CAIB 3 PRACTICE TEST EXAM 2025/2026 QUESTIONS WITH
ANSWERS GRADED A+
✔✔Defamation - ✔✔consists of a statement that causes unjustified injury to the
reputation of another person and which results in the loss to that person of the esteem,
confidence, respect and goodwill of a considerable part of the community.
✔✔Slander - ✔✔refers to spoken defamation.
✔✔Libel - ✔✔refers to written defamation.
✔✔Aggregate Limit - ✔✔the most the policy will pay during the policy period for all
claims for which insurance is provided.
✔✔Bill of Lading - ✔✔a document issued by the carrier responsible for transporting or
forwarding the goods.
✔✔Agreed Value - ✔✔a fair value of the shipment agreed to in advance by the insured
and insurer.
✔✔Freight - ✔✔the money payable either for the hire of a vessel or for the conveyance
of cargo from one port to another.
✔✔Actual Total Loss - ✔✔a loss in which the subject property is totally lost or is so
badly damaged that it has no value left.
✔✔Constructive Total Loss - ✔✔occurs when the cost of salvaging the cargo is too high
relative to the value saved.
✔✔Particular Average - ✔✔involves a partial loss to a specific shipment, other than a
General Average.
✔✔General Average - ✔✔deals with payment for marine losses voluntarily incurred for
the safety of the entire venture. The parties whose property was saved shall contribute
to the losses of the parties whose property was sacrificed.
✔✔Surety - ✔✔state of being sure, certain and secure.
✔✔Suretyship - ✔✔the guarantee of performance made by one person or entity for
another.
✔✔Surety Bond - ✔✔an undertaking by one party (the surety) to become accountable
to another party (the obligee) for the performance of an obligation or undertaking by a
, third party (the principal). It is a promise to provide credit, if and when needed, to ensure
the faithful performance of an obligation.
✔✔Obligee - ✔✔the party to whom someone else is obligated under a contract.
or
the party to whom the bond is given.
✔✔Principal - ✔✔the person primarily liable.
✔✔Penalty - ✔✔the amount of credit given to the principal by the surety;
or
the amount which the surety is prepared to pay in the event the principal should default.
✔✔Statutory Bond - ✔✔one that is required by a municipal ordinance, or federal or
provincial regulation or statute.
✔✔Non-Statutory Bond - ✔✔not required by law but flows from the contract or
agreement between the parties.
✔✔Contract Bond - ✔✔guarantees the fulfillment of certain obligations required under
public and private contracts.
✔✔Consent of Surety - ✔✔a letter assuring the owner that if the principal is the
successful bidder, the surety will issue such other bonds as are specified to ensure the
performance of the contract.
✔✔Working Capital - ✔✔the amount of funds available to pay continuing business
operating expenses until payment is received for work being undertaken by the
contractor.
✔✔Net Worth - ✔✔the amount of money remaining after all assets have been liquidated
and all liabilities cleared.
✔✔Licence - ✔✔issued by a regulatory body such as government in order to set rules
and regulations to safeguard the public.
✔✔Permit - ✔✔Fulfils same general function as a licence, except that they are usually
required as prerequisites to performing special functions incidental to the operation of
the business.
✔✔Risk Management - ✔✔is the process of making and carrying out decisions that will
minimize the adverse effects of accidental losses upon an organization.
ANSWERS GRADED A+
✔✔Defamation - ✔✔consists of a statement that causes unjustified injury to the
reputation of another person and which results in the loss to that person of the esteem,
confidence, respect and goodwill of a considerable part of the community.
✔✔Slander - ✔✔refers to spoken defamation.
✔✔Libel - ✔✔refers to written defamation.
✔✔Aggregate Limit - ✔✔the most the policy will pay during the policy period for all
claims for which insurance is provided.
✔✔Bill of Lading - ✔✔a document issued by the carrier responsible for transporting or
forwarding the goods.
✔✔Agreed Value - ✔✔a fair value of the shipment agreed to in advance by the insured
and insurer.
✔✔Freight - ✔✔the money payable either for the hire of a vessel or for the conveyance
of cargo from one port to another.
✔✔Actual Total Loss - ✔✔a loss in which the subject property is totally lost or is so
badly damaged that it has no value left.
✔✔Constructive Total Loss - ✔✔occurs when the cost of salvaging the cargo is too high
relative to the value saved.
✔✔Particular Average - ✔✔involves a partial loss to a specific shipment, other than a
General Average.
✔✔General Average - ✔✔deals with payment for marine losses voluntarily incurred for
the safety of the entire venture. The parties whose property was saved shall contribute
to the losses of the parties whose property was sacrificed.
✔✔Surety - ✔✔state of being sure, certain and secure.
✔✔Suretyship - ✔✔the guarantee of performance made by one person or entity for
another.
✔✔Surety Bond - ✔✔an undertaking by one party (the surety) to become accountable
to another party (the obligee) for the performance of an obligation or undertaking by a
, third party (the principal). It is a promise to provide credit, if and when needed, to ensure
the faithful performance of an obligation.
✔✔Obligee - ✔✔the party to whom someone else is obligated under a contract.
or
the party to whom the bond is given.
✔✔Principal - ✔✔the person primarily liable.
✔✔Penalty - ✔✔the amount of credit given to the principal by the surety;
or
the amount which the surety is prepared to pay in the event the principal should default.
✔✔Statutory Bond - ✔✔one that is required by a municipal ordinance, or federal or
provincial regulation or statute.
✔✔Non-Statutory Bond - ✔✔not required by law but flows from the contract or
agreement between the parties.
✔✔Contract Bond - ✔✔guarantees the fulfillment of certain obligations required under
public and private contracts.
✔✔Consent of Surety - ✔✔a letter assuring the owner that if the principal is the
successful bidder, the surety will issue such other bonds as are specified to ensure the
performance of the contract.
✔✔Working Capital - ✔✔the amount of funds available to pay continuing business
operating expenses until payment is received for work being undertaken by the
contractor.
✔✔Net Worth - ✔✔the amount of money remaining after all assets have been liquidated
and all liabilities cleared.
✔✔Licence - ✔✔issued by a regulatory body such as government in order to set rules
and regulations to safeguard the public.
✔✔Permit - ✔✔Fulfils same general function as a licence, except that they are usually
required as prerequisites to performing special functions incidental to the operation of
the business.
✔✔Risk Management - ✔✔is the process of making and carrying out decisions that will
minimize the adverse effects of accidental losses upon an organization.
