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Fundamentals of Insurance - Practice
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Automobile insurance policies are subject to statutory conditions. One such condition requires that when there has been loss or damage to the insured automobile, the most immediate requirement upon insured is: a. To notify the repair garage b. To notify the insurer within 30 days c. To protect the automobile from further loss d. To make a full written report to their insurer - Correct Answer-c. To protect the automobile from further loss Physical damage coverage for automobiles rented in the same of an individual can be added to the insureds automobile insurance policy by the SEF No. 27 Legal Liability for damage to non-owned automobiles endorsement. All of the following coverage provisions apply to this endorsement, except one. Pick the exception: a. Coverage is for the same perils as are insured under the insureds automobile insurance b. Coverage is restricted to a citrine type of automobile c. Coverage is subject to a maximum of $50,000 in any one occurrence d. No more than one such automobile may be in the insureds or their spouses care, custody or control at any one time - Correct Answer-c. Coverage is subject to a maximum of $50,000 in any one occurrence The major function of insurance is: a. To reduce the cost of the losses b. To share the losses of the few among the many c. The safeguard the interest of mortgages d. To serve as a basis of existing credit system - Correct Answer-b. To share the losses of the few among the many A peril if best defined as: a. The chance of a loss b. The occurrence of a loss c. The cause of a loss d. The result of a loss - Correct Answer-c. The cause of a loss
Indemnify means: a. Returning the premium of the insured b. Restoring the insured's to the same financial position as they were in immediately prior to the loss c. Paying the insured's the face amount of the policy d. Restoring the insured's to the same financial position as they were - Correct Answer- b. Restoring the insured's to the same financial position as they were immediately prior to the loss Property insurance contracts are designed to pay for loss or damage arising out of the happening of a specific event. Only the following statement regarding the events insured by property insurance contract is correct: a. The event must be a future event and it must be accidental b. The event may happen with the co-operation of the insured c. The event may happen with the intent of the insured d. The event may occur accidentally or be caused deliberately by the insured - Correct Answer-a. The event must be must be a future event and it must be accidental All contracts require that five elements be present if the contract is to be enforceable by law. An insurance contract is enforceable only if it contains the following three additional interest: a. Insurable Interest, Utmost Good Faith b. Insurable Interest, Consideration, Indemnity c. Insurable Interest, Indemnity, Utmost Good Faith d. Insurable Interest, Indemnity, Genuine Intention - Correct Answer-c. Insurable Interest, Indemnity, Utmost Good Faith If your clients do not advise the insurer of previous losses when required to do so, they have violated an essential principle of insurance contracts. This principle is: a. Legality of Object b. Utmost good faith c. Insurable Interest d. Indemnity - Correct Answer-b. Utmost good faith To bind a risk means: a. That the broker has committed an insurer to provide a contract of insurance on the subject matter under discussion b. Finding a company willing to give a quote on a risk c. Getting underwriting information from a client
b. Is required by law to cover fire, windstorm, and lightening c. Covers fire, explosion, and windstorm d. Is required by law to cover at least fire, lightening, and specified types of explosions - Correct Answer-d. Is required by law to cover at least fire, lightening and specified types of explosions Your clients recently burnt a large pot roast when a fire broke out in their kitchen oven. This loss to the roast is considered to be a result of: a. Direct fire b. Indirect fire c. Hostile fire d. Friendly fire - Correct Answer-d. Friendly fire Statutory conditions found in all policies of "fire" insurance: a. Outline the duties and responsibilities of the insured and the insurer b. Specify the coverages provided c. State the rights of third parties d. Are not expressly required by law - Correct Answer-a. Outline the duties and responsibilities of the insured and the insurer When an insured knowingly fails to reveal all material information when applying for insurance and their is a subsequent loss under the policy, the insurer: a. Must pay the insured's claim b. Must continue the policy until expiry, but may choose not to renew it c. May void the policy only if it is able to show that the misrepresentation was directly linked to the loss d. May sue the insured for misrepresentation - Correct Answer-c. May void the policy only if it is able to show that the misrepresentation was directly linked to the loss In the following case, the insurer must give consent to transfer an existing insurance contract: a. When the insured's sell their home and the new owners want to continue the existing policy b. When there has been a change in title to the insured's property after the death of the insured c. When there has been an authorization assignment under the bankruptcy act d. When the insured becomes insane and title to the insured property is given to another by order of the court - Correct Answer-a. When the insured's sell their home and the new owners want to continue the existing policy The statutory conditions provide that the insured must promptly notify the insurer of any material change. A material change is one which:
