CAIB 1 key terms
Risk—ANSWER--Chance of financial loss to which an object of insurance is exposed
Speculative risk—ANSWER--The chance of a financial loss or gain
Pure risk—ANSWER--The chance of financial loss but no chance of financial gain.
Insurance—ANSWER--The undertaking by one person to indemnify another person
against loss or liability for loss in respect of a certain risk or peril to which the object of
the insurance may be exposed... or to pay a sum of money or other thing of value upon
the happening of a certain event.
Contract—ANSWER--An agreement between two or more persons which creates an
obligation to do or not to do a particular thing
Consideration—ANSWER--An exchange of something of value between parties.
Insurable Interest—ANSWER--One has an insurable interest in the subject matter of the
insurance when they will suffer financially by a loss.
Utmost Good Faith—ANSWER--The law requires insurance contracts maintain a higher
standard of honesty than is needed of other contracts. (The duty of utmost good faith
applies to the insured, the insurer and the broker.)
Indemnity—ANSWER--Application of the principle of indemnity ensures people receive
the actual amount of their loss, no more and no less.
, Insurance Binder—ANSWER--A temporary agreement in which the insurer agrees to
provide certain coverages pending the issuance of the policy
Agency Agreement—ANSWER--A written agreement or contract between the insurer
and the brokerage which acknowledges their relationship.
Void Contract—ANSWER--One which is unable in law to support the purpose for which
it was intended. Such contracts are deemed never to have existed.
Voidable Contract—ANSWER--A contract that may be voided at the option of the
wronged party only and not the wrongdoer.
Peril—ANSWER--The cause of a loss
Direct Loss—ANSWER--A direct loss occurs when the peril insured actually attacks the
object of insurance
Indirect Loss—ANSWER--Losses which arise as a consequence of a direct loss.
Actual Cash Value—ANSWER--New or replacement cost of the property at the time of
the loss, less depreciation.
Replacement Cost—ANSWER--The cost to repair or replace the lost or damaged
property with new property of like kind and quality, without deduction for depreciation.
Valued Policy—ANSWER--Both the insured and insurer agree at the time the policy is
issued as to the cash value of the property. In the event of a loss, the agreed amount
would be paid.
Blanket Coverage—ANSWER--Policy which provides a single limit of insurance for all
property falling within a specific class.
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law, Copyrighted By Brittie Donald
Risk—ANSWER--Chance of financial loss to which an object of insurance is exposed
Speculative risk—ANSWER--The chance of a financial loss or gain
Pure risk—ANSWER--The chance of financial loss but no chance of financial gain.
Insurance—ANSWER--The undertaking by one person to indemnify another person
against loss or liability for loss in respect of a certain risk or peril to which the object of
the insurance may be exposed... or to pay a sum of money or other thing of value upon
the happening of a certain event.
Contract—ANSWER--An agreement between two or more persons which creates an
obligation to do or not to do a particular thing
Consideration—ANSWER--An exchange of something of value between parties.
Insurable Interest—ANSWER--One has an insurable interest in the subject matter of the
insurance when they will suffer financially by a loss.
Utmost Good Faith—ANSWER--The law requires insurance contracts maintain a higher
standard of honesty than is needed of other contracts. (The duty of utmost good faith
applies to the insured, the insurer and the broker.)
Indemnity—ANSWER--Application of the principle of indemnity ensures people receive
the actual amount of their loss, no more and no less.
, Insurance Binder—ANSWER--A temporary agreement in which the insurer agrees to
provide certain coverages pending the issuance of the policy
Agency Agreement—ANSWER--A written agreement or contract between the insurer
and the brokerage which acknowledges their relationship.
Void Contract—ANSWER--One which is unable in law to support the purpose for which
it was intended. Such contracts are deemed never to have existed.
Voidable Contract—ANSWER--A contract that may be voided at the option of the
wronged party only and not the wrongdoer.
Peril—ANSWER--The cause of a loss
Direct Loss—ANSWER--A direct loss occurs when the peril insured actually attacks the
object of insurance
Indirect Loss—ANSWER--Losses which arise as a consequence of a direct loss.
Actual Cash Value—ANSWER--New or replacement cost of the property at the time of
the loss, less depreciation.
Replacement Cost—ANSWER--The cost to repair or replace the lost or damaged
property with new property of like kind and quality, without deduction for depreciation.
Valued Policy—ANSWER--Both the insured and insurer agree at the time the policy is
issued as to the cash value of the property. In the event of a loss, the agreed amount
would be paid.
Blanket Coverage—ANSWER--Policy which provides a single limit of insurance for all
property falling within a specific class.
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law, Copyrighted By Brittie Donald
