CAIB 1 Exam • Complete Study Guide & Practice Questions • 2026/2027
CAIB 1 Exam 2026/2027
Complete Study Guide & Practice Questions
Section 1: Brief Introduction
CAIB 1 is the first of four national courses in the Canadian Accredited Insurance Broker
program, administered by the Insurance Brokers Association of Canada through its
provincial member associations. It covers general insurance principles, habitational and
personal liability coverages, farm insurance, personal automobile insurance, travel and
accident and sickness insurance, and broker professionalism, and in most provinces a pass
qualifies a candidate for a Level 1 general insurance licence. These 100 practice questions
apply that curriculum to knowledge recall, scenario-based application, and legal and
regulatory compliance.
Note on exam format and jurisdiction. The actual CAIB 1 examination is not entirely
multiple choice: it combines key term definitions, a small number of multiple-choice
questions, and short-answer questions, with 3.5 hours allowed and a passing grade of 60
percent. The multiple-choice format used throughout this guide is a study device for rapid
self-testing and does not replicate the written portions, so candidates should also practise
writing full definitions and short answers. Because insurance is regulated provincially,
statutory conditions, automobile systems, accident benefits, licensing, and notice periods
vary by jurisdiction; always confirm the rules that apply where you are licensed.
1 | CAIB 1 Exam 2026/2027 — study aid only
, CAIB 1 Exam • Complete Study Guide & Practice Questions • 2026/2027
Section 2: Complete Study Guide & Exam
1. Insurance is best defined as:
A. A guarantee that a loss will never occur
B. A savings plan that returns all premiums with interest
C. A government benefit available to all residents
D. A contract transferring the financial consequences of a fortuitous loss from an
individual to an insurer in exchange for a premium
Rationale: Insurance transfers the financial consequences of risk, it does not prevent the loss
itself. It is a contract requiring consideration in the form of premium, which distinguishes it
from a social benefit or a savings vehicle.
2. Which of the following is a pure risk?
A. The possibility that a stock investment will gain or lose value
B. The possibility that a new product will outsell competitors
C. The possibility that a house will be destroyed by fire
D. The possibility that a lottery ticket will win
Rationale: Pure risk involves only the chance of loss or no loss and is the only category
insurers will normally accept. Speculative risk carries a chance of gain as well as loss and is
therefore uninsurable.
3. A peril is best described as:
A. A condition that increases the chance of loss
B. The cause of a loss, such as fire, theft, or windstorm
C. The financial consequence of a loss
D. The maximum amount an insurer will pay
Rationale: A peril is the cause of loss while a hazard is a condition that increases the
likelihood or severity of that loss. Confusing the two is a common error, because a hazard such
as storing gasoline indoors is not itself the cause of loss.
4. Storing oily rags in a basement furnace room is an example of a:
A. Moral hazard
B. Morale hazard
C. Physical hazard
D. Peril
Rationale: A physical hazard is a tangible condition of the property that increases the chance
of loss. A moral hazard involves dishonesty and a morale hazard involves carelessness or
indifference.
2 | CAIB 1 Exam 2026/2027 — study aid only
, CAIB 1 Exam • Complete Study Guide & Practice Questions • 2026/2027
5. An insured who deliberately sets fire to their own property to collect insurance
proceeds represents a:
A. Physical hazard
B. Moral hazard
C. Morale hazard
D. Fortuitous loss
Rationale: Moral hazard arises from the dishonesty or criminal intent of the insured. Morale
hazard, by contrast, is carelessness such as leaving a door unlocked because insurance exists.
6. Which risk management technique is applied when a homeowner installs a
monitored alarm system?
A. Risk avoidance
B. Risk transfer
C. Risk reduction
D. Risk retention
Rationale: Reduction lessens the frequency or severity of a loss without eliminating the
exposure. Avoidance would mean not owning the property at all, and transfer would be the
purchase of insurance.
7. A business that chooses not to manufacture a product because of the liability
exposure is using:
A. Risk avoidance
B. Risk retention
C. Risk reduction
D. Risk transfer
Rationale: Avoidance eliminates the exposure entirely by declining the activity. Retention
would mean proceeding while absorbing the loss internally, and reduction would mean
proceeding with safeguards in place.
8. A deductible on a property policy is a form of:
A. Risk avoidance
B. Risk transfer
C. Risk retention
D. Subrogation
Rationale: The insured retains the first portion of every loss, which reduces premium and
discourages small claims. The balance above the deductible is the portion transferred to the
insurer.
