CAIB 1 DEFINITIONS EXAM QUESTIONS
AND ANSWERS 100% PASS
risk—ANSWER-chance of financial loss to which an object of insurance is exposed
speculative risk—ANSWER-The chance of financial loss or gain
pure risk—ANSWER-The chance of financial loss but no chance of financial gain.
insurance—ANSWER-a way to indemnify a person after a loss or liability
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-when one knows they will suffer financially when
insurable object is damaged
utmost good faith—ANSWER-: A higher standard of honesty is imposed on insured,
insurer and broker on an insurance contract
indemnity—ANSWER-people will 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 insurance of the policy
, agency agreement—ANSWER-a written agreement between the insurer and the
brokerage which confirms their relationship
void contract—ANSWER-a contract which is legaglly unable to support the purpose for
which it was intended; deemed never to have existed
Voidable Contract—ANSWER-a contract that may be voided at the option of the
wronged party only
peril—ANSWER-the cause of a loss
direct loss—ANSWER-when a peril actually attacks the object of insurance
indirect loss—ANSWER-losses which happen 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 property using new materials
of like kind and quality with no deduction for depreciation.
valued policy—ANSWER-the insured and insurer agree at the time of the policy is issued
as to the cash value of the property; agreed amount would be paid.
blanket coverage—ANSWER-Policy which provides a single limit of insurance for all
property falling within a specific class
scheduled coverage—ANSWER-Covered property is itemized on the policy
fire—ANSWER-visible flame or glow
friendly fire—ANSWER-fire contained in its proper receptacle
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law, Copyrighted By Brittie Donald
AND ANSWERS 100% PASS
risk—ANSWER-chance of financial loss to which an object of insurance is exposed
speculative risk—ANSWER-The chance of financial loss or gain
pure risk—ANSWER-The chance of financial loss but no chance of financial gain.
insurance—ANSWER-a way to indemnify a person after a loss or liability
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-when one knows they will suffer financially when
insurable object is damaged
utmost good faith—ANSWER-: A higher standard of honesty is imposed on insured,
insurer and broker on an insurance contract
indemnity—ANSWER-people will 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 insurance of the policy
, agency agreement—ANSWER-a written agreement between the insurer and the
brokerage which confirms their relationship
void contract—ANSWER-a contract which is legaglly unable to support the purpose for
which it was intended; deemed never to have existed
Voidable Contract—ANSWER-a contract that may be voided at the option of the
wronged party only
peril—ANSWER-the cause of a loss
direct loss—ANSWER-when a peril actually attacks the object of insurance
indirect loss—ANSWER-losses which happen 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 property using new materials
of like kind and quality with no deduction for depreciation.
valued policy—ANSWER-the insured and insurer agree at the time of the policy is issued
as to the cash value of the property; agreed amount would be paid.
blanket coverage—ANSWER-Policy which provides a single limit of insurance for all
property falling within a specific class
scheduled coverage—ANSWER-Covered property is itemized on the policy
fire—ANSWER-visible flame or glow
friendly fire—ANSWER-fire contained in its proper receptacle
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law, Copyrighted By Brittie Donald
