Practice Exam for CAIB 1 Questions With
Correct Answers
Insurers are in the business of assuming the financial risks of others
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which involves entering into a formal contract. A contract is enforceable
| | | | | | | | | | |
at law only when all legal elements have been observed. Insurance
| | | | | | | | | | |
contracts differ from other formal agreements and are subject to what
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three additional elements? - ANSWER✔✔✔-Insurable Interest
| | | | |
Utmost Good Faith | |
Indemnity
Explain the meaning and disadvantage of the following approaches:
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Avoidance of Risk & Control of Risk - ANSWER✔✔✔-Avoidance:
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Avoidance means that all chance of financial loss has been eliminated or
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a decision not to do something. The disadvantage is its not very
| | | | | | | | | | | | |
effective as often the elimination of one exposure creates another in its
| | | | | | | | | | | |
place.
Control: taking measures to reduce the frequency and severity of losses.
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The disadvantage is that not all losses can be controlled, because
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equipment will not work 100% of the time | | | | | | |
Identify the three elements that are unique to contracts of insurance: -
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ANSWER✔✔✔-Insurable Interest, Utmost Good Faith, and Indemnity | | | | | |
, The Insurance Act restricts payment for an insured loss to those
| | | | | | | | | | |
amounts required to indemnify the Insured. Indicate the amount the
| | | | | | | | | |
Insured is legally entitled to receive and the measure used to determine
| | | | | | | | | | | |
this value. - ANSWER✔✔✔-Entitled to receive payment for the actual
| | | | | | | | | |
amount of the loss, no more and no less. The measure is the value of
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the object of insurance as it was immediately before the loss.
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Policies insuring against the peril of fire must contain Fire Statutory
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Conditions. Indicate the Statutory Condition and the applicable rules:
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During the policy term the insured installed a wood burning stove as a
| | | | | | | | | | | | |
secondary heating device. The application indicates that a gas furnace is
| | | | | | | | | |
|used to heat the premises. - ANSWER✔✔✔-Material Change. The
| | | | | | | | |
insured must notify the insurer promptly of any change that serves to
| | | | | | | | | | | |
increase the chance of loss. After receiving notification of the Material
| | | | | | | | | | |
Change the insurer has the option to cancel the policy and return the
| | | | | | | | | | | | |
unearned portion of the premium to the insured; or continue to insure
| | | | | | | | | | | |
the risk and advise the insured in writing of the additional premium
| | | | | | | | | | | |
payable.
All Homeowners policies describe the Basis of Claim Payment for loss or
| | | | | | | | | | | |
damage to dwelling building, detached private structures and personal
| | | | | | | | |
property. Indicate the basis of settlement and conditions: Water used to
| | | | | | | | | |
extinguish a small fire at the Insured's home destroyed all electronic
| | | | | | | | | | | |
media and records kept by the Insured. - ANSWER✔✔✔-Cost to
| | | | | | | | | |
reproduce lost or damage media from duplicates or from originals of the
| | | | | | | | | | |
previous generation of the media. The payment for lost records is the
| | | | | | | | | | | | |
Correct Answers
Insurers are in the business of assuming the financial risks of others
| | | | | | | | | | | |
which involves entering into a formal contract. A contract is enforceable
| | | | | | | | | | |
at law only when all legal elements have been observed. Insurance
| | | | | | | | | | |
contracts differ from other formal agreements and are subject to what
| | | | | | | | | | |
three additional elements? - ANSWER✔✔✔-Insurable Interest
| | | | |
Utmost Good Faith | |
Indemnity
Explain the meaning and disadvantage of the following approaches:
| | | | | | | | |
Avoidance of Risk & Control of Risk - ANSWER✔✔✔-Avoidance:
| | | | | | | | |
Avoidance means that all chance of financial loss has been eliminated or
| | | | | | | | | | |
a decision not to do something. The disadvantage is its not very
| | | | | | | | | | | | |
effective as often the elimination of one exposure creates another in its
| | | | | | | | | | | |
place.
Control: taking measures to reduce the frequency and severity of losses.
| | | | | | | | | |
The disadvantage is that not all losses can be controlled, because
| | | | | | | | | | | |
equipment will not work 100% of the time | | | | | | |
Identify the three elements that are unique to contracts of insurance: -
| | | | | | | | | | | |
ANSWER✔✔✔-Insurable Interest, Utmost Good Faith, and Indemnity | | | | | |
, The Insurance Act restricts payment for an insured loss to those
| | | | | | | | | | |
amounts required to indemnify the Insured. Indicate the amount the
| | | | | | | | | |
Insured is legally entitled to receive and the measure used to determine
| | | | | | | | | | | |
this value. - ANSWER✔✔✔-Entitled to receive payment for the actual
| | | | | | | | | |
amount of the loss, no more and no less. The measure is the value of
| | | | | | | | | | | | | | |
the object of insurance as it was immediately before the loss.
| | | | | | | | | |
Policies insuring against the peril of fire must contain Fire Statutory
| | | | | | | | | | |
Conditions. Indicate the Statutory Condition and the applicable rules:
| | | | | | | | |
During the policy term the insured installed a wood burning stove as a
| | | | | | | | | | | | |
secondary heating device. The application indicates that a gas furnace is
| | | | | | | | | |
|used to heat the premises. - ANSWER✔✔✔-Material Change. The
| | | | | | | | |
insured must notify the insurer promptly of any change that serves to
| | | | | | | | | | | |
increase the chance of loss. After receiving notification of the Material
| | | | | | | | | | |
Change the insurer has the option to cancel the policy and return the
| | | | | | | | | | | | |
unearned portion of the premium to the insured; or continue to insure
| | | | | | | | | | | |
the risk and advise the insured in writing of the additional premium
| | | | | | | | | | | |
payable.
All Homeowners policies describe the Basis of Claim Payment for loss or
| | | | | | | | | | | |
damage to dwelling building, detached private structures and personal
| | | | | | | | |
property. Indicate the basis of settlement and conditions: Water used to
| | | | | | | | | |
extinguish a small fire at the Insured's home destroyed all electronic
| | | | | | | | | | | |
media and records kept by the Insured. - ANSWER✔✔✔-Cost to
| | | | | | | | | |
reproduce lost or damage media from duplicates or from originals of the
| | | | | | | | | | |
previous generation of the media. The payment for lost records is the
| | | | | | | | | | | | |
