Insurance Concepts and Terminology, Exams of Insurance Economics

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RIBO General Insurance Exam- Solved

Which of the following provinces offer only government compulsory auto insurance? - ANS-British Columbia, Manitoba and Saskatchewan The definition of ordinary negligence? - ANS-Is the failure to do what a reasonable person would do in a given situation. A broker/agent is responsible for what? - ANS-Writing only those classes of business acceptable to his/her insurer. An insurance contract contains all of the elements of any other legal contract. One element that must also be contained in a valid contract of insurance is what? - ANS- Utmost good faith. C-82 Study 2 ("In it's underwear") The definition of a physical hazard would best be described as what? - ANS-Slippery floors, C-81 Study 1 Insurance is what? - ANS-The undertaking by one person to indemnify another person against loss or Liability for loss in respect of a certain risk or peril As far as reinsurance is concerned, the amount one party reinsures with another is called what? - ANS-Its cession True or False: The absence of true mutual understanding with respect to a contract will not effect the legality of the contract once it has been signed - ANS-False Which of the following auto coverage responds regardless of fault? - ANS-Accident Benefits, A B Pays Regardless of Fault What is the name of the legal process used by insurers when collecting from a responsible 3rd party? - ANS-Subrogation True or False: Statutory Conditions can be changed at the request of the insured to decrease minimum legislated coverage available. - ANS-False: Set out by Insurance act Which of the following statements about co-insurance is true? - ANS-They are designed to encourage the insured to carry adequate amounts of Insurance. They force the insured to bear a portion of every loss if under insurance exists. It is mostly applied to commercial policies. Which of the following helps insurers determine the probability of insured losses in the future? - ANS-Past loss histories (this is Step 2 in order to determine rates and premiums)

When an insurer intentionally issues a policy that differs from the application. - ANS-It must notify the insured in writing the ways in which it differs from the application. 3 things must occur notify, writing, silence is acceptance What would not affect the rate on a property insurance policy? - ANS-Length of time applicant has been in business. (Not on the application) Under RIBO regulation 991, section 15, a broker would not be considered to be guilty of misconduct if: - ANS-The broker compares line for line, a potential customer's present insurance coverage with that of a competing company, which he or she represents, in order to point out the benefits of his proposed policy coverage. Of the following, the person who most clearly has an insurable interest in an automobile is - ANS-The person who actually owns the automobile Extension insurance is available in provinces having government automobile insurance plans. - ANS-It may be used to increase limits of insurance and/or reduce deductibles. Which of the following types of insurance does not belong under the heading of General Insurance? - ANS-Life Insurance What do Applications for insurance policies do? - ANS-Provide details for assessing and rating a risk. True or False: Third parties are not a party to the policy. - ANS-True True or False: Every member must maintain errors and omissions insurance of at least $100,000 for any one occurrence. - ANS-False: Errors and Omissions at 1 Million and Fidelity at 100 K A member who places insurance with an insurer unlicensed to trade insurance in Ontario must? - ANS-Obtain the written consent of the member of the public whom the broker services to the effect that they are aware their coverage will be carried by an unlicensed insurer in the province. Which of the following is NOT a stipulation of the broker's Code of Conduct as found in RIBO regulation 991, section 14? - ANS-All members shall assist in preventing the authorized practice of their occupation. Under the RIB act definition, an insurance broker is all of the following, except: - ANS-A person who arranges any payment plan for the premium due under a contract of insurance. E R tells us payment plans acceptable we simply hold in trust Where the RIBO Discipline Committee finds a member guilty of misconduct, it may do all of the following except: - ANS-Set fines of up to $10,000 and/or imprison the member for up to 12 months.

Under a fire policy the insurer will pay what? - ANS-The least of the interest of the insured in the property. The property's actual cash value at the time of the loss. The amount of insurance purchased which is applicable to the item lost or damaged. The insured decides to renovate their home. As a result they have to obtain temporary residence until the work is completed. The Homeowner policy will pay what? - ANS- None of the expenses. (not insured peril) A property is insured for $100,000 and valued at $150,000. There is a 90% coinsurance clause. A loss of $90,000 occurs. The insurer will pay: - ANS-$66,667 (100,000/135,

• 90,000= $66,667) Under a Fire and Extended Coverage policy which item is not included? - ANS- Earthquake. When a standard Mortgage Clause is attached to a policy: - ANS-The insurer could be called upon to pay a loss to the Mortgagee even though the insured has violated a condition of the policy. The insured's dining room furniture was badly damaged when a fire broke out. The claim was settled by paying an amount equal to the replacement cost minus physical depreciation. This illustrates the application of: - ANS-Actual cash value. (Replacement cost - depreciation) Under the fire statutory condition Entry-Control-Abandonment the insurer is not entitled to: - ANS-The control or possession of the property damaged. Which of these situations would be covered by the RIBO Homeowner's Form? - ANS- Pipes freeze and burst causing water damage while the insured is away overnight. ( consecutive days no coverage) Under a Personal Articles endorsement what happens? - ANS-Valuations will be required on those items insured on a valued basis. (valued basis must provide on app) You have 3 candlesticks, 2 of which are stolen and one is being repaired. Which clause would prevent you from claiming for all three? - ANS-Pair and Set. You have a Comprehensive Homeowners policy with a limit of $200,000 for Coverage A and a $250 deductible. In which of the following circumstances would your policy apply?

