CAIB 1 2026 EXAM PREPARATION PACK KEY
CONCEPTS AND SAMPLE QUESTIONS WITH
EXPLANATIONS
◉ Insurance purchased by an insurance company is called
a. Reinsurance
b. Risk avoidance insurance
c. Full protection
d. Umbrella insurance. Answer: a. Reinsurance
◉ The main purpose of an insurance contract is to...
a. Allow the spread of risk
b. Allow insured's to take more risk
c. Protect you from loss
d. Manage income risk. Answer: a. Allow the spread of risk
◉ A person has a few options when dealing with financial risk:
avoidance, retention, control, and transfer. Which is usually the best
option for most people?
a. Avoidance
b. Retention
c. Transfer
,d. Control. Answer: c. Transfer
◉ 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. Answer: c. Tess' Restaurants Ltd.
◉ Often times, brokers are asked to provide binders to the insured.
A binder is...
a. A preliminary contract of insurance
b. Permitted for all risks
c. Binds the insured to certain terms specified by the insurer
d. Binds the insured to certain terms specific by the brokerage.
Answer: a. A preliminary contract of insurance
◉ All changes to an insurance policy must be made in writing. What
does an insurer issue when both parties have agreed on a change to
the policy terms?. Answer: An endorsement
, ◉ In Canada, the insurance industry is regulated on both a federal
and provincial level. The provincial government performs which of
the following functions:
a. Supervising the terms and conditions of insurance contracts
b. Licensing insurance companies to allow them to do business in
the province
c. Monitor the financial stability of insurers that are not federally
licensed
d. All of the above
e. Only a and b. Answer: d. All of the above
◉ The financial solvency of insurers is critical. Solvency means....
Answer: The ability of an insurer to pay all insured losses
◉ Both insurance companies and brokers act as fiduciaries. What is
the fiduciary responsibility of a broker in regards to commissions?.
Answer: Unearned commissions are to be held in trust and paid back
if the policy is cancelled before expiry
CONCEPTS AND SAMPLE QUESTIONS WITH
EXPLANATIONS
◉ Insurance purchased by an insurance company is called
a. Reinsurance
b. Risk avoidance insurance
c. Full protection
d. Umbrella insurance. Answer: a. Reinsurance
◉ The main purpose of an insurance contract is to...
a. Allow the spread of risk
b. Allow insured's to take more risk
c. Protect you from loss
d. Manage income risk. Answer: a. Allow the spread of risk
◉ A person has a few options when dealing with financial risk:
avoidance, retention, control, and transfer. Which is usually the best
option for most people?
a. Avoidance
b. Retention
c. Transfer
,d. Control. Answer: c. Transfer
◉ 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. Answer: c. Tess' Restaurants Ltd.
◉ Often times, brokers are asked to provide binders to the insured.
A binder is...
a. A preliminary contract of insurance
b. Permitted for all risks
c. Binds the insured to certain terms specified by the insurer
d. Binds the insured to certain terms specific by the brokerage.
Answer: a. A preliminary contract of insurance
◉ All changes to an insurance policy must be made in writing. What
does an insurer issue when both parties have agreed on a change to
the policy terms?. Answer: An endorsement
, ◉ In Canada, the insurance industry is regulated on both a federal
and provincial level. The provincial government performs which of
the following functions:
a. Supervising the terms and conditions of insurance contracts
b. Licensing insurance companies to allow them to do business in
the province
c. Monitor the financial stability of insurers that are not federally
licensed
d. All of the above
e. Only a and b. Answer: d. All of the above
◉ The financial solvency of insurers is critical. Solvency means....
Answer: The ability of an insurer to pay all insured losses
◉ Both insurance companies and brokers act as fiduciaries. What is
the fiduciary responsibility of a broker in regards to commissions?.
Answer: Unearned commissions are to be held in trust and paid back
if the policy is cancelled before expiry
