CAIB 1 Practice Questions (100) With Correct Answers.

CAIB 1 Practice Questions (100) With
Correct Answers

Consideration is... n n


a. The law of insurance
n n n n n


b. A promise between parties
n n n n n


c. A contract's binding force
n n n n n


d. An exchange of something of value - ANS-d. An exchange of something of value
n n n n n n n n n n n n n n




A stock company is...
n n n n


a. A company that invests in other companies
n n n n n n n n




b. A company owned by stockholders who provide the capital to start and run the
n n n n n n n n n n n n n n


company
n n




c. Is owned by customers of the company
n n n n n n n n




d. A company that owns livestock - ANS-b. A company owned by stockholders who
n n n n n n n n n n n n n


provide the capital to start and run the company
n n n n n n n n n




The difference between pure and speculative risk is...
n n n n n n n n


a. Speculative risk is insurable but pure risk is not
n n n n n n n n n n




b. Speculative risk means that there is a chance to gain or lose whereas one can only
n n n n n n n n n n n n n n n n


lose with pure risk
n n n n n




c. Speculative risk means that there is only the chance to lose whereas pure risk means
n n n n n n n n n n n n n n n


you have a chance to win too
n n n n n n n n




d. Speculative risk is a term invented by marine insurance companies in 1864 - ANS-b.
n n n n n n n n n n n n n n


Speculative risk means that there is a chance to gain or lose whereas one can only
n n n n n n n n n n n n n n n n


lose with pure risk
n n n n




A legally enforceable agreement between 2 or more parties is defined as...
n n n n n n n n n n n n


a. A contract
n n n


b. An agreement
n n n


c. A will
n n n


d. A contract of consideration - ANS-a. A contract
n n n n n n n n




What are the 4 methods of dealing with risk? - ANS-Avoidance,
n n n n n n n n n n n

, control, n


retention, n


transfer

A reduction in value is called a...
n n n n n n n


a. Loss
n n


b. Unlucky situation
n n n


c. Claim
n n


d. Transfer - ANS-a. Loss
n n n n




What elements must be present to constitute a legal contract?
n n n n n n n n n n


a. Parties to the contract, the contract itself, consideration
n n n n n n n n n




b. Parties to the contract, a written document, consideration, and legal purpose
n n n n n n n n n n n n




c. Agreement, consideration, legality of object, legal capacity, genuine intention
n n n n n n n n n n




d. Competent parties, consideration, warranty, and legal purpose - ANS-c. Agreement,
n n n n n n n n n n


consideration, legality of object, legal capacity, genuine intention
n n n n n n n n




The act of intentionally giving up some right or privilege is...
n n n n n n n n n n n


a. A representation
n n n


b. A transfer
n n


c. A waiver
n n n


d. Subrogation - ANS-c. A waiver
n n n n n




Insurance purchased by an insurance company is called
n n n n n n n n


a. Reinsurance
n n


b. Risk avoidance insurance
n n n n


c. Full protection
n n n


d. Umbrella insurance - ANS-a. Reinsurance
n n n n n




The main purpose of an insurance contract is to...
n n n n n n n n n


a. Allow the spread of risk
n n n n n n


b. Allow insured's to take more risk
n n n n n n n


c. Protect you from loss
n n n n n


d. Manage income risk - ANS-a. Allow the spread of risk
n n n n n n n n n n




A person has a few options when dealing with financial risk: avoidance, retention,
n n n n n n n n n n n n


control, and transfer. Which is usually the best option for most people?
n n n n n n n n n n n n n


a. Avoidance
n n


b. Retention
n n


c. Transfer
n n


d. Control - ANS-c. Transfer
n n n n