CAIB 1 PRACTICE EXAM 2025
QUESTIONS AND ANSWERS
Consideration is...
a. The law of insurance
b. A promise between parties
c. A contract's binding force
d. An exchange of something of value - ANS d. An exchange of something of value
A stock company is...
a. A company that invests in other companies
b. A company owned by stockholders who provide the capital to start and run the company
c. Is owned by customers of the company
d. A company that owns livestock - ANS b. A company owned by stockholders who provide
the capital to start and run the company
The difference between pure and speculative risk is...
a. Speculative risk is insurable but pure risk is not
Copyright ©2025 BRIGHTSTARS ALL RIGHTS RESERVED 1
,b. Speculative risk means that there is a chance to gain or lose whereas one can only lose with
pure risk
c. Speculative risk means that there is only the chance to lose whereas pure risk means you
have a chance to win too
d. Speculative risk is a term invented by marine insurance companies in 1864 - ANS b.
Speculative risk means that there is a chance to gain or lose whereas one can only lose with
pure risk
A legally enforceable agreement between 2 or more parties is defined as...
a. A contract
b. An agreement
c. A will
d. A contract of consideration - ANS a. A contract
What are the 4 methods of dealing with risk? - ANS Avoidance,
control,
retention,
transfer
A reduction in value is called a...
a. Loss
b. Unlucky situation
c. Claim
d. Transfer - ANS a. Loss
What elements must be present to constitute a legal contract?
Copyright ©2025 BRIGHTSTARS ALL RIGHTS RESERVED 2
, a. Parties to the contract, the contract itself, consideration
b. Parties to the contract, a written document, consideration, and legal purpose
c. Agreement, consideration, legality of object, legal capacity, genuine intention
d. Competent parties, consideration, warranty, and legal purpose - ANS c. Agreement,
consideration, legality of object, legal capacity, genuine intention
The act of intentionally giving up some right or privilege is...
a. A representation
b. A transfer
c. A waiver
d. Subrogation - ANS c. A waiver
Insurance purchased by an insurance company is called
a. Reinsurance
b. Risk avoidance insurance
c. Full protection
d. Umbrella insurance - ANS a. Reinsurance
The main purpose of an insurance contract is to...
a. Allow the spread of risk
b. Allow insured's to take more risk
c. Protect you from loss
d. Manage income risk - ANS a. Allow the spread of risk
Copyright ©2025 BRIGHTSTARS ALL RIGHTS RESERVED 3
QUESTIONS AND ANSWERS
Consideration is...
a. The law of insurance
b. A promise between parties
c. A contract's binding force
d. An exchange of something of value - ANS d. An exchange of something of value
A stock company is...
a. A company that invests in other companies
b. A company owned by stockholders who provide the capital to start and run the company
c. Is owned by customers of the company
d. A company that owns livestock - ANS b. A company owned by stockholders who provide
the capital to start and run the company
The difference between pure and speculative risk is...
a. Speculative risk is insurable but pure risk is not
Copyright ©2025 BRIGHTSTARS ALL RIGHTS RESERVED 1
,b. Speculative risk means that there is a chance to gain or lose whereas one can only lose with
pure risk
c. Speculative risk means that there is only the chance to lose whereas pure risk means you
have a chance to win too
d. Speculative risk is a term invented by marine insurance companies in 1864 - ANS b.
Speculative risk means that there is a chance to gain or lose whereas one can only lose with
pure risk
A legally enforceable agreement between 2 or more parties is defined as...
a. A contract
b. An agreement
c. A will
d. A contract of consideration - ANS a. A contract
What are the 4 methods of dealing with risk? - ANS Avoidance,
control,
retention,
transfer
A reduction in value is called a...
a. Loss
b. Unlucky situation
c. Claim
d. Transfer - ANS a. Loss
What elements must be present to constitute a legal contract?
Copyright ©2025 BRIGHTSTARS ALL RIGHTS RESERVED 2
, a. Parties to the contract, the contract itself, consideration
b. Parties to the contract, a written document, consideration, and legal purpose
c. Agreement, consideration, legality of object, legal capacity, genuine intention
d. Competent parties, consideration, warranty, and legal purpose - ANS c. Agreement,
consideration, legality of object, legal capacity, genuine intention
The act of intentionally giving up some right or privilege is...
a. A representation
b. A transfer
c. A waiver
d. Subrogation - ANS c. A waiver
Insurance purchased by an insurance company is called
a. Reinsurance
b. Risk avoidance insurance
c. Full protection
d. Umbrella insurance - ANS a. Reinsurance
The main purpose of an insurance contract is to...
a. Allow the spread of risk
b. Allow insured's to take more risk
c. Protect you from loss
d. Manage income risk - ANS a. Allow the spread of risk
Copyright ©2025 BRIGHTSTARS ALL RIGHTS RESERVED 3