3 | CAIB 1 Exam 2026/2027 — study aid only
CAIB 1 Exam 2026/2027
Complete Study Guide & Practice Questions
Section 1: Brief Introduction
CAIB 1 is the first of four national courses in the Canadian Accredited Insurance Broker
program, administered by the Insurance Brokers Association of Canada through its
provincial member associations. It covers general insurance principles, habitational and
personal liability coverages, farm insurance, personal automobile insurance, travel and
accident and sickness insurance, and broker professionalism, and in most provinces a pass
qualifies a candidate for a Level 1 general insurance licence. These 100 practice questions
apply that curriculum to knowledge recall, scenario-based application, and legal and
regulatory compliance.
Note on exam format and jurisdiction. The actual CAIB 1 examination is not entirely
multiple choice: it combines key term definitions, a small number of multiple-choice
questions, and short-answer questions, with 3.5 hours allowed and a passing grade of 60
percent. The multiple-choice format used throughout this guide is a study device for rapid
self-testing and does not replicate the written portions, so candidates should also practise
writing full definitions and short answers. Because insurance is regulated provincially,
statutory conditions, automobile systems, accident benefits, licensing, and notice periods
vary by jurisdiction; always confirm the rules that apply where you are licensed.
1 | CAIB 1 Exam 2026/2027 — study aid only
, CAIB 1 Exam • Complete Study Guide & Practice Questions • 2026/2027
Section 2: Complete Study Guide & Exam
1. Insurance is best defined as:
A. A guarantee that a loss will never occur
B. A savings plan that returns all premiums with interest
C. A government benefit available to all residents
D. A contract transferring the financial consequences of a fortuitous loss from an
individual to an insurer in exchange for a premium
Rationale: Insurance transfers the financial consequences of risk, it does not prevent the loss
itself. It is a contract requiring consideration in the form of premium, which distinguishes it
from a social benefit or a savings vehicle.
2. Which of the following is a pure risk?
A. The possibility that a stock investment will gain or lose value
B. The possibility that a new product will outsell competitors
C. The possibility that a house will be destroyed by fire
D. The possibility that a lottery ticket will win
Rationale: Pure risk involves only the chance of loss or no loss and is the only category
insurers will normally accept. Speculative risk carries a chance of gain as well as loss and is
therefore uninsurable.
3. A peril is best described as:
A. A condition that increases the chance of loss
B. The cause of a loss, such as fire, theft, or windstorm
C. The financial consequence of a loss
D. The maximum amount an insurer will pay
Rationale: A peril is the cause of loss while a hazard is a condition that increases the
likelihood or severity of that loss. Confusing the two is a common error, because a hazard such
as storing gasoline indoors is not itself the cause of loss.
4. Storing oily rags in a basement furnace room is an example of a:
A. Moral hazard
B. Morale hazard
C. Physical hazard
D. Peril
Rationale: A physical hazard is a tangible condition of the property that increases the chance
of loss. A moral hazard involves dishonesty and a morale hazard involves carelessness or
indifference.
2 | CAIB 1 Exam 2026/2027 — study aid only
, CAIB 1 Exam • Complete Study Guide & Practice Questions • 2026/2027
5. An insured who deliberately sets fire to their own property to collect insurance
proceeds represents a:
A. Physical hazard
B. Moral hazard
C. Morale hazard
D. Fortuitous loss
Rationale: Moral hazard arises from the dishonesty or criminal intent of the insured. Morale
hazard, by contrast, is carelessness such as leaving a door unlocked because insurance exists.
6. Which risk management technique is applied when a homeowner installs a
monitored alarm system?
A. Risk avoidance
B. Risk transfer
C. Risk reduction
D. Risk retention
Rationale: Reduction lessens the frequency or severity of a loss without eliminating the
exposure. Avoidance would mean not owning the property at all, and transfer would be the
purchase of insurance.
7. A business that chooses not to manufacture a product because of the liability
exposure is using:
A. Risk avoidance
B. Risk retention
C. Risk reduction
D. Risk transfer
Rationale: Avoidance eliminates the exposure entirely by declining the activity. Retention
would mean proceeding while absorbing the loss internally, and reduction would mean
proceeding with safeguards in place.
8. A deductible on a property policy is a form of:
A. Risk avoidance
B. Risk transfer
C. Risk retention
D. Subrogation
Rationale: The insured retains the first portion of every loss, which reduces premium and
discourages small claims. The balance above the deductible is the portion transferred to the
insurer.
3 | CAIB 1 Exam 2026/2027 — study aid only
