CAIB 1 Question and Answer [2026] | UPDATED
ACTUAL Exam | Step-by-Step Review
• Risk . CORRECT ANSWER: the chance of financial loss to which an object of
insurance is exposed
• Speculative Risk . CORRECT ANSWER: Involves the possibility of either
financial loss or gain
• Pure Risk . CORRECT ANSWER: involves the chance of financial loss does
not, at the same time, offer a chance of financial gain
• Insurance . CORRECT ANSWER: the undertaking by one person to indemnify
another persons against loss or liability for loss in respect of a certain risk or peril
to which the object of insurance may be exposed... or to pay a sum of money or
other thing of value upon the happening of a certain event
• Contract . CORRECT ANSWER: an agreement between two or more people
which creates an obligation to do or not to do something
• Consideration . CORRECT ANSWER: an exchange of something of value
between the parties
• Insurable Interest . CORRECT ANSWER: when they are able to show that they
would suffer financially by a loss
• Utmost Good Faith . CORRECT ANSWER: sellers are to tell the truth about
their products and that buyers exercise care in their selection
,• Insurance Binder . CORRECT ANSWER: contracts of insurance; the broker has
committed the insurer to provide a contract of insurance on the subject matter
under discussion
• Void Contract . CORRECT ANSWER: one which is unable in law to support the
purpose for which it was intended
• Voidable Contract . CORRECT ANSWER: one which is void as to the
wrongdoer but not void as to the wronged party, unless he elects to so treat it
• Peril . CORRECT ANSWER: the cause of a loss
• Direct Loss . CORRECT ANSWER: when the object of insurance is actually
attacked by an insured peril
• Indirect Loss . CORRECT ANSWER: loss which arise as a consequence of
direct loss
• Actual Cash Value . CORRECT ANSWER: the new or replacement cost of the
property at the time of the loss, less depreciation
• Replacement Cost . CORRECT ANSWER: how much it would cost to replace or
repair any lost or damaged property of LIKE kind and quality, without deduction
for depreciation
• Valued Policy . CORRECT ANSWER: Insurance for property such as old
jewellery, antiques, memorabilia, and original works of art, will generally be
unable to replace them in the event of a loss
,• Blanket Coverage . CORRECT ANSWER: policies that allow insured's to select
a single limit of insurance for all property falling within a specific class
• Scheduled Coverage . CORRECT ANSWER: when property is itemized on a
policy
• Fiduciary . CORRECT ANSWER: one who occupies a position of special trust
in the handling or supervising of the affairs or funds of another
• Unearned Premiums . CORRECT ANSWER: are deemed to be held in trust in
order to refund the insured's in event the policy is cancelled prior to the expiry date
• Fire . CORRECT ANSWER: involves the presence of a visible flame or glow
• Friendly Fire . CORRECT ANSWER: one that is contained in its proper
receptacle
• Hostile Fire . CORRECT ANSWER: once a fire passes out the limits assigned to
it
• Proximate Result . CORRECT ANSWER: Damage which arises from a natural
or continuous sequence of the peril causing the loss
• Material Change . CORRECT ANSWER: any change within control and
knowledge of the insured which; arises after the policy has been issued, and serves
to increase the chance of loss
• Pro Rata . CORRECT ANSWER: when the policy is terminated by the insurer,
the amount of the refund will be calculated using this
, • Short Rate . CORRECT ANSWER: when the insured terminates the policy, the
amount of the refund is calculated using this
• Notice of Loss . CORRECT ANSWER: must be given forthwith and
immediately as well as in writing
• Proof of Loss . CORRECT ANSWER: states what was lost and how
• Fraud . CORRECT ANSWER: a deliberate attempt to deceive, with the goal of
financial gain
• Deductible . CORRECT ANSWER: Amount you must pay before you begin
receiving any benefits from your insurance company
• Subrogation . CORRECT ANSWER: when insurers put themselves into the
insured's shoes in respect of their right to recover the amount of their loss from the
responsible party
• Proprietary Insurer . CORRECT ANSWER: Insurer formed for the purpose of
earning a profit for its owners
• Non-Proprietary Insurer . CORRECT ANSWER: organize for the reasons other
than profit, is owned and controlled by their policy holders who have banded
together to secure insurance at as low cost as possible, with no stock or share
capital involved
• Personal Property . CORRECT ANSWER: contents of the insured's dwelling
and other property owned, worn or used by the insured while on the premises
