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CAIB 1 Practice Exam || Most Recent Exam 2026-2027 Actual Complete 100 Real Exam Questions And Correct Answers (Verified Answers) Already Graded A+ | Guaranteed Success!! Newest Exam | Just Released!!
When an underwriter looks at the financial and claims history of the applicant, they are looking for... a. Morale hazard b. Moral hazard c. Physical hazard d. Risks - ANSWER -b. Moral hazard
It is often said that property insurance policies are designed to insure against "direct damage" only. Yesterday, a fire destroyed 65% of your client's apartment building. What is the likely not covered in this situation? - ANSWER -Loss of rental income
All property policies contain some conditions & warranties. Which of the following is not true?
a. A condition is a requirement that the insured do or not do something
b. A claim is still valid despite a breach of condition if the loss was not caused by the breach
c. A claim is still valid despite a breach of warranty by the insured as long as the breach did not directly cause the loss
d. A warranty is a promise that certain facts are true and shall remain true for the duration of the policy period - ANSWER -c. A claim is still valid despite a breach of warranty by the insured as long as the breach did not directly cause the loss
What is the definition of insurance? - ANSWER -The undertaking by one person to indemnify another against loss or liability in respect to a certain risk or peril
What is the definition of contract? - ANSWER -An agreement between people to do or not do something
What is the definition of risk? - ANSWER -Chance of financial loss
What is a valued policy? - ANSWER -This is where the insured and insurer agree on the cash value of the property. If a loss occurs, this is the amount that would be paid
What is insurable interest? - ANSWER -One has insurable interest if they would suffer financially from a loss
What is utmost good faith? - ANSWER -With insurance contracts, you must maintain a higher standard of honesty than with other contracts. This applies to the insured, insurer and the broker
What is a fiduciary? - ANSWER -Someone who has a special position of trust when handing the affairs or funds of another
What is the difference between a friendly fire and a hostile fire?
- ANSWER -A friendly fire is a fire contained in its proper receptacle. Once that fire passes outside its boundaries, it becomes a hostile fire. (ie. a spark escapes the fireplace and burns the carpet)
What is the difference between pro-rata and short rate forms of premium return calculation? - ANSWER -Pro-rata means calculating the premium refund by dividing the amount of premium paid by the number of days left remaining on the policy. Short rate is pro-rata minus any administrative charges or cancellation penalty What is the insured's responsibility when it comes to providing notice of loss? - ANSWER -The insured or his representative must immediately report the loss to the insurer in writing
What is proof of loss? - ANSWER -A formal verification, under oath, of the details and amounts claimed
What is fraud? - ANSWER -A deliberate attempt to deceive with the aim of financial gain
What is a deductible and why does it exist? - ANSWER -The amount the insured is required to absorb for each loss before insurer pays out. A deductible exists to reduce the number of petty claims
Explain the idea of subrogation - ANSWER -When an insurer pays a claim for a loss caused by a 3rd party, the insurer is allowed to place itself "into the insured's shoes" and take on their legal rights (ie. to sue the responsible party)
Provide 3 examples of tort - ANSWER - Trespass, nuisance, defamation, false arrest, invasion of privacy, or negligence
3 elements of a tort - ANSWER - Duty owed, duty breached & damages resulted (proximately)
Which type of tort is insurable? - ANSWER -Unintentional torts What is strict liability and when does it apply? - ANSWER - Strict liability assumes a person is guilty until proven innocent. This typically applies to cases where the person is doing something inherently dangerous
What is negligence? - ANSWER -Carelessness: not doing what a reasonable man in the same situation would have done, or doing something a reasonable man would not have done
There are 4 broad types of people who might seek to enter your premises. What are these 4, define them and explain the duty you owe to each - ANSWER -a. Trespasser: entering without permission from occupier i. Duty owed: no legal duty owed but cannot set traps or cause intentional harm
b. Licensee: someone entering for their own purpose with permission from occupier i. Duty owed: warn of any hazards known to occupier that licensee would not expect
c. Invitee: invited in for benefit of the occupier i. Duty owed: protect against dangers down or might reasonably discover
d. Children: protected by law i. Duty owed: premises must be safe from all dangers
What is the liability of a landlord in a building with multiple tenancy? - ANSWER -Responsible for common areas
How do you determine the liability of a bailee for customer's goods? - ANSWER -Under the 2 types of civil law a. Tort law: must exercise ordinary care b. Contract law: for responsibilities assumed under contract
related to premises (construction, occupancy, housekeeping) A moral hazard is - ANSWER - Subjective characteristics of the applicant that could cause a peril
What is the main difference between "named perils" and "all risk" policies as typically provided by insurers - ANSWER - Named perils cover FSWILLER only. All risks covers all direct losses not excluded
What are the 3 types of property insured under a commercial property policy - ANSWER -Building, stock and equipment
Briefly explain explosion coverage under homeowners form - ANSWER -Covers damage caused by hot water heaters and domestic boilers not due to water hammer
Briefly explain smoke coverage - ANSWER -Covers losses out of sudden, unusual and faulty operation of stationary furnace
What do homeowners forms typically exclude in the context of impact by aircraft or land vehicles? - ANSWER - Damaged caused by insureds
What do homeowners forms typically exclude in the context of windstorm and hail? - ANSWER -Excludes loss or damage to antennae and satellite dishes
What do homeowners forms typically exclude in the context of theft? - ANSWER -Excludes theft by tenant, employee or member of household
What are 5 coverages in broad form that aren't in named perils forms? - ANSWER -a. Vehicle impact to insured's building when driven by insured
b. All sources of smoke damage excluding industrial operations
c. Water damage due to freezing or rupturing of water lines
d. Theft
e. Collapse (excluding earthquake or faulty workmanship)
What are 5 factors insurers look at to determine the base rate for commercial property? - ANSWER -Construction,
insurable interest in the property
What responsibilities does an insured have under the property protection systems clause? - ANSWER -Notify insurer immediately when they: know of an interruption or flaw, when a monitoring/maintenance contract has lapsed, suspension of police services
What are 2 key coverages under boiler and machinery (aka equipment breakdown)? - ANSWER -a. Damage from explosion of boiler/pressure vessel operating at over 15 psi
b. Electrical/mechanical breakdown of objects
Do business interruption policies cover any perils excluded the corresponding property policy? - ANSWER -No
What is the basic difference between the earning form and the profits form? - ANSWER -Earnings form ends when property has been replaced. Profits form ends when income is restored to pre-loss levels.
What is bodily injury? - ANSWER -Physical injury associated with external causes
What does it mean when an insurer agrees to pay supplementary payments? What is the purpose and give 3 examples. - ANSWER -pays for investigating, settling or defending a claim a. Cost of defense b. Reasonable expenses insured incurred to help in investigation and defense c. Court costs d. Interest from date of judgement to payment (based on limit of insurance only)
Liability coverages on the homeowners forms do not usually insure damage arising out of business activities, what are the 3 exceptions?
- ANSWER -a. Personal actions during work not directly related to job
b. Rental portions of your home (up to 2 roomers/boarders)
c. Temporary or part-time business of an insured person under 21
Name 3 workers compensation plan benefits - ANSWER - Necessary health care costs,
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 wil
l
d. A contract of consideration - ANSWER -a. A contract
What are the 4 methods of dealing with risk? - ANSWER - Avoidance, control, retention, transfer
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
