CAIB 1 Practice Questions With 100% Correct Answers (Pass!)

CAIB 1 Practice Questions With 100% Correct Answers (Pass!) 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 w ho 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 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 ther e 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? 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 waive r 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 A person has a few options when dealing with financi al risk: avoidance, retention, control, and transfer. Which is usually the best option for most people? a. Avoidance b. Retention