ACTUAL Exam | Step-by-Step Review
• Risk . CORRECT ANSWER: the chance of financial loss to which an object of
insurance is exposed
• Speculative Risk . CORRECT ANSWER: Involves the possibility of either
financial loss or gain
• Pure Risk . CORRECT ANSWER: involves the chance of financial loss does
not, at the same time, offer a chance of financial gain
• Insurance . CORRECT ANSWER: the undertaking by one person to indemnify
another persons against loss or liability for loss in respect of a certain risk or peril
to which the object of insurance may be exposed... or to pay a sum of money or
other thing of value upon the happening of a certain event
• Contract . CORRECT ANSWER: an agreement between two or more people
which creates an obligation to do or not to do something
• Consideration . CORRECT ANSWER: an exchange of something of value
between the parties
• Insurable Interest . CORRECT ANSWER: when they are able to show that they
would suffer financially by a loss
• Utmost Good Faith . CORRECT ANSWER: sellers are to tell the truth about
their products and that buyers exercise care in their selection
,• Insurance Binder . CORRECT ANSWER: contracts of insurance; the broker has
committed the insurer to provide a contract of insurance on the subject matter
under discussion
• Void Contract . CORRECT ANSWER: one which is unable in law to support the
purpose for which it was intended
• Voidable Contract . CORRECT ANSWER: one which is void as to the
wrongdoer but not void as to the wronged party, unless he elects to so treat it
• Peril . CORRECT ANSWER: the cause of a loss
• Direct Loss . CORRECT ANSWER: when the object of insurance is actually
attacked by an insured peril
• Indirect Loss . CORRECT ANSWER: loss which arise as a consequence of
direct loss
• Actual Cash Value . CORRECT ANSWER: the new or replacement cost of the
property at the time of the loss, less depreciation
• Replacement Cost . CORRECT ANSWER: how much it would cost to replace or
repair any lost or damaged property of LIKE kind and quality, without deduction
for depreciation
• Valued Policy . CORRECT ANSWER: Insurance for property such as old
jewellery, antiques, memorabilia, and original works of art, will generally be
unable to replace them in the event of a loss
,• Blanket Coverage . CORRECT ANSWER: policies that allow insured's to select
a single limit of insurance for all property falling within a specific class
• Scheduled Coverage . CORRECT ANSWER: when property is itemized on a
policy
• Fiduciary . CORRECT ANSWER: one who occupies a position of special trust
in the handling or supervising of the affairs or funds of another
• Unearned Premiums . CORRECT ANSWER: are deemed to be held in trust in
order to refund the insured's in event the policy is cancelled prior to the expiry date
• Fire . CORRECT ANSWER: involves the presence of a visible flame or glow
• Friendly Fire . CORRECT ANSWER: one that is contained in its proper
receptacle
• Hostile Fire . CORRECT ANSWER: once a fire passes out the limits assigned to
it
• Proximate Result . CORRECT ANSWER: Damage which arises from a natural
or continuous sequence of the peril causing the loss
• Material Change . CORRECT ANSWER: any change within control and
knowledge of the insured which; arises after the policy has been issued, and serves
to increase the chance of loss
• Pro Rata . CORRECT ANSWER: when the policy is terminated by the insurer,
the amount of the refund will be calculated using this
, • Short Rate . CORRECT ANSWER: when the insured terminates the policy, the
amount of the refund is calculated using this
• Notice of Loss . CORRECT ANSWER: must be given forthwith and
immediately as well as in writing
• Proof of Loss . CORRECT ANSWER: states what was lost and how
• Fraud . CORRECT ANSWER: a deliberate attempt to deceive, with the goal of
financial gain
• Deductible . CORRECT ANSWER: Amount you must pay before you begin
receiving any benefits from your insurance company
• Subrogation . CORRECT ANSWER: when insurers put themselves into the
insured's shoes in respect of their right to recover the amount of their loss from the
responsible party
• Proprietary Insurer . CORRECT ANSWER: Insurer formed for the purpose of
earning a profit for its owners
• Non-Proprietary Insurer . CORRECT ANSWER: organize for the reasons other
than profit, is owned and controlled by their policy holders who have banded
together to secure insurance at as low cost as possible, with no stock or share
capital involved
• Personal Property . CORRECT ANSWER: contents of the insured's dwelling
and other property owned, worn or used by the insured while on the premises
