CAIB 1-Chapter 1 Questions and Answers

RISK - Answer- Chance of financial loss to which an object of insurance is exposed SPECULATIVE RISK - Answer- the chance of financial loss or gain PURE RISK - Answer- the chance of financial loss but no chance of financial gain INSURANCE - Answer- the 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 the insurance may be exposed...or to pay a sum of money or other thing 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 CONSIDERATION - Answer- an exchange or something of value between parties INSURABLE INTEREST - Answer- onr has an insurable interest in the subject matter of the insurance when they will suffer financially by a loss UTMOST GOOD FAITH - Answer- the law requires insurance contracts maintain a higher standard of honesty than is needed of other contracts. The duty applies to the insured, the insurer and the broker INDEMNITY - Answer- application of the principle of indemnity ensures people receive the actual amount of their loss no more and no less INSURANCE BINDER - Answer- a temporary agreement in which the insurer agrees to provide certain coverages pending the issuance of the policy AGENCY AGREEMENT - Answer- a written agreeement or contract between the insurer and the brokerage which acknowledges their relationship VOID CONTRACT - Answer- one which is unable in law to support the purpose for which it was intended. Such contracts are deemed never to have existed VOIDABLE CONTRACT - Answer- a contract that may be voided at the option of the wronged party only and not the wrongdoer PERIL - Answer- the cause of loss