• ANS-Your whole house burns down; the insurer will pay $199,750 plus debris removal. Under the Fire Statutory conditions, should an insurer choose to replace a damaged property instead of making payment for it, the insurer must give written notice of its intention - ANS-Within 30 days of receiving proof of loss. (pg. 62)

True or False: Since a contract of insurance is said to be a personal contract, people who sell a business can under no circumstance sell or assign to the purchaser the insurance on it. - ANS-False (if they meet 2 conditions) True or False: A friendly fire is a hostile fire when it leaves the place provided for it. - ANS-True What is the number one requirement to qualify for a Comprehensive Homeowners policy - ANS-The owner must live in the dwelling. Exclusions under all-risks policies can be divided into several different groups. Which of the following is not one of those groups? (5 Categories) - ANS-Losses that are accidental (why we buy insurance) An extended coverage endorsement attached to a fire policy does what? - ANS-Adds coverage for more perils. Within the RIBO homeowner's form, the statement "The limits [listed below] do not apply to any claim caused by a Specified Peril" means: - ANS-The limits apply if the claim is due to theft. (Not a Specified Peril therefore limits apply) Under the RIBO homeowner's form, what type of loss is not required to be reported to the police? - ANS-Riot. (The police should already know about this) (pg. 63) Under the RIBO homeowner's form, if it is necessary to move property to protect it from loss, which one of these statements is true? - ANS-The amount of coverage available for 30 days or until the policy expires, whichever occurs first. True or False: in regards to your Homeowners Liability coverage for owned watercraft, acquired after the effective date of the policy. Damage to the boat itself is covered. - ANS-False, this is covered under section one The Voluntary Property Damage section of a Personal Liability Policy excludes damage caused intentionally by an insured over the age of - ANS-12 years (Coverage G) All of the following are exclusions under your Homeowners Liability coverage except: - ANS-The ownership, use or operation of any motorized vehicle, trailer or watercraft. (Does not cover claims for Auto, SN, watercraft over the allotted HP) Special damages are for out of pocket items such as medical expenses, loss of earnings or damage to property, which do not have to be substantiated, True or False. - ANS-False Personal Injury is? - ANS-Injury to a person's character.

Is this a correct definition under Section II- Liability Coverage of a Homeowners Policy: "Property Damage" means physical damage to, or destruction of intangible property - ANS-Incorrect (Tangible pg. 17) Is a family cemetery plot considered premises under your Homeowners Liability? - ANS- Yes, under section 2 Under Third Party Liability the insurer does not agree to do what? - ANS-Reimburse the insured for chiropractic costs. You cant sue yourself. Under the Commercial General Liability policy, aggregate refers to maximum total amount that will be paid out for all occurrences. T or F - ANS-True An Umbrella Policy does what? - ANS-Provides excess insurance over another policy. There are three exclusions on a Glass Policy. These are: - ANS-Fire, war, nuclear damage. Fidelity insurance is really what kind of insurance? - ANS-Dishonesty Insurance What would be considered the key difference between the "Profit" and "Earnings" approach to Business Interruption insurance? - ANS-The potential period of indemnity. Lawyers, Accountants, Insurance Agents, Travel Agents and others providing expert service to the public would be best served by: - ANS-Errors and Omissions. (you need this as a broker) A type of insurance which protects those who work on the human body or on animals i.e., doctors, hairdressers, and veterinarians is: - ANS-Malpractice (working on the human body) A Fiduciary is: - ANS-A person to whom the administration of something is entrusted for the benefit of another. Under the Third Party Liability coverage, the insured is entitled to: - ANS-Court costs even if they are paid over the policy limits. (Always above and beyond) The condo unit owner owns what in regards to Condominium insurance? - ANS-The Condo Unit owner owns the space inside the unit, the contents and improvements by the owner. When there has been an auto loss, the insured is required to: - ANS-Protect the automobile from further loss. 90 Days Under the OAP1, the Loss of Use Due to Theft provision - ANS-Won't cover costs until 72 hours after the theft has been reported.

The minimum limit of automobile liability allowable by law in the province of Ontario is $200,000. In the event of claims for both bodily injury and property damage which exceeds the limit, the money will be apportioned: - ANS-190,000 to Bodily Injury and 10,000 to Property Damage (priority of payments) Lawsuits for Non-economic loss due to an automobile accident are subject to which of the following? - ANS-$30,000 per person deductible. Under the OAP1, the Statutory Condition: Termination does not state - ANS-The actual amount of premium to be refunded. You have an automobile with liability coverage for $500,000 under one policy (A), and another automobile with liability coverage for $1,000,000 under a separate policy (B). How much will policy B pay if you are involved in an accident involving an automobile you do not own? - ANS-2/ What is considered "persons insured" under Uninsured Automobile coverage? - ANS- The spouse of the insured when hit by an uninsured vehicle while walking the dog. T or F: When terminating an Auto Policy, The insured can terminate coverage anytime subject to returned premium on a pro-rata basis - ANS-False (Short rate cancellation) Which losses are covered under the specified perils section of the policy? - ANS-Hail damage to the roof of the automobile Are Custom duties levied when the insured vehicle suffers a blown motor while vacationing in the U.S.A. necessitating replacing the motor covered under the additional benefits? - ANS-No, this is an example of wear and tear If you have comprehensive coverage with the standard $300 deductible, the deductible will apply to all of the following losses except what? - ANS-Lightning damage to your vehicle. (fire and lightning have no deductible) T or F: In regards to the risks insured by the Facility Association, A broker can assign facility business to any insurer? - ANS-False All perils provides coverage for all of the following situations except - ANS-Loss or damage that results when the insured sells the auