CAIB 1 definitions
Risk(1)—ANSWER--Chance of financial loss to which an object of insurance is exposed
Speculative Risk(1)—ANSWER--Involves the possibility of either financial loss or gain
Pure Risk(1)—ANSWER--The chance of financial loss but no chance of financial gain
Insurance(1)—ANSWER--The undertaking by one person to indemnify another person
against loss
To pay a sum of money or other thing of value upon the happening of a certain event
Contract(1)—ANSWER--An agreement between two or more persons which creates an
obligation to do or not to do a particular thing
Consideration(1)—ANSWER--An exchange of something of value between the parties
Insurable Interest(1)—ANSWER--When a party is able to show that they would suffer
financially by a loss
Insurance Binder(1)—ANSWER--A temporary agreement in which the insurer agrees to
provide certain coverages pending the issuance of the policy
Utmost Good Faith(1)—ANSWER--The law requires insurance contracts maintain a
higher standard of honesty that is needed of other contracts
, (This applies to the insured the insured and the broker)
Indemnity(1)—ANSWER--Application of the principle of indemnity ensures people
receive the actual amount of their loss, no more and no less
Agency Agreement(1)—ANSWER--A written agreement or contract between the insurer
and the Brokerage which acknowledges their relationship
(Provides the Brokerage with the authority to bind the insurer for certain classes of risk
and limits)
Void Contract(1)—ANSWER--One which is unable in law to support the purpose for
which it was intended. Such contracts are deemed never to have existed.
Voidable Contract(1)—ANSWER--A contract that may be voided at the option of the
wronged party only and not the wrongdoer
peril(1)—ANSWER--The cause of the loss
Direct Loss(1)—ANSWER--The object of insurance is actually attacked by an insured
peril
Indirect Loss(1)—ANSWER--Losses which arise as a consequence of direct losses
Actual Cash Value (ACV)(1)—ANSWER--New or replacement cost of the property at the
time of the loss less depreciation
RC-D=ACV
Replacement Cost(1)—ANSWER--The cost to repair or replace the lost or damaged
property with new property of like kind and quality, without deduction for depreciation
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law, Copyrighted By Brittie Donald
Risk(1)—ANSWER--Chance of financial loss to which an object of insurance is exposed
Speculative Risk(1)—ANSWER--Involves the possibility of either financial loss or gain
Pure Risk(1)—ANSWER--The chance of financial loss but no chance of financial gain
Insurance(1)—ANSWER--The undertaking by one person to indemnify another person
against loss
To pay a sum of money or other thing of value upon the happening of a certain event
Contract(1)—ANSWER--An agreement between two or more persons which creates an
obligation to do or not to do a particular thing
Consideration(1)—ANSWER--An exchange of something of value between the parties
Insurable Interest(1)—ANSWER--When a party is able to show that they would suffer
financially by a loss
Insurance Binder(1)—ANSWER--A temporary agreement in which the insurer agrees to
provide certain coverages pending the issuance of the policy
Utmost Good Faith(1)—ANSWER--The law requires insurance contracts maintain a
higher standard of honesty that is needed of other contracts
, (This applies to the insured the insured and the broker)
Indemnity(1)—ANSWER--Application of the principle of indemnity ensures people
receive the actual amount of their loss, no more and no less
Agency Agreement(1)—ANSWER--A written agreement or contract between the insurer
and the Brokerage which acknowledges their relationship
(Provides the Brokerage with the authority to bind the insurer for certain classes of risk
and limits)
Void Contract(1)—ANSWER--One which is unable in law to support the purpose for
which it was intended. Such contracts are deemed never to have existed.
Voidable Contract(1)—ANSWER--A contract that may be voided at the option of the
wronged party only and not the wrongdoer
peril(1)—ANSWER--The cause of the loss
Direct Loss(1)—ANSWER--The object of insurance is actually attacked by an insured
peril
Indirect Loss(1)—ANSWER--Losses which arise as a consequence of direct losses
Actual Cash Value (ACV)(1)—ANSWER--New or replacement cost of the property at the
time of the loss less depreciation
RC-D=ACV
Replacement Cost(1)—ANSWER--The cost to repair or replace the lost or damaged
property with new property of like kind and quality, without deduction for depreciation
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law, Copyrighted By Brittie Donald
