CAIB 1 2026 CERTIFICATION STUDY GUIDE
COMPLETE INSURANCE BASICS AND
PRACTICE QUESTIONS
◉ A stock company is...
a. A company that invests in other companies
b. A company owned by stockholders who provide the capital to
start and run the company
c. Is owned by customers of the company
d. A company that owns livestock. Answer: b. A company owned by
stockholders who provide the capital to start and run the company
◉ The difference between pure and speculative risk is...
a. Speculative risk is insurable but pure risk is not
b. Speculative risk means that there is a chance to gain or lose
whereas one can only lose with pure risk
,c. Speculative risk means that there is only the chance to lose
whereas pure risk means you have a chance to win too
d. Speculative risk is a term invented by marine insurance
companies in 1864. Answer: b. Speculative risk means that there is a
chance to gain or lose whereas one can only lose with pure risk
◉ 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. Answer: a. A contract
◉ What are the 4 methods of dealing with risk?. Answer: Avoidance,
control,
retention,
transfer
◉ A reduction in value is called a...
a. Loss
b. Unlucky situation
c. Claim
, d. Transfer. Answer: a. Loss
◉ 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.
Answer: c. Agreement, consideration, legality of object, legal
capacity, genuine intention
◉ The act of intentionally giving up some right or privilege is...
a. A representation
b. A transfer
c. A waiver
d. Subrogation. Answer: c. A waiver
◉ Insurance purchased by an insurance company is called
a. Reinsurance
COMPLETE INSURANCE BASICS AND
PRACTICE QUESTIONS
◉ A stock company is...
a. A company that invests in other companies
b. A company owned by stockholders who provide the capital to
start and run the company
c. Is owned by customers of the company
d. A company that owns livestock. Answer: b. A company owned by
stockholders who provide the capital to start and run the company
◉ The difference between pure and speculative risk is...
a. Speculative risk is insurable but pure risk is not
b. Speculative risk means that there is a chance to gain or lose
whereas one can only lose with pure risk
,c. Speculative risk means that there is only the chance to lose
whereas pure risk means you have a chance to win too
d. Speculative risk is a term invented by marine insurance
companies in 1864. Answer: b. Speculative risk means that there is a
chance to gain or lose whereas one can only lose with pure risk
◉ 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. Answer: a. A contract
◉ What are the 4 methods of dealing with risk?. Answer: Avoidance,
control,
retention,
transfer
◉ A reduction in value is called a...
a. Loss
b. Unlucky situation
c. Claim
, d. Transfer. Answer: a. Loss
◉ 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.
Answer: c. Agreement, consideration, legality of object, legal
capacity, genuine intention
◉ The act of intentionally giving up some right or privilege is...
a. A representation
b. A transfer
c. A waiver
d. Subrogation. Answer: c. A waiver
◉ Insurance purchased by an insurance company is called
a. Reinsurance
