Canadian Accredited Insurance Broker (CAIB) Two Practice Exam

What type of clause might you find that is unique to Equipment Breakdown Policies?

1. Exemption clause

2. Supplemental clause

3. Suspension clause

4. Exclusion clause

The correct answer is: Suspension clause

In Equipment Breakdown Policies, a suspension clause is indeed relevant as these policies often include provisions that allow for the temporary suspension of coverage under certain conditions. This is particularly important given that Equipment Breakdown coverage addresses risks associated with machinery and equipment, where operational interruptions may occur due to breakdowns. A suspension clause enables insurers to pause coverage if specific criteria are met, such as when equipment is not maintained per the policy's standards, or when it is operating outside its intended use. This clause serves as a risk management tool for insurers and ensures that policyholders are accountable for proper maintenance and operation of the equipment. While exemption, supplemental, and exclusion clauses may exist in various insurance policies, they do not specifically pertain to the unique circumstances and risks addressed by Equipment Breakdown Policies. For this coverage, the focus on maintaining proper operation and care of equipment necessitates the inclusion of a suspension clause, making it distinct in this context.