CAIB
CAIB 1 PRACTICE EXAM 100% WITH
SOLVED 2025
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 -Correct Answer ✔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 -Correct Answer ✔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
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 -Correct
Answer ✔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 -Correct Answer ✔a. A contract
What are the 4 methods of dealing with risk? -Correct Answer ✔Avoidance,
control,
retention,
transfer
CAIB
, CAIB
A reduction in value is called a...
a. Loss
b. Unlucky situation
c. Claim
d. Transfer -Correct Answer ✔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 -Correct Answer ✔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 -Correct Answer ✔c. A waiver
Insurance purchased by an insurance company is called
a. Reinsurance
b. Risk avoidance insurance
c. Full protection
d. Umbrella insurance -Correct Answer ✔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 -Correct Answer ✔a. Allow the spread of risk
A person has a few options when dealing with financial risk: avoidance, retention,
control, and transfer. Which is usually the best option for most people?
a. Avoidance
b. Retention
c. Transfer
d. Control -Correct Answer ✔c. Transfer
Legal capacity of parties is an important part of a contract. Who below has the legal
capacity to enter into an insurance contract?
a. ABC Bakery
b. Black's Hardware
CAIB
CAIB 1 PRACTICE EXAM 100% WITH
SOLVED 2025
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 -Correct Answer ✔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 -Correct Answer ✔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
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 -Correct
Answer ✔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 -Correct Answer ✔a. A contract
What are the 4 methods of dealing with risk? -Correct Answer ✔Avoidance,
control,
retention,
transfer
CAIB
, CAIB
A reduction in value is called a...
a. Loss
b. Unlucky situation
c. Claim
d. Transfer -Correct Answer ✔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 -Correct Answer ✔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 -Correct Answer ✔c. A waiver
Insurance purchased by an insurance company is called
a. Reinsurance
b. Risk avoidance insurance
c. Full protection
d. Umbrella insurance -Correct Answer ✔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 -Correct Answer ✔a. Allow the spread of risk
A person has a few options when dealing with financial risk: avoidance, retention,
control, and transfer. Which is usually the best option for most people?
a. Avoidance
b. Retention
c. Transfer
d. Control -Correct Answer ✔c. Transfer
Legal capacity of parties is an important part of a contract. Who below has the legal
capacity to enter into an insurance contract?
a. ABC Bakery
b. Black's Hardware
CAIB
