Canadian Accredited Insurance Broker (CAIB) Three Practice Exam

Which vehicles fall under the classification of non-owned automobiles?

1. Vehicles owned by the insurer

2. Vehicles owned by employees, hired automobiles, or vehicles operated under contract

3. Vehicles owned by the insured only

4. Vehicles used in personal capacity

The correct answer is: Vehicles owned by employees, hired automobiles, or vehicles operated under contract

Non-owned automobiles are defined as vehicles that are not owned by the insured but are still utilized in certain contexts. The correct answer points to vehicles owned by employees, hired automobiles, or those operated under contract, which fits this definition perfectly. This classification is important in insurance because it helps identify which vehicles would be covered under a policy's liability and other provisions when they are driven by the insured or their employees. Understanding non-owned automobiles is crucial in terms of liability insurance. For instance, if an employee uses their personal vehicle for work-related purposes, the insurance coverage would generally extend to that vehicle since it falls under non-owned vehicles. Similarly, rented or leased vehicles also typically qualify as non-owned automobiles, ensuring that the policyholder is protected against claims that may arise while using these vehicles. The other options do not accurately represent the classification of non-owned automobiles. Vehicles owned by the insurer and vehicles owned by the insured are specifically owned vehicles, thus not considered non-owned. Vehicles used in a personal capacity do not fall under the definition either unless specific circumstances apply, such as using a personal vehicle for business purposes, which would still refer to the vehicle as non-owned in the context of the insured's primary vehicle.