a. Results in damage to goods caused by their undergoing a process involving the application of heat b. Due to a bylaw change, provides for use of materials inferior to those that existed at the time the insurance policy was purchased c. Results in damage to buildings/contents caused by alterations or additions d. Introduces a new feature which increases the chance of loss - Correct Answer-d. Introduces a new feature which increases the chance of loss Your clients insurance policy was recently cancelled for non-payment of premium, six days after the notice of termination was mailed by the insurer, your client has a loss: a. The loss would not be covered because not premium has been paid b. The mailing of the notice automatically cancels the policy after five days c. The loss is covered because 15 days notice must be given by registered mail d. The loss would be covered but only in proportion to the time the policy was in effect - Correct Answer-c. The loss is covered because 15 days notice must be given by registered mail Your client recently had a burglary, in the documents filed with the insurance company, she made a claim for a $12,000 TV set she never had. This is an example of: a. Breach of Warranty b. Fraud c. Misrepresentation d. Material Change - Correct Answer-b. Fraud Your clients building is insured against fire, with loss payable to Dogwood trust company as a mortgagee. The property is destroyed by fire, but, before he can file proof of loss, your client dies without a will and with no one to look after his affairs. A proof of loss may ne filed by: a. No one b. The insurance Company c. The superintendent of insurance d. The dogwood trust company - Correct Answer-d. The dogwood trust company Your client has made application for appraisal. The intent of the appraisal process is to settle the dispute between your client and the insured regarding: a. The amount of the settlement being offered b. The denial of insurance coverage under the policy c. The right of the insured to purchase the salvage after an insured loss d. The premium change for coverages being provided by the insurer - Correct Answer- a. The amount of the settlement being offered
d. All risks of direct physical loss or damage, subject to the policy conditions and exclusions - Correct Answer-d. All risks of direct physical loss or damage, subject to the policy conditions and exclusions Property policies contain two types of exclusions - one for property excluded and one for perils excluded. All of the following property items are normally excluded by property policies, except one. Pick the exception: a. Automobiles b. Yard and maintenance equipment c. Money and securities d. Property which has been vacant for more than 30 consecutive days - Correct Answer-b. Yard and maintenance equipment Under a policy of insurance, a "deductible" is: a. payable by the insureds only if they are responsible for the loss b. Payable by the insured's only when the insurer disputes the amount of its liability for the loss c. The amount the insured is required to absorb for each loss before receiving any payment from the insurer d. The responsibility of the broker - Correct Answer-c. The amount the insured is required to absorb for each loss before receiving any payment from the insurer Every property insurance policy describes the method used to pay claims. Normally, the insurer will pay the lesser of the three amounts in the event of a claim. One factor which does not enter into this calculation is: a. The actual cash value of the property b. The original cost of the property c. The insured's interest in the property d. The policy limit - Correct Answer-b. The original cost of the property Your clients furniture store is insured under a commercial property insurance policy to which a replacement cost endorsement is attached. To qualify for settlement on a replacement cost basis. The insured must comply with all of the following obligations, except one. Pick the exception: a. Replacement shall be effective by the insured with due diligence and dispatch b. Replacement shall be on the same site on an adjacent site c. Replacement shall commence within 45 days of the insurer agreeing to pay the loss d. Payment of the loss on a replacement cost basis shall be provided only after the insured has actually repaired or replaced the property - Correct Answer-c. Replacement shall commence within 45 days of the insurer agreeing to pay the loss The chief advantage of replacement cost coverage is:
a. No deductible for depreciation b. Only limited depreciation is charged to the insured c. The insured receives a settlement based on replacement cost, even if the property is not replaced d. It removes the effect of the bylaws exclusion - Correct Answer-a. No deductible for depreciation Which of the following statements is true when a standard mortgagee clause is attached to the policy? a. The insurer could be called upon to pay a loss of the mortgagee, even though the insured violated a policy or other condition b. The insurer can reduce the coverage at any time at the request of the insured, even if such changes prejudice the position of the mortgagee c. The insurer may cancel the policy at any time by providing the mortgagee with seven days notice of cancellation by registered mail d. Neither the insured nor the insurer may cancel the policy until the mortgage has been paid off - Correct Answer-a. The insurer could be called upon to pay a loss of the mortgagee, even though the insured violated a policy or other condition The personal property of all the following persons would be insured under the homeowners form, except one. Pick the exception. a. Grandmother living with the insured b. Roomers or boarders living with the insured