CAIB 1 PRACTICE QUESTIONS WITH COMPLETE ANSWERS ALREADY SCORED A+

3 elements of a tort - Answer-Duty owed, duty breached & damages resulted (proximately) A "building" is defined as... - Answer-a. Fixed structures b. Additions/extensions c. Permanent fittings d. Materials on premises for regular maintenance e. Growing plants inside the building for decoration A contract is only legally enforceable when it has all of these 3 elements - Answer-Insurable interest, utmost good faith, indemnity 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 A moral hazard is - Answer-Subjective characteristics of the applicant that could cause a peril 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. TransferA reduction in value is called a... a. Loss b. Unlucky situation c. Claim d. Transfer - Answer-a. Loss 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 After the insurer had indemnified the insured for loss, the insurer has the legal right to recover from the at fault party. This right is known as... - Answer-The right of subrogation 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 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 breachc. 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 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 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 Consideration is... a. The law of insurance b. A promise between parties c. A contract's binding force d. An exchange of something of value - Answer-d. An exchange of something of value