Canadian Accredited Insurance Broker (CAIB) Three Practice Exam

When does the seller's insurable interest cease under Cash in Advance method?

1. Upon delivery of goods

2. At the moment the payment is made

3. Once the shipment is dispatched

4. After receiving confirmation of payment

The correct answer is: At the moment the payment is made

In the context of the Cash in Advance method, the seller's insurable interest ceases at the moment the payment is made. This method involves the buyer paying for goods upfront before they are delivered or shipped. Once the seller has received the full payment, their responsibility to insure the goods diminishes because ownership and risk have effectively transferred to the buyer. Understanding this timing is crucial in the realm of insurance, as it aligns with the principle of insurable interest, which states that a party must have a stake in the property to insure it. In this case, only until payment is received does the seller retain a financial interest in the goods, meaning they are responsible for protecting those goods through insurance until they are compensated. Once payment is made, any potential loss would impact the buyer, shifting the associated risk. The other choices do not accurately reflect the point at which the seller’s insurable interest would realistically end. For instance, delivery of goods could happen after payment is made, and therefore it would not be the definitive moment for the seller's interest to cease. Similarly, shipping or confirmation of payment do not indicate a change in ownership or risk until payment is confirmed, which is why those options do not represent the correct answer.