CAIB 1 CHAPTER 1 EXAM WITH
VERIFIED ANSWERS
Define hin hpure hinsurance hterms h"risk." h- hcorrect hanswers h-The hchance hof
hfinancial hloss hto hwhich han hobject hof hinsurance his hexposed.
List hthe hthree hcategories hof hrisk hgenerally hfaced hby hpeople. h- hcorrect
hanswers h-Personal h- hloss hof hhealth/life
Property h- hobjects
Liability h- hnegligent hactions hresult hin hinjury/damage
State h4 hpossible hoptions hpeople hcan hchose hto hdeal hwith hrisk hand hgive ha
hbrief hexplanation hand hexample hof heach. h- hcorrect hanswers h-Avoidance h- hall
hchance hof hfinancial hloss hhas hbeen heliminated
Controlling h- htaking hmeasures hto hreduce hthe hfrequency hand hseverity hof hlosses
Retention h- hkeeping hthe hrisk hdeductibles
Transfer h- hto hothers, hin hexchange hfor hpremium
, Give h2 hexamples hof hloss hcontrol hmeasures hthat hcan hbe htaken hto hreduce hthe
hfrequency hand hseverity hof hlosses h- hcorrect hanswers h-Installing hintrusion
hdetection hequipment, hinstalling hfire hdetection hequipment
State h2 hreasons hwhy hloss hcontrol hmeasures hare hnot ha htotal hsolution hin
heliminating hfinancial hloss h- hcorrect hanswers h-Equipment hwill hnot hwork h100%
hof hthe htime, hcertain htypes hof hlosses hcannot hbe heffectively hcontrolled h(wind,
hlightening)
Which hof hthe hfour hpossible hoptions his hgenerally hnot han heffective hmeans hof
hdealing hwith hrisk? h- hcorrect hanswers h-Avoidance
Which hof hthe hfour hpossible hoptions his hpopular hand hpractical hmeans hof
hdealing hwith hrisk? h- hcorrect hanswers h-Transfer
Explain, husing han hexample hof hspeculative hrisk h- hcorrect hanswers h-Involves
hrisk hof hfinancial hgain hOR hloss. hEx. hGambling hcan hwin hor hlose
Explain, husing han hexample hof hpure hrisk h- hcorrect hanswers h-Involves hchance
hof honly hloss. hEx. hOwning ha hhouse hthe hchance hit hmight hburn.
Which hof hthese htypes hof hrisk hwill hinsurers hnot hprovide han hinsurance hpolicy
hto? h- hcorrect hanswers h-Speculative
A hcontract his han hagreement hbetween h2 hor hmore hpersons hwhich hcreates han
hobligation hto hdo hor hnot hdo ha hparticular hthing. hAll hcontracts hcontain h5
helements. hIdentify hand hexplain hthese hfive helements. h- hcorrect hanswers h-
Agreement h- hMust hbe ha hmeeting hof hminds has hto hthe hsubject hmatter hand
hterms hof hthe hcontract. h
a. hAn hoffer hmade
b. hAn hunequivocal hand hunconditional hacceptance hof hthe hterms hof hthat hoffer
Consideration h- han hexchange hof hsomething hof hvalue hbetween hthe hparties
a. hA hreturn hpromise
b. hAn hact hperformed
c. hAn hagreement hnot hto hact
Legality hof hobject h- hA hcontract hintended hfor ha hpurpose hwhich his hcontrary hto
hpublic hpolicy his hnot henforceable hat hlaw. h
a. hMust hbe hlegal
Legal hCapacity hof hthe hParties hto hContract h- hMust hbe hcompetent.
hIncompetence hincludes:
a. hMinors h(Under h21/19)
b. hMental hIncompetents h- hInsane, hsenile, hor hother hmental hdefects
c. hUnder hthe hinfluence hof halcohol hor hdrugs
d. hTrade hNames
Genuine hIntention h- hIntended hto henter hcontract hcannot hbe haffected hby
a. hFraud h- hdeliberately husing hfalse hsuggestions, hor hcunning hto hcheat hanother
b. hDuress h- hforce hor hillegal himprisonment
c. hConcealment h- hmisrepresent hpast hor hpresent hfacts hor hfail hto hdisclose
hpertinent hfacts
d. hMistake h- hsigned hby hmistake hor herror
VERIFIED ANSWERS
Define hin hpure hinsurance hterms h"risk." h- hcorrect hanswers h-The hchance hof
hfinancial hloss hto hwhich han hobject hof hinsurance his hexposed.
