooding and earthquakes are perilous events, they often require additional coverage or separate policies due to their complex nature and potentially high costs. Theft and vandalism, although significant, typically fall under different policy terms rather than the basic natural phenomena coverage. Fire and hailstorms might be included in other forms of coverage but are not as universally recognized as explosions and lightning within basic insurance parameters.