CAIB 1 - CHAPTER 1 EXAM QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026

CAIB 1 - CHAPTER 1 EXAM QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026 Define "Risk" - Answers The chance of a financial loss to which the object of insurance may be exposed to List 3 Categories of Risk - Answers 1) Personal 2) Property 3) Liability List 4 Types of Risk Management Techniques - Answers 1) Risk Avoidance 2) Risk Retention 3) Risk Control 4) Risk Transfer Define "Risk Avoidance" - Answers To avoid doing something in order to eliminate the chance of risk Define "Risk Retention" - Answers To self-insure or to pay for losses themselves Define "Risk Control" - Answers To reduce the frequency or severity of the loss Define "Risk Transfer" - Answers To shift the financial obligation to someone better equipped to handle it (an insurance company) List 2 Types of Risks - Answers 1) Speculative Risk 2) Pure Risk Define "Speculative Risk" - Answers Chance of Financial Loss or Financial Gain Define "Pure Risk" - Answers Chance of Financial Loss only What type of risk is insurable? - Answers Pure Risk What is a Contract? - Answers An agreement between 2 or more parties that creates an obligation or do or not to do a specific thing List the 5 components of a contract - Answers 1) Agreement 2) Consideration 3) Legality of Object 4) Legal Capacity 5) Genuine Intention Define "Agreement" - Answers a meeting of the minds where an offer has been made and accepted unconditionally Define "Consideration" - Answers the exchange of something of value Define "Legality of Object" - Answers must be legal and cannot violate the public good Define "Legal Capacity" - Answers all parties must be competent and of sound mind Define "Genuine Intention" - Answers basic level of honesty Who cannot enter into contracts? - Answers Minors, people with mental illness' or under the influence of drugs or alcohol, business who operate under a trade name List 3 additional components of a contract specific to Insurance Contracts - Answers 1) Insurable Interest 2) Utmost Good Faith 3) Indemnity Define "Insurable Interest" - Answers must be able to show that they'd be hurt financially from a loss Define "Utmost Good Faith" - Answers complete and total honesty of all parties - a higher degree of honesty Define "Indemnity" - Answers ensures people receive the actual amount of their loss, no more and no less Define "Void" - Answers to have never existed Define "Voidable" - Answers wronged party may void the contract at discrection What 3 Elements are found in the Indemnity Agreement? - Answers 1) ACV 2) Financial Interest 3) Amount of Insurance How is Actual Cash Value Determined? - Answers Replacement Cost - Condition/Resale Value/Life Expectancy = ACV Define "Financial Interest" - Answers The amount of property that is actually owned by the insured What role does the Federal Government play in insurance? - Answers They ensure the financial health (solvency) of federally licensed insurers What role does the Provincial Government play in insurance - Answers They oversee the content of policies, the licensing of agents and brokers and ensure provincially licensed insurers are solvent Define "Binders" - Answers A temporary insurance policy When are losses insured? - Answers when they are accidental and unforeseen and is a direct loss from an insured peril Define "Direct Loss" - Answers Where the peril actually attacks the object of insurance What does PACICC stand for & what is their purpose? - Answers Property And Casualty Insurance Compensation Corp - protects clients in the event of an insurance company becoming insolvent Is PACICC Federal or Provincial? - Answers Federal What does the PACICC do? - Answers Collects fees from every federal insurer into a pool so in the event an insurer becomes insolvent (financially unstable) claims and cancelled policies will still be paid How much will PACICC pay for claims? - Answers $250K for unpaid loss or up to 70% unearned premium up to $700 What 3 Coverages are legislated into Fire Policies - Answers 1) Fire 2) Lightning 3) Explosion of Natural Gas / Coal or Manufactured Gas Define "Friendly Fire" - Answers fire stays where in the receptacle where it belongs Define "Hostile Fire" - Answers fire escapes receptacle Define "Proximate Result" - Answers Residual damages caused by an insured peril List Losses Excluded on Fire Policies - Answers 1) Application of Heat 2) Lightning damage to electrical devices 3) Electrical currents or power surges 4) radio active contamination 5) Deliberate acts of violence List 15 Statutory Conditions (MPCMSRFNSEAWRAN) - Answers 1) Misrepresentation 2) Property of Others 3) Change of Interest 4) Material Change 5) Termination 6) Requirements of Loss 7) Fraud 8) Who May Give Proof & Notice of Loss 9) Salvage 