CAIB 1 Exam Questions and Verified Answers Graded A+ 2026/27
-Risk - the chance of financial loss to which an object of insurance is exposed
Speculative Risk - Involves the possibility of either financial loss or gain
Pure Risk - involves the chance of financial loss does not, at the same time, offer a chance
of financial gain
Insurance - 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 - an agreement between two or more people which creates an obligation to do or
not to do something
Consideration - an exchange of something of value between the parties
Insurable Interest - when they are able to show that they would suffer financially by a loss
Utmost Good Faith - sellers are to tell the truth about their products and that buyers
exercise care in their selection
,Insurance Binder - contracts of insurance; the broker has committed the insurer to provide
a contract of insurance on the subject matter under discussion
Void Contract - one which is unable in law to support the purpose for which it was
intended
Voidable Contract - one which is void as to the wrongdoer but not void as to the wronged
party, unless he elects to so treat it
Peril - the cause of a loss
Direct Loss - when the object of insurance is actually attacked by an insured peril
Indirect Loss - loss which arise as a consequence of direct loss
Actual Cash Value - the new or replacement cost of the property at the time of the loss,
less depreciation
Replacement Cost - 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 - 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 - policies that allow insured's to select a single limit of insurance for all
property falling within a specific class
Scheduled Coverage - when property is itemized on a policy
Fiduciary - one who occupies a position of special trust in the handling or supervising of
the affairs or funds of another
Unearned Premiums - 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 - involves the presence of a visible flame or glow
Friendly Fire - one that is contained in its proper receptacle
Hostile Fire - once a fire passes out the limits assigned to it
Proximate Result - Damage which arises from a natural or continuous sequence of the
peril causing the loss
Material Change - 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 - when the policy is terminated by the insurer, the amount of the refund will be
calculated using this
Short Rate - when the insured terminates the policy, the amount of the refund is calculated
using this
Notice of Loss - must be given forthwith and immediately as well as in writing
Proof of Loss - states what was lost and how
Fraud - a deliberate attempt to deceive, with the goal of financial gain
Deductible - Amount you must pay before you begin receiving any benefits from your
insurance company
Subrogation - 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 - Insurer formed for the purpose of earning a profit for its owners
-Risk - the chance of financial loss to which an object of insurance is exposed
Speculative Risk - Involves the possibility of either financial loss or gain
Pure Risk - involves the chance of financial loss does not, at the same time, offer a chance
of financial gain
Insurance - 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 - an agreement between two or more people which creates an obligation to do or
not to do something
Consideration - an exchange of something of value between the parties
Insurable Interest - when they are able to show that they would suffer financially by a loss
Utmost Good Faith - sellers are to tell the truth about their products and that buyers
exercise care in their selection
,Insurance Binder - contracts of insurance; the broker has committed the insurer to provide
a contract of insurance on the subject matter under discussion
Void Contract - one which is unable in law to support the purpose for which it was
intended
Voidable Contract - one which is void as to the wrongdoer but not void as to the wronged
party, unless he elects to so treat it
Peril - the cause of a loss
Direct Loss - when the object of insurance is actually attacked by an insured peril
Indirect Loss - loss which arise as a consequence of direct loss
Actual Cash Value - the new or replacement cost of the property at the time of the loss,
less depreciation
Replacement Cost - 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 - 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 - policies that allow insured's to select a single limit of insurance for all
property falling within a specific class
Scheduled Coverage - when property is itemized on a policy
Fiduciary - one who occupies a position of special trust in the handling or supervising of
the affairs or funds of another
Unearned Premiums - 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 - involves the presence of a visible flame or glow
Friendly Fire - one that is contained in its proper receptacle
Hostile Fire - once a fire passes out the limits assigned to it
Proximate Result - Damage which arises from a natural or continuous sequence of the
peril causing the loss
Material Change - 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 - when the policy is terminated by the insurer, the amount of the refund will be
calculated using this
Short Rate - when the insured terminates the policy, the amount of the refund is calculated
using this
Notice of Loss - must be given forthwith and immediately as well as in writing
Proof of Loss - states what was lost and how
Fraud - a deliberate attempt to deceive, with the goal of financial gain
Deductible - Amount you must pay before you begin receiving any benefits from your
insurance company
Subrogation - 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 - Insurer formed for the purpose of earning a profit for its owners