c. Daughter over 21 years of age living with the insured d. Common-Law spouse who has lived with the insured for five years - Correct Answer- b. Roomers or boarders living with the insured The homeowners forms contain a number of "extensions of coverage". All of the following statements, respecting these coverage extensions are true, except one. Pick the exception. a. Coverage is provided for lock replacement when the keys to the insured dwelling have been lost or stolen b. Property which is necessarily removed to protect it from loss or damage is insured for 30 days or until the expiry of the policy. Whichever occurs first c. If the amount payable for loss, including expenses for debris removal, is greater than the amount of insurance, an additional 5% of that amount will be available to cover debris removal expenses d. Coverage is automatically extended for a minimum of 30 days to insure personal property while in transit to and at another location in Canada which is to be occupied by the insured's as their principal dwelling - Correct Answer-a. Coverage is provided for lock replacement when the keys to the insured dwelling have been lost or stolen
b. Pays all costs as incurred by the insured for food, transportation, and accommodations after an insured loss c. Pays those increased costs for items such as food, transportation, and accommodations which are incurred by the insured after an insured loss, so long as such costs do not serve to increase the insured's standard of living d. Pays all mortgage payments which the insured must continue to make after an insured loss - Correct Answer-c. Pays those increased costs for items such as food, transportation, and accommodations which are incurred by the insured after an insured loss, so long as such costs do not serve to increase the insured's standard of living Personal property insured on the homeowners form is covered: a. Only at the location described on the coverage summary page b. Anywhere in the world c. Anywhere in North America excluding Mexico d. Anywhere in Canada, Mexico, or the United States - Correct Answer-b. Anywhere in the world Under the homeowners basic form (IBC 1151), only the following loss is covered: a. Water hammer b. Damage to a garage door caused by a vehicle driven by insured c. Smoke damage due to the faulty operation of the basement furnace d. Sewer backup - Correct Answer-c. Smoke damage due to the faulty operation of the basement furnace Loss caused by freezing during the usual heating season is covered by homeowners forms. However, when the insureds are away for more than four consecutive days, the must: a. Advise the insurer that the dwelling building will be occupied b. Obtain written permission from the insurer for continuation of coverage during the period of no-occupancy c. Ensure all windows and doors are securely locked and heating maintained d. Arrange for a competent person to enter the dwelling daily to ensure heating is being maintained or shut the water supply off and drain all pipes and appliances - Correct Answer-d. Arrange for a competent person to enter the dwelling daily to ensure heating is being maintained or shut the water supply off and drain all pipes and appliances The windstorm or hail coverage provided by the homeowners basic form (IBC 1151) would pay for the following loss or damage only: a. Damage to dwelling building shingles b. Damage to satellite dish c. Damage to interior of building by rain which entered through an open window
d. Damage to insureds waterfront dwelling caused by high waves, which resulted directly from a severe thunderstorm - Correct Answer-b. Damage to a satellite dish While the glass breakage coverage provided by the homeowners basic form (IBC 1151) is very broad, there is no coverage for: a. Damage to glass in picture window due to shifting of the ground or other earth movement b. Damage to lamp which broke when accidentally knocked off night stand c. Damage caused by vandals to glass in garage door d. Damage to glass in screen door which broke when insureds son accidental shot a hockey puck through it - Correct Answer-b. Damage to lamp which broke when accidentally knocked off night stand All of the following coverages are provided to commercial property insured under the broad form, except one. Pick the exception: a. Smoke from agricultural smudging or industrial operations b. Collapse of building due to snow or ice load c. Loss or damage caused by land vehicles d. Theft of stock and equipment - Correct Answer-a. Smoke from agricultural smudging or industrial operations Generally, the fire rate charged by the insured on a commercial property insurance will not be effected by: a. The type of building construction b. The occupancy or use of the building by the insured c. The level of available fire protection d. The type of burglar protection system installed - Correct Answer-d. The type of burglar protection system installed The named perils form and broad form insure the property of a business. All of the following items would be insured within the limit of insurance selected for "stock" except one. Pick the exception: a. Advertising materials b. Packing and wrapping materials c. Leased photocopier d. Similar property of others for which the insured is legally liable - Correct Answer-c. Leased photocopier The named perils form and broad insure the property of a business. Your client, a dentist, is a tenant in a building formerly occupied by a hairdresser. When her took possession of the building, the dentist made several building improvements and
