CAIB 1 2026 PRACTICE TEST QUESTIONS AND
DETAILED ANSWER EXPLANATIONS FULL
REVIEW
◉ Speculative Risk. Answer: possibility of financial loss or gain
◉ Pure Risk. Answer: Chance of financial loss, no gain
◉ Insurance. Answer: undertaking by one person to indemnify
another person against loss or liability for loss in respect of a certain
risk or peril to which the object of insurance may be exposed or to
pay a sum of money or other ting of value upon the happening of a
certain event
◉ Contract. Answer: an agreement between two or more persons
which creates an obligation to do or not to do a particular thing
◉ Insurable Interest. Answer: showing you would suffer financially
by a loss
◉ Utmost good faith. Answer: caveat emptor, buyer beware. Exercise
a higher standard of honesty
, ◉ Indemnity. Answer: putting the insured back into the same
position as they were in as immediately prior to loss
◉ Binder. Answer: Contract of insurace
◉ Agency Agreement. Answer: source of a brokers authority
◉ Void. Answer: Unable to support its intended purpose, treated as
though it never existed
◉ Voidable. Answer: void to the wrongdoer but not to the wronged
party unless they elect to treat it so
◉ Peril. Answer: The cause of a loss
◉ Direct Loss. Answer: When the object of insurance is the loss
◉ Indirect loss. Answer: Losses which arise as a consequence of a
direct loss
◉ Actual cash value. Answer: New or replacement cost of the
insured property less depreciation
DETAILED ANSWER EXPLANATIONS FULL
REVIEW
◉ Speculative Risk. Answer: possibility of financial loss or gain
◉ Pure Risk. Answer: Chance of financial loss, no gain
◉ Insurance. Answer: undertaking by one person to indemnify
another person against loss or liability for loss in respect of a certain
risk or peril to which the object of insurance may be exposed or to
pay a sum of money or other ting of value upon the happening of a
certain event
◉ Contract. Answer: an agreement between two or more persons
which creates an obligation to do or not to do a particular thing
◉ Insurable Interest. Answer: showing you would suffer financially
by a loss
◉ Utmost good faith. Answer: caveat emptor, buyer beware. Exercise
a higher standard of honesty
, ◉ Indemnity. Answer: putting the insured back into the same
position as they were in as immediately prior to loss
◉ Binder. Answer: Contract of insurace
◉ Agency Agreement. Answer: source of a brokers authority
◉ Void. Answer: Unable to support its intended purpose, treated as
though it never existed
◉ Voidable. Answer: void to the wrongdoer but not to the wronged
party unless they elect to treat it so
◉ Peril. Answer: The cause of a loss
◉ Direct Loss. Answer: When the object of insurance is the loss
◉ Indirect loss. Answer: Losses which arise as a consequence of a
direct loss
◉ Actual cash value. Answer: New or replacement cost of the
insured property less depreciation
