CAIB 1 COMPLETE EXAMINATION TEST
QUESTIONS WITH VERIFIED SOLUTIONS
●● 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 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.
QUESTIONS WITH VERIFIED SOLUTIONS
●● 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 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.
