Page 1 of 141
CAIB 1 EXAM AND PRACTICE EXAM NEWEST 2025
TEST BANK| COMPLETE 550 REAL EXAM QUESTIONS
AND CORRECT DETAILED ANSWERS (VERIFIED
ANSWERS) GRADED A+| CAIB 1 ACTUAL EXAM TEST
BANK (MOST RECENT!!)
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
pg. 1
,Page 2 of 141
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
c. Tess' Restaurants Ltd.
d. Blue Duck a.k.a Grey Goos - Correct Answer -c. Tess' Restaurants
Ltd.
When an underwriter looks at the financial and claims history of the
applicant, they are looking for...
a. Morale hazard
b. Moral hazard
c. Physical hazard
d. Risks - Correct Answer -b. Moral hazard
pg. 2
,Page 3 of 141
Identify the coverages provided under a farm insurance policy. -
ANSWER -Dwelling Building and Personal Property, Major
Outbuildings and Contents, Machinery and Equipment, General Liability
Identify the legal principle upon which the entitlement is based and how
the analysis is conducted: - ANSWER -The Principle of Indemnity. The
analysis is based on lowest value after calculating: ACV, interest of the
insured in the property, the limit of insurance provided
Identify two (2) other coverages included under C - Personal Property,
which are not found in a Homeowners policy - ANSWER -
Improvements or betterments made by or acquired at the expense of the
tenant; $500 for damage (excluding fire damage) to the portion of the
building occupied by the tenant resulting from theft or attempted theft;
Damage caused to the interior of the building by vandalism or malicious
acts.
List the three categories of risk generally faced by people. - ANSWER -
Personal - loss of health/life
Property - objects
Liability - negligent actions result in injury/damage
State 4 possible options people can chose to deal with risk and give a
brief explanation and example of each. - ANSWER -Avoidance - all
chance of financial loss has been eliminated
pg. 3
, Page 4 of 141
Controlling - taking measures to reduce the frequency and severity of
losses
Retention - keeping the risk deductibles
Transfer - to others, in exchange for premium
Give 2 examples of loss control measures that can be taken to reduce the
frequency and severity of losses - ANSWER -Installing intrusion
detection equipment, installing fire detection equipment
State 2 reasons why loss control measures are not a total solution in
eliminating financial loss - ANSWER -Equipment will not work 100%
of the time, certain types of losses cannot be effectively controlled
(wind, lightening)
What obligation and/or time constrain is upon the applicant for
insurance when a policy is issued differently than requested? -
ANSWER -The applicant has 2 weeks to reject a written notification
from insurer. Policy will be considered accepted if not returned in the 2
week period.
Identify four persons or incompetents, who generally do not have the
legal capacity to contract. - ANSWER -Minors, mental incompetents,
under influence of drugs/alcohol, trade names
Identify 3 "necessities" of life for which minors are permitted to
contract. - ANSWER -Food, clothing, lodging
pg. 4
CAIB 1 EXAM AND PRACTICE EXAM NEWEST 2025
TEST BANK| COMPLETE 550 REAL EXAM QUESTIONS
AND CORRECT DETAILED ANSWERS (VERIFIED
ANSWERS) GRADED A+| CAIB 1 ACTUAL EXAM TEST
BANK (MOST RECENT!!)
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
pg. 1
,Page 2 of 141
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
c. Tess' Restaurants Ltd.
d. Blue Duck a.k.a Grey Goos - Correct Answer -c. Tess' Restaurants
Ltd.
When an underwriter looks at the financial and claims history of the
applicant, they are looking for...
a. Morale hazard
b. Moral hazard
c. Physical hazard
d. Risks - Correct Answer -b. Moral hazard
pg. 2
,Page 3 of 141
Identify the coverages provided under a farm insurance policy. -
ANSWER -Dwelling Building and Personal Property, Major
Outbuildings and Contents, Machinery and Equipment, General Liability
Identify the legal principle upon which the entitlement is based and how
the analysis is conducted: - ANSWER -The Principle of Indemnity. The
analysis is based on lowest value after calculating: ACV, interest of the
insured in the property, the limit of insurance provided
Identify two (2) other coverages included under C - Personal Property,
which are not found in a Homeowners policy - ANSWER -
Improvements or betterments made by or acquired at the expense of the
tenant; $500 for damage (excluding fire damage) to the portion of the
building occupied by the tenant resulting from theft or attempted theft;
Damage caused to the interior of the building by vandalism or malicious
acts.
List the three categories of risk generally faced by people. - ANSWER -
Personal - loss of health/life
Property - objects
Liability - negligent actions result in injury/damage
State 4 possible options people can chose to deal with risk and give a
brief explanation and example of each. - ANSWER -Avoidance - all
chance of financial loss has been eliminated
pg. 3
, Page 4 of 141
Controlling - taking measures to reduce the frequency and severity of
losses
Retention - keeping the risk deductibles
Transfer - to others, in exchange for premium
Give 2 examples of loss control measures that can be taken to reduce the
frequency and severity of losses - ANSWER -Installing intrusion
detection equipment, installing fire detection equipment
State 2 reasons why loss control measures are not a total solution in
eliminating financial loss - ANSWER -Equipment will not work 100%
of the time, certain types of losses cannot be effectively controlled
(wind, lightening)
What obligation and/or time constrain is upon the applicant for
insurance when a policy is issued differently than requested? -
ANSWER -The applicant has 2 weeks to reject a written notification
from insurer. Policy will be considered accepted if not returned in the 2
week period.
Identify four persons or incompetents, who generally do not have the
legal capacity to contract. - ANSWER -Minors, mental incompetents,
under influence of drugs/alcohol, trade names
Identify 3 "necessities" of life for which minors are permitted to
contract. - ANSWER -Food, clothing, lodging
pg. 4
