Canadian Accredited Insurance Broker (CAIB) One Practice Exam

How is stock defined in the context of commercial insurance?

1. Only finished goods

2. Raw materials and finished goods together

3. Merchandise usual to the business

4. Goods held for resale only

The correct answer is: Merchandise usual to the business

In the context of commercial insurance, stock is defined as "merchandise usual to the business." This definition encompasses a broader view of what stock represents within a business environment. It includes not just finished goods that are ready for sale but also other types of inventory that are important to the operation of the business. This definition recognizes that businesses may deal with various forms of merchandise, including raw materials, components that are part of the manufacturing process, and finished goods. By considering stock as merchandise usual to the business, the definition effectively reflects the diversity of inventory that businesses may hold and utilize in their operations. Some alternative definitions are narrower: for instance, focusing solely on finished goods or just goods held for resale fails to capture the complete picture of what stock can signify in different types of industries. Thus, defining stock as merchandise usual to the business ensures that all relevant inventory is acknowledged in commercial insurance policies.