List hthe hthree hcategories hof hrisk hgenerally hfaced hby hpeople. h- hcorrect
hanswers h-Personal h- hloss hof hhealth/life
Property h- hobjects
Liability h- hnegligent hactions hresult hin hinjury/damage
State h4 hpossible hoptions hpeople hcan hchose hto hdeal hwith hrisk hand hgive ha
hbrief hexplanation hand hexample hof heach. h- hcorrect hanswers h-Avoidance h- hall
hchance hof hfinancial hloss hhas hbeen heliminated
Controlling h- htaking hmeasures hto hreduce hthe hfrequency hand hseverity hof hlosses
Retention h- hkeeping hthe hrisk hdeductibles
Transfer h- hto hothers, hin hexchange hfor hpremium
, Give h2 hexamples hof hloss hcontrol hmeasures hthat hcan hbe htaken hto hreduce hthe
hfrequency hand hseverity hof hlosses h- hcorrect hanswers h-Installing hintrusion
hdetection hequipment, hinstalling hfire hdetection hequipment
State h2 hreasons hwhy hloss hcontrol hmeasures hare hnot ha htotal hsolution hin
heliminating hfinancial hloss h- hcorrect hanswers h-Equipment hwill hnot hwork h100%
hof hthe htime, hcertain htypes hof hlosses hcannot hbe heffectively hcontrolled h(wind,
hlightening)
Which hof hthe hfour hpossible hoptions his hgenerally hnot han heffective hmeans hof
hdealing hwith hrisk? h- hcorrect hanswers h-Avoidance
Which hof hthe hfour hpossible hoptions his hpopular hand hpractical hmeans hof
hdealing hwith hrisk? h- hcorrect hanswers h-Transfer
Explain, husing han hexample hof hspeculative hrisk h- hcorrect hanswers h-Involves
hrisk hof hfinancial hgain hOR hloss. hEx. hGambling hcan hwin hor hlose
Explain, husing han hexample hof hpure hrisk h- hcorrect hanswers h-Involves hchance
hof honly hloss. hEx. hOwning ha hhouse hthe hchance hit hmight hburn.
Which hof hthese htypes hof hrisk hwill hinsurers hnot hprovide han hinsurance hpolicy
hto? h- hcorrect hanswers h-Speculative
A hcontract his han hagreement hbetween h2 hor hmore hpersons hwhich hcreates han
hobligation hto hdo hor hnot hdo ha hparticular hthing. hAll hcontracts hcontain h5
helements. hIdentify hand hexplain hthese hfive helements. h- hcorrect hanswers h-
Agreement h- hMust hbe ha hmeeting hof hminds has hto hthe hsubject hmatter hand
hterms hof hthe hcontract. h
a. hAn hoffer hmade
b. hAn hunequivocal hand hunconditional hacceptance hof hthe hterms hof hthat hoffer
Consideration h- han hexchange hof hsomething hof hvalue hbetween hthe hparties
a. hA hreturn hpromise
b. hAn hact hperformed
c. hAn hagreement hnot hto hact
Legality hof hobject h- hA hcontract hintended hfor ha hpurpose hwhich his hcontrary hto
hpublic hpolicy his hnot henforceable hat hlaw. h
a. hMust hbe hlegal
Legal hCapacity hof hthe hParties hto hContract h- hMust hbe hcompetent.
hIncompetence hincludes:
a. hMinors h(Under h21/19)
b. hMental hIncompetents h- hInsane, hsenile, hor hother hmental hdefects
c. hUnder hthe hinfluence hof halcohol hor hdrugs
d. hTrade hNames
Genuine hIntention h- hIntended hto henter hcontract hcannot hbe haffected hby
a. hFraud h- hdeliberately husing hfalse hsuggestions, hor hcunning hto hcheat hanother
b. hDuress h- hforce hor hillegal himprisonment
c. hConcealment h- hmisrepresent hpast hor hpresent hfacts hor hfail hto hdisclose
hpertinent hfacts
d. hMistake h- hsigned hby hmistake hor herror