10) Entry, Control, Abandonment 11) Appraisal 12) When Loss is Payable 13) Replacement 14) Action 15) Notice Define "Misrepresentation" - Answers knowingly or deliberately giving false descriptions to benefit the insured or leaving out material facts to obtain coverage Define "Property of Others" - Answers Unless otherwise stated the insurer is not liable for loss or damage of to other peoples' property Define "Change of Interest" - Answers The insurer is liable for loss or damage occurring after an authorized assignment under bankruptcy act, change of title by succession, operation of law or death Define "Material Change" - Answers Any change material to the risk and within the control & knowledge of the insured Discuss what happens when a contract is Terminated by the INSURED - Answers The insured may terminate that contract at any time - The insurer shall refund excess of premium on a short rate basis. Discuss what happens when a contract is Terminated by the INSURER - Answers The insurer may terminate the contract by giving the insured 15 days written notice by registered mail or 5 days written notice hand delivered. The insurer shall refund excess premium actually paid by the insured on a pro rata basis Define "Requirements After Loss" - Answers Upon loss or damage the insured must give notice forthwith in writing to the insurer. Deliver Proof of Loss as soon as possible and provide inventory of undamaged items and produce receipts or documentation to prove amounts claimed Define "Fraud" - Answers Deliberate attempt to deceive with the intent of securing profit When can the Agent Give Proof & Notice of Loss? - Answers If the insured is unable / absent / refuses with reason Define "Salvage" - Answers The insured shall take steps to prevent further loss by removing such property. the insurer shall contribute pro rata towards any reasonable and proper expenses in the removal of such property Define "Entry, Control, Abandonment" - Answers After loss or damage the insurer has an immediate right of access and entry to survey and examine the property and to estimate the loss / damage Define "Appraisal" - Answers In the event of value disagreement What are the 5 Steps in the Appraisal Process? - Answers 1) Proof of Loss must be filed 2) Submit written application for appraisal 3) insurer and insured must each select appraisers to represent them 4) if both appraisers cannot determine the value they submit it to an umpire. 5) each party must pay their own representative and then equal parts to the umpire When can courts choose the appraiser or umpire? - Answers 1) if one of the parties fails to appoint one with 7 days 2) if the appraisers fail to agree with 15 days 3) when appraiser or umpire refuses to act/is incapable of acting or dies When is loss payable? - Answers Loss is payable within 60 days after completion of the proof of loss unless the contract calls for a shorter time. Define "Replacement" - Answers The insurer may, instead of making payment, repair rebuild or replace when notice if given in writing within 30 days after receipt of proof of loss. the insurer then has 45 days to complete replacement/repair or rebuild Define "Action" - Answers Action against the insurer is barred unless commenced within 1 year after loss or damage occurs Define "Notice" - INSURED to INSURER - When is Notice required? - Answers Termination, Request for Appraisal, Notice of Legal Action When & How is "Notice" Required? - INSURER to INSURED - Answers Termination, Notice of Replacement, Chq for Settlement. Personal Delivery within 5 days or Registered Mail to latest address within 15 days - (True or False) Policy Conditions are implemented by insurers not law - Answers True List 5 of the additional policy conditions that impose restrictions on coverage and additional responsibility on insureds - Answers 1) Notice to Authorities 2) Sue & Labour 3) No Benefits to Bailee 4) Pair & Set 5) Parts Define "Notice to Authorities" - Answers The insured must give immediate notice to the authorities when loss is due to malicious acts / theft / burglary so as to improve the chances of recovery and reduce the amount of the claim Define "Sue & Labour" - Answers The insured must take all reasonable steps to recover the lost or stolen property. The insurer agrees to contribute pro-rata towards any reasonable and proper expenses in connection with efforts made. Define "No Benefits to Bailee" - Answers Insurance does not protect the insurable interest of a carrier or bailee. this condition allows the insurer to recover any payments made when the bailee is responsible for loss. Define "Pair & Set" - Answers When there is loss or damage to one item of a pair in a set it is not considered a total loss as the item not lost or damaged still has value and will be considered in the amount of the settlement