The locked vehicle warranty requires that: a. The vehicle be equipped with a theft deterrent system b. The vehicle locked between the house of 9:00 p.m. and 6:00 a.m. and when not in motion c. The vehicle containing the property insured be properly licensed and registered by the highway traffic board d. Visible signs of forcible entry must be present before the insurer will agree to pay any claim for theft - Correct Answer-d. Visible signs of forcible entry must be present before the insurer will agree to pay any claim for theft Loss resulting from the taking of property by a person breaking into the premises is defined as: a. Theft b. Robbery c. Burglary d. Hold-up - Correct Answer-c. Burglary Crime policies define certain terms as they relate to coverage. The broadest meaning is given to: a. Burglary b. Theft c. Kidnapping d. Robbery - Correct Answer-b. Theft In addition to the coverage provided for the explosion of boilers and pressure vessels, boiler, and machinery policies also provide this important coverage: a. Wear and Tear b. Gradual Deterioration c. Mechanical and Electrical Breakdown d. Latent Defect - Correct Answer-c. Mechanical and Electrical breakdown The builders risk - Broad Form can be used to insure all of the following items, except one. Pick the exception: a. All materials and supplies entering into the completed project b. Value of landscaping c. Temporary building on project site d. Contractors tools and equipment - Correct Answer-d. Contractors tools and equipment The basic principle behind business interruption insurance is:
a. To restore the building to the condition it was in before the loss b. To find a place for the employees to work during the period that the business is out of operation c. Restore the income that would have been earned had the loss not occurred d. To maintain a higher level of operation during the period of repair than exsisted prior to the loss - Correct Answer-c. Restore the income that would have been earned had the loss not occurred Payment is made for as long as the business results are affected by the interruption, subject to specified limits. This statement is a characteristic of: a. Earnings form b. Profits form c. Extra Expense Insurance d. Broad Form - Correct Answer-b. Profits form Liability policies are concerned with matters of civil liability. Civil Law: a. Deals with wrongs against society b. Uses fines, penalties, probation or imprisonment as a means of enforcing its many rules c. Focuses on compensating the victim for the financial loss or damage suffered d. Deals primarily with settling disputes on contractual matters - Correct Answer-c. Focuses on compensating the victim of the financial loss or damage suffered All of the following "elements" must be present if your clients legal liability for a tort is to be established, except one. Pick the exception: a. The plaintiff was owed a legal duty b. The duty owed to the plaintiff was breached by the defendant c. The defendant's actions was the proximate cause of all damages d. The results of the defendants actions were unforeseeable - Correct Answer-d. The results of the defendants actions were unforeseeable "Negligence" is the most important tort in the study of liability insurance. Negligence is: a. Failing to use that degree of care which a reasonable person would use under the given circumstances b. Acting prudently, having regard to the circumstances c. Any deliberate violation of the law d. Aiding and abetting another person in the commission of felony - Correct Answer-a. Failing to use that degree of care which a reasonable person would use under the given circumstances The occupier of a property owes the greatest duty to care to:
a. Insure bodily injury and property damage caused to a third party b. Are not intended to insure injury or damage intentionally caused c. Provided for payment only when the insured is deemed to be legally liable d. Provide for the payment of compensatory punitive and exemplary damages - Correct Answer-d. Provide for the payment of compensatory punitive and exemplary damages Liability insurance policies provide coverage on an "occurrence" basis. An occurrence basis policy: a. Provides coverage only for a sudden and usual event b. Provides coverage for accidents including injury or damage caused by continuous and repeated exposure to substantially the same harmful conditions c. Provides excess insurance over the existing liability policies d. Provides coverage for bodily injury and property damage caused intentionally - Correct Answer-b. Provides coverage for accidents including injury or damage caused by continuous and repeated exposure to substantially the same harmful conditions The only expense that insured is entitled to incur on behalf of the insurer in respect to potential claim under a liability policy that is related to: a. First aid b. Legal Fees c. Interest payments from the date the judgement is rendered d. Amount of the judgement - Correct Answer-a. First Aid Supplementary payments include all of the following costs, except one. Pick the exception: a. Cost of establishing the insureds defense b. Court costs c. Transportation d. Meals and accommodations - Correct Answer-d. Meals and accommodations The liability coverage provided by homeowners form insure all of the following premises owned or used by the insured, except on. Pick the exception: a. Vacant farm land b. Family cemetery plot c. Vacant land purchased as a future dwelling site d. Land where independent contractor is building a single family dwelling for the insured
- Correct Answer-a. Vacant Farm Land The personal liability coverage provided on homeowners form are designed to: a. Insure the legal liability of private citizens for their actions
