PRACTICE EXAM FOR CAIB 1 2024

QUESTIONS WITH COMPLETE ANSWERS

GRADED A+

Insurers are in the business of assuming the financial risks of others which involves entering into a formal contract. A contract is enforceable at law only when all legal elements have been observed. Insurance contracts differ from other formal agreements and are subject to what three additional elements? - ANSWER Insurable Interest Utmost Good Faith Indemnity Explain the meaning and disadvantage of the following approaches: Avoidance of Risk & Control of Risk - ANSWER Avoidance: Avoidance means that all chance of financial loss has been eliminated or a decision not to do something. The disadvantage is its not very effective as often the elimination of one exposure creates another in its place. Control: taking measures to reduce the frequency and severity of losses. The disadvantage is that not all losses can be controlled, because equipment will not work 100% of the time Identify the three elements that are unique to contracts of insurance: - ANSWER Insurable Interest, Utmost Good Faith, and Indemnity