CAIB 1 Key Terms
Risk—ANSWER--The chance of financial loss to which an object of insurance is
exposed
Person Risk—ANSWER--Loss of health/life
Property Risk—ANSWER--Objects
Liability Risk—ANSWER--negligent actions resulting in injury or damage
Avoidance—ANSWER--all chance of financial loss has been eliminated
Controlling—ANSWER--taking measures to reduce the frequency and severity of loss
Retention—ANSWER--keeping the risk deductibles
Transfer—ANSWER--to others in exchange for premium
Speculative risk—ANSWER--Involves risk of financial gain or loss
Pure risk—ANSWER--Involves chance of only loss
Void—ANSWER--Unable in law to support the purpose for which it was intended
Voidable—ANSWER--one which is void as to the wrongdoer, but not void to the wronged
party, unless he elects to treat it as so
, Consideration—ANSWER--Must pay their premium, or the promise to pay the premium
at a later date
Legal Capacity—ANSWER--Must be competent and have the legal capacity to contract
Insurable interest—ANSWER--Must show that they would suffer financially by a loss
Utmost good faith—ANSWER--Parties must ensure complete honesty
Peril—ANSWER--The cause of a loss
Actual cash value—ANSWER--deemed to be the new replacement cost of the property
at the time of loss, less depreciation
Fire—ANSWER--involves the presence of visible flame or glow, with lighting or ignition
Friendly Fire—ANSWER--Contained in proper receptacle
Hostile fire—ANSWER--Once a fire passes out side the limits assigned to it
Fraud—ANSWER--a deliberate attempt to deceive, with a view to secure some profit
Condominium—ANSWER--system of separate ownership of individual units in a
multiple unit building
Endorsement—ANSWER--an extra sheet or slip of paper attached to the policy
indicating in writing that the insurer and insured have agreed to a change in terms of the
insurance contract
Criminal law—ANSWER--wrongs against society, prosecute them in criminal courts
with fines, imprisonment or probation
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law, Copyrighted By Brittie Donald
Risk—ANSWER--The chance of financial loss to which an object of insurance is
exposed
Person Risk—ANSWER--Loss of health/life
Property Risk—ANSWER--Objects
Liability Risk—ANSWER--negligent actions resulting in injury or damage
Avoidance—ANSWER--all chance of financial loss has been eliminated
Controlling—ANSWER--taking measures to reduce the frequency and severity of loss
Retention—ANSWER--keeping the risk deductibles
Transfer—ANSWER--to others in exchange for premium
Speculative risk—ANSWER--Involves risk of financial gain or loss
Pure risk—ANSWER--Involves chance of only loss
Void—ANSWER--Unable in law to support the purpose for which it was intended
Voidable—ANSWER--one which is void as to the wrongdoer, but not void to the wronged
party, unless he elects to treat it as so
, Consideration—ANSWER--Must pay their premium, or the promise to pay the premium
at a later date
Legal Capacity—ANSWER--Must be competent and have the legal capacity to contract
Insurable interest—ANSWER--Must show that they would suffer financially by a loss
Utmost good faith—ANSWER--Parties must ensure complete honesty
Peril—ANSWER--The cause of a loss
Actual cash value—ANSWER--deemed to be the new replacement cost of the property
at the time of loss, less depreciation
Fire—ANSWER--involves the presence of visible flame or glow, with lighting or ignition
Friendly Fire—ANSWER--Contained in proper receptacle
Hostile fire—ANSWER--Once a fire passes out side the limits assigned to it
Fraud—ANSWER--a deliberate attempt to deceive, with a view to secure some profit
Condominium—ANSWER--system of separate ownership of individual units in a
multiple unit building
Endorsement—ANSWER--an extra sheet or slip of paper attached to the policy
indicating in writing that the insurer and insured have agreed to a change in terms of the
insurance contract
Criminal law—ANSWER--wrongs against society, prosecute them in criminal courts
with fines, imprisonment or probation
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law, Copyrighted By Brittie Donald