b. Insurer the legal liability of insured arising out of their business pursuits c. Insure the legal liability of insured arising out of the operation of all owned and non- owned automobiles d. Insure all exposures for which an insured might be legally liable - Correct Answer-c. Insure the legal liability of insured arising out of the operation of all owned and non- owned automobiles The voluntary payment for damage to property coverage provided under section 2 - liability coverage of the homeowners forms covers property damage intentionally caused by insureds: a. 12 years of age or under b. 18 years of age or under c. 21 years of age or under d. under the age of the majority, as determined in the province in which the insured resides - Correct Answer-a. 12 years of age or under The liability coverage provided by homeowners forms covers the insured's legal liability for a loss or damage to the premises of others which the insured is using or renting from all of the following, except one. Pick the exception: a. Water escape b. Smoke c. Vehicle Impact d. Explosion - Correct Answer-c. Vehicle Impact Liability coverage provided by the Homeowners form for motorized vehicles and watercraft is subject to special limitations. There is no coverage for bodily injury or property damage caused by an insured who operates the following automobiles or watercraft: a. a 14' watercraft owned by the insured and which is equipped with a 15 h/p outboard motor b. a watercraft which is equipped with a 220 h/p inboard-outboard motor and which purchased two weeks ago c. a 20 h/p riding lawnmower used exclusively on the insured's premises d. A motorized golf card owned by the insured while being used on the insured premises or adjacent walkway - Correct Answer-d. A motorized golf card owned by the insured while being used on the insured premises or adjacent walkway Liability coverage provided by homeowners form covers the insured's liability arising out of a certain business activities. Liability for bodily injury or property damage arising out of all the following business activities are automatically insured, except one. Pick the exception: a. Occasional rental of premises
b. Adding a warranty or condition to the insured's policy without informing them c. Charging a fee on an individual policy of insurance in excess of the premium charged by the insurer d. Making the insurance of an insurance policy conditional on the purchase of another insurance policy - Correct Answer-d. Making the insurance of an insurance policy conditional on the purchase of another insurance policy When licensees take improper advantage of a clients inexperience, lack of education, youth or lack of sophistication, they are in breach of this ethical standard: a. Competence b. Quality of service c. Integrity d. Confidentiality - Correct Answer-c. Integrity All of the following details are required to be shown on an application for automobile insurance, except one. Pick the exception: a. Number of people residing in the insured's household b. Particulars of the insured's automobile c. License, insurance and loss history d. Territory in which the described automobile will chiefly be used - Correct Answer-a. Number of people residing in the insured's household Under an application for automobile insurance: a. All drivers who will be using the described automobile must sign the application b. Only the applicant need sign the application c. No signature is required on the application d. The applicant's signature is required only when insuring leased automobiles - Correct Answer-b. Only the applicant need sign the application Financial responsibility laws in each province requires automobile owners to establish their financial ability to pay losses up the a certain minimum dollar limit. The minimum legislated limits of third party liability coverage requires to be carried in all provinces (except Quebec is): a. 50, b. 100, c. 200, d. 500,000 - Correct Answer-b. 100, When physical damage coverage by an automobile insurance policy, the deductible is applied only to the following cause of a loss: a. Collision or upset
b. Fire c. Lightening d. Theft of an entire automobile - Correct Answer-a. Collision or upset The general provisions, definitions and exclusions contained in automobile policies do not permit the use of the insured automobile for certain purposes. All of the following are excluded uses under the policy, except one. Pick the exception: a. The carrying of passengers for compensation for hire b. The carrying of explosive and radioactive material c. The carrying of clients or customers prospective clients or customers d. The lease or rental of the insured automobile - Correct Answer-c. The carrying of clients or customers prospective clients or customers There are a number of general provisions, definitions and exclusions that apply to the entire automobile insurance policy. The coverage provided by the automobile policy to losses occurring in all of the following territories except one, pick the exception: a. Northwest Territories b. USA c. Mexico d. Hawaii - Correct Answer-c. Mexico When an insured replaces an automobile designated in the policy or adds another automobile to others which are all insured by the same insurer, coverage is automatically provided for such newly acquired automobile for a maximum of: a. 7 days b. 14 days c. 21 days d. 30 days - Correct Answer-b. 14 days The SEF No. 20 loss of use endorsement contains all of the following provisions except one, pick the exception: a. Provides coverage only when the entire automobile has been stolen b. Covers expenses incurred for taxicabs or public means of transportation c. Coverage provided are subject to a daily and occurrence limit d. The time in which coverage starts varies with the cause of loss - Correct Answer-a. Provides coverage only when the entire automobile has been stolen Automobile insurance policies are subject to statutory conditions. One such condition prohibits insureds from driving or operating an automobile in all of the following circumstances, except one. Pick the exception:
