CAIB 1 Exam Practice Questions and Answers

CAIB 1 Exam Practice Questions and
Answers
Question 1
What is a tort?
Correct Answer
A wrong done by another person's breach of legal duty



Question 2
What is proof of loss?
Correct Answer
A formal verification, under oath, of the details and amounts claimed



Question 3
A contract is only legally enforceable when it has all of these 3 elements
Correct Answer
Insurable interest,
utmost good faith,
indemnity



Question 4
The financial solvency of insurers is critical. Solvency means...
Correct Answer
The ability of an insurer to pay all insured losses



Question 5
What is the formula for calculating co-insurance?
Correct Answer
Did/should x amount of loss




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,Question 6
Which of the following best reflects the duties of the broker?

a. A broker acts only in the best interest of the client

b. A broker must always place insurance with the cheapest insurer

c. A broker does not owe any duty to the insurer he/she represents

d. A broker must always be truthful and disclose all material facts about the client's
risk to the insurer
Correct Answer
d. A broker must always be truthful and disclose all material facts about the client's
risk to the insurer



Question 7
It is often said that property insurance policies are designed to insure against "direct
damage" only. Yesterday, a fire destroyed 65% of your client's apartment building.
What is the likely not covered in this situation?
Correct Answer
Loss of rental income



Question 8
What elements must be present to constitute a legal contract?
a. Parties to the contract, the contract itself, consideration

b. Parties to the contract, a written document, consideration, and legal purpose

c. Agreement, consideration, legality of object, legal capacity, genuine intention

d. Competent parties, consideration, warranty, and legal purpose
Correct Answer
c. Agreement, consideration, legality of object, legal capacity, genuine intention




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,Question 9
What is an endorsement?
Correct Answer
A written agreement between the insured and the insurer to change some terms of
the insurance contract



Question 10
What is the definition of insurance?
Correct Answer
The undertaking by one person to indemnify another against loss or liability in
respect to a certain risk or peril



Question 11
What is the basic difference between the earning form and the profits form?
Correct Answer
Earnings form ends when property has been replaced. Profits form ends when
income is restored to pre-loss levels.



Question 12
A legally enforceable agreement between 2 or more parties is defined as...
a. A contract
b. An agreement
c. A will
d. A contract of consideration
Correct Answer
a. A contract



Question 13
What is a peril?
Correct Answer
Cause of loss




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, Question 14
What do homeowners forms typically exclude in the context of windstorm and hail?
Correct Answer
Excludes loss or damage to antennae and satellite dishes



Question 15
What is an elimination period?
Correct Answer
A period of self-insurance between the start of disability and the start of benefits



Question 16
What is negligence?
Correct Answer
Carelessness: not doing what a reasonable man in the same situation would have
done, or doing something a reasonable man would not have done



Question 17
Legal capacity of parties is an important part of a contract. Who below has the legal
capacity to enter into an insurance contract?
a. ABC Bakery
b. Black's Hardware
c. Tess' Restaurants Ltd.
d. Blue Duck a.k.a Grey Goos
Correct Answer
c. Tess' Restaurants Ltd.



Question 18
3 elements of a tort

Correct Answer
Duty owed,
duty breached
& damages resulted (proximately)




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