CAIB 1 Question and Answer [2026] |
UPDATED ACTUAL Exam | A+ Verified
• Risk . CORRECT ANSWER: Chance of financial loss to which an object of
insurance is exposed.
• Speculative Risk . CORRECT ANSWER: The chance of a financial loss or gain.
• Pure Risk . CORRECT ANSWER: The chance of financial loss but no chance of
financial gain.
• Insurance . CORRECT ANSWER: The undertaking by one person to indemnify
another person against loss or liability for loss in respect of a certain risk or peril to
which the object of the 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 persons
which creates an obligation to do or not to do a particular thing.
• Consideration . CORRECT ANSWER: An exchange of something of value
between parties.
• Insurable Interest . CORRECT ANSWER: One has an insurable interest in the
subject matter of the insurance when they will suffer financially by a loss.
• Utmost Good Faith . CORRECT ANSWER: The law requires insurance
contracts maintain a higher standard of honesty than is needed of other contracts.
(The duty of utmost good faith applies to the insured, the insurer and the broker.)
, • Indemnity . CORRECT ANSWER: Application of the principle of indemnity
ensures people receive the actual amount of their loss, no more and no less.
• Insurance Binder . CORRECT ANSWER: A temporary agreement in which the
insurer agrees to provide certain coverages pending the issuance of the policy.
• Agency Agreement . CORRECT ANSWER: A written agreement or contract
between the insurer and the brokerage which acknowledges their relationship.
• Void Contract . CORRECT 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 . CORRECT ANSWER: A contract that may be voided at the
option of the wronged party only and not the wrongdoer.
• Peril . CORRECT ANSWER: The cause of loss
• Direct Loss . CORRECT ANSWER: A direct loss occurs when the peril insured
actually attacks the object of insurance.
• Indirect Loss . CORRECT ANSWER: Losses which arise as a consequence of a
direct loss.
• Actual Cash Value . CORRECT ANSWER: New or replacement cost of the
property at the time of the loss, less depreciation.
UPDATED ACTUAL Exam | A+ Verified
• Risk . CORRECT ANSWER: Chance of financial loss to which an object of
insurance is exposed.
• Speculative Risk . CORRECT ANSWER: The chance of a financial loss or gain.
• Pure Risk . CORRECT ANSWER: The chance of financial loss but no chance of
financial gain.
• Insurance . CORRECT ANSWER: The undertaking by one person to indemnify
another person against loss or liability for loss in respect of a certain risk or peril to
which the object of the 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 persons
which creates an obligation to do or not to do a particular thing.
• Consideration . CORRECT ANSWER: An exchange of something of value
between parties.
• Insurable Interest . CORRECT ANSWER: One has an insurable interest in the
subject matter of the insurance when they will suffer financially by a loss.
• Utmost Good Faith . CORRECT ANSWER: The law requires insurance
contracts maintain a higher standard of honesty than is needed of other contracts.
(The duty of utmost good faith applies to the insured, the insurer and the broker.)
, • Indemnity . CORRECT ANSWER: Application of the principle of indemnity
ensures people receive the actual amount of their loss, no more and no less.
• Insurance Binder . CORRECT ANSWER: A temporary agreement in which the
insurer agrees to provide certain coverages pending the issuance of the policy.
• Agency Agreement . CORRECT ANSWER: A written agreement or contract
between the insurer and the brokerage which acknowledges their relationship.
• Void Contract . CORRECT 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 . CORRECT ANSWER: A contract that may be voided at the
option of the wronged party only and not the wrongdoer.
• Peril . CORRECT ANSWER: The cause of loss
• Direct Loss . CORRECT ANSWER: A direct loss occurs when the peril insured
actually attacks the object of insurance.
• Indirect Loss . CORRECT ANSWER: Losses which arise as a consequence of a
direct loss.
• Actual Cash Value . CORRECT ANSWER: New or replacement cost of the
property at the time of the loss, less depreciation.
