Term
1. Insurance plays an important role in managing financial risk. The main purpose of insurance is to:
a) Enable the consumer to obtain a loan or a mortgage
b) Provide employment and investment capital
c) Allow the spread of Risk
d) Reduce losses through loss prevention and loss reduction |
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Definition
| c) Allow the spread of risk |
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Term
2. The definition of insurance in the Insurance Act includes all of the following important points, except one. Pick the exception.
a) Payment is made only when a certain peril has damaged the object of insurance.
b) Payment is limited to the actual amount of the loss - no more, no less
c) There is no payment for losses that are deliberately caused by an insured
d) The indemnity must always be in the form of a sum of money; no other method is permitted by law |
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Definition
| d) The indemnity must always be in the form of a sum of money; no other method is permitted by law |
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Term
3. The majority of insurance companies use independent brokers to sell their insurance policies to the public. Which of the following statements does NOT apply to this system of distribution?
a) Independent brokers are employees of the insurance companies they represent
b) Independent brokers receive commissions from their insurers for the business they produce
c) Independent brokers can represent more than one insurance company
d) Independent brokers own all of their client files |
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Definition
| a) Independent brokers are employees of the insurance companies they represent |
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Term
4. When dealing with financial risk of a person has several options available. In your opinion, which of the following is the best option for most people?
a) Avoidance of risk
b) Retention of the risk
c) Controlling the risk
d) Transfer of the risk |
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Definition
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Term
5. Risk as the "chance of financial loss" can be classified as either speculative or pure. Which of the following best describes the meaning of pure risk?
a) There is no chance of financial loss
b) There is a chance of financial gain
c) Financial loss and financial gain are both present
d) There is only the chance of financial loss with no chance of profiting from it |
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Definition
| d) There is only the chance of financial loss with no chance of profiting from it |
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Term
6. A contract is legally enforceable only when all legal elements are present. Only an insurance contract contains the following element:
a) Genuine Intention
b) Legality of the object
c) Consideration
d) Indemnity |
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Definition
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Term
7. "Consideration" is required of all parties to a contract. Consideration means:
a) Thinking about purchasing insurance
b) An agreement by the insurer to treat the insured fairly
c) An exchange of something of value between the parties
d) A commitment by the broker to represent an insurance company |
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Definition
| c) An exchange of something of value between the parties |
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Term
8. Legal capacity of the parties is an important element to a contract. Only the following party has the legal capacity to enter into a contract of insurance.
a) Sweet Cravings Bakery
b) Tools 4 U Enterprises
c) Mario Montana Sportswear Ltd.
d) Jack Daniels a.k.a Jacks Liquors |
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Definition
| c) Mario Montana Sportwear Ltd. |
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Term
9. Insurance brokers are often asked to provide a binder to insured. A Binder is:
a) An insurance policy issued by the broker
b) A cover for an insurance manual
c) When a broker has committed an insurer to a contract of insurance on a risk
d) Never legal when it was given orally |
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Definition
| c) When a broker has committed an insurer to a contract of insurance on a risk |
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Term
10. All changes to an existing insurance policy must be in writing. Which document does the insurer issue when an insured has agreed to a change in the terms of the policy?
a) A rider
b) An endorsement
c) A binder
d) A floater |
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Definition
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Term
11. In Canada, the General Insurance Industry is strictly regulated by federal and provincial statutes. The Provincial Government performs all of the following functions, except one. Pick the exception.
a) Supervising the terms and conditions of insurance contracts
b) Establishing premium levels for insurance contracts
c) Licensing insurance companies to transact business in the province
d) Monitoring the financial stability of insurers that are not federally licensed |
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Definition
| b) Establishing premium levels for insurance contracts |
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Term
12. The financial solvency of insurers is a crucial matter. Solvency refers to:
a) Selling shares to shareholders
b) The ability of an insurer to pay all insured losses
c) The payment of commissions to brokers selling the policies of the insurer
d) Survival of the fittest |
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Definition
| b The ability of an insurer to pay all insured losses |
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Term
13. Both, insurance companies and brokers are considered fiduciaries. Under the Insurance Act the fiduciary responsibility of a broker requires that:
a) The broker must regularly remit the collected premiums to the insurer
b) All policies not paid for within sixty (60) days of the effective date must be terminated
c) Unearned commissions are held in trust to be available should the policy be terminated before expiry
d) The full amount of the commission must be held in trust until the expiry of the policy |
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Definition
| c) Unearned commissions must be held in trust to be available should the policy be terminated before expiry |
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Term
14. The Insurance Act determines when a contract of insurance takes effect. Coverage commences at:
a) 12:01pm standard time at the address of the Named Insured
b) 12:01 am standard time at the address of the location of the risk
c) 12:01 am standard time at the address of the insurer
d) 12:01 am standard time at the address of the Named Insured |
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Definition
| d) 12:01 am standard time at the address of the Named Insured |
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Term
15. The Removal Clause requires the insurer to extend coverage to another location where the insured property is kept, even if this location is not stated on the policy. Only one of the following situations would qualify for this coverage:
a) The insured moved to a new residence (5) days ago and has not yet advised the insurer of the new location
b) The insured keeps furniture and fixtures in a rented storage locker because there is no more room at the principle residence
c) The insured moved personal property to a storage facility to protect it from loss because of an encroaching forest fire
d) The insured keeps some personal property at her seasonal dwelling but only during the summer months |
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Definition
| c) The insured moved personal property to a storage facility to protect it from loss because of an encroaching forest fire |
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Term
16. When the insurer has indemnified the insured for a loss caused by a third party, the insurer has the legal right of recovery from that party. This legal process is referred to as:
a) Arbitration
b) Restitution
c) Subrogation
d) Mediation |
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Definition
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17. The Insurance Act provides that a policy insuring the peril of "fire" must also include coverage for:
a) Windstorm and Lightning
b) Lightning, including damage to electrical appliances and devices
c) Lightning and all types of Explosion
d) Explosion of natural, coal or manufactured gas and lightning, excluding damage to electrical appliances and devices |
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Definition
| d) Explosion of natural, coal or manufactured gas and lightning, excluding damage to electrical appliances and devices |
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Term
18. Only one of the following statements regarding Statutory Condition No. 1 - Misrepresentation is correct:
a) Any description of the property that proves to be incorrect constitutes a Misrepresentation
b) Withholding information about previous cancellations or refusal of insurance is not a Misrepresentation
c) Statements made by the applicant, which lead the insurer to believe that the risk is better than it actually is, are considered Misrepresentation
d) A Misrepresentation has no effect whatsoever on the coverage under the policy, even when the insurer is able to prove misrepresentation |
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Definition
| c) Statements made by the applicant, which lead the insurer to believe that the risk is better than it actually is, are considered Misrepresentation |
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Term
19. All of the following statements regarding the Statutory Conditions are true, except one. Pick the exception:
a) The insurer has an obligation only to those parties whose name appears on the Declarations Page and who can prove insurable interest
b) A "Material Change" is considered a change that alters the risk in a way that greatly increases the potential for some losses
c) When a loss is caused directly by an unreported Material Change, the insurer has the right to deny the claim
d) As long as the insured reports a Material Change promptly, the insurer rarely charges an additional premium. |
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Definition
| d) As long as the insured reports a Material Change promptly, the insurer rarely charges an additional premium |
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Term
20. Your client has requested the termination if his insurance policy. You advise your client of the provisions of Statutory Condition No. 5 - Termination. Which of the four provisions stated below is wrong?
a) Written request for termination signed by all persons stated on the policy must be provided to the insurer
b) Your client does not have to give the insurer any notice prior to the requested cancellation date
c) As the insurer has the right to charge the insured administrative costs to process the cancellation, the premium refund is calculated on a short-rate system
d) When the insured terminated the policy, the insured is not entitled to a premium refund |
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Definition
| d) When the insured terminated the policy, the insured ins not entitled to a premium refund |
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Term
21.In the event of a claim there are also a number of Statutory Conditions that affect both the insurer and the insured. One of the following statements regarding these conditions is incorrect. Select the statement that is incorrect:
a) the insured must provide the insurer with a Proof of Loss as soon as practicable
b) In the claim the insured included an article she did not even own, therefore, the insurer will only pay for those articles for which the insured can prove ownership
c) When the insurer opts for a cash settlement, payment must be made to the insured within sixty (60) days after receipt of the Proof of Loss or less, if the contract provides for a shorter period
d) If the insurer denies a claim and the insured wishes to sue the insurer, legal action must be taken within one year after the date of loss |
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Definition
| b) In the claim the insured included an article she did not even own, therefore, the insurer will only pay for those articles for which the insured can prove ownership |
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Term
22. All of the following statements apply to the Statutory Conditions, except one. Pick the exception:
a) After a loss has been reported, the insurer has the immediate right of access and entry to the property to investigate the loss
b) When the insurer elects to repair or rebuild the damaged property, it must give written notice to the insured within thirty (30) days after receipt of the Proof
c) When the insured is unable to notify the insurer of a loss and provide Proof of Loss, an agent of the insured is permitted to give notice and proof
d) Even if the insured had a reasonable chance to protect property from loss but failed to do any such thing, this usually does not affect the claim settlement |
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Definition
| d) Even if the insured had a reasonable chance to protect property from loss but failed to do any such thing, this usually does not affect the claim settlement |
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Term
23. The role of agents and brokers is to serve as an intermediary between the client and the insurer. Which of the following best reflects the duties of the broker?
a) A broker acts exclusively in the best interest of the client
b) A broker must always place insurance with the insurer that charges the lowest premium
c) A broker must always present the client's risk truthfully and disclose all material facts to the insurer
d) A broker does not owe any duty to the insurer he or she represents |
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Definition
| c) A broker must always present the client's risk truthfully and disclose all material facts to the insurer |
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Term
24. The law requires that insurance brokers exercise "reasonable skill, care and diligence" in carrying out their duties. Failure to do so can result in an Errors and Omissions claim against the broker. The main reason for Errors and Omissions claims is due o:
a) Providing the client with coverage he doesn't need
b) The failure to properly identify the client's loss exposures and offering the required coverages
c) The failure to cancel the policy when requested by the insured
d) A violation of the Agency Agreement |
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Definition
| b) The failure to properly identify the client's loss exposures and offering the required coverages |
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Term
25. An Underwriter is required to perform numerous tasks, however, the primary function of an Underwriter is to:
a) Select those risks that are most likely to be profitable to the insurer
b) Bind coverage on all risks the insurer accepts
c) Set the premium rates mostly for commercial risks
d) Process cancellation certificates and issue premium refund cheques |
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Definition
| a) Select those risks that are most likely to be profitable to the insurer |
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Term
26. Determining whether a risk meets the criteria for insurance the Underwriter must assess the hazards that could cause a peril to occur. When checking into an applicant's prior claims history or financial condition the Underwriter is concerned about the existence of claims history or financial condition the Underwriter is concerned about the existence of:
a) Other parties with an insurable interest
b) Abnormal physical hazards
c) A moral hazard
d) Smoking material on the premises |
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Definition
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Term
27. Property policies are designed to insure "Direct Damage" only. Two months ago, a fire caused substantial damage to an apartment building your client owns and he was shocked when the adjuster explained that a portion of the loss would not be paid out under this policy. Which part of the loss is not covered by the property policy?
a) Damage to the building's roof caused by fire fighter's axes to dampen the fire
b) Water damage to the entire structure to halt the spread of and extinguish the fire
c) Heat damage to the siding of the undamaged part of the building
d) Loss of rental income from the tenants who left because the building was unsafe after the fire |
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Definition
| d) Loss of rental income from the tenants who left because the building was unsafe after the fire |
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Term
28. All property policies contain conditions; insurers may also include warranties. The following provisions, except one, apply to conditions and warranties. Select the exception:
a) A condition is a clause in a policy that requires the insured to do or not do something
b) A warranty is a promise made by the insured that certain facts are truly as they are represented and will remain so for the duration of the policy
c) A breach of a condition does not result in the denial of a claim so long as the loss was not caused by such a breach
d) A breach of warranty by the insured has the effect that the insurer will not pay a claim when this breach directly caused the loss |
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Definition
| d) A breach of a warranty by the insured has the effect that the insurer will not pay a claim when this breach directly caused the loss |
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Term
29. Property policies exclude certain types of property. All of the following properties are generally excluded, except one. Select the exception:
a) Money and securities
b) A building that to the insured's knowledge has been vacant for more than 15 days
c) Automobiles and other motorized vehicles
d) Books of account |
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Definition
| b) A building that to the insured's knowledge has been vacant for more than 15 days |
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Term
30. The following perils, except one, are also excluded under property policies. Select the exception:
a) Lightning, including lightning damage to electrical devices
b) War and Nuclear Incident
c) Earthquake and Flood
d) Books of Account |
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Definition
| a) Lightning, including lightning damage to electrical devices |
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Term
| to be continued.... just taking a break to actually study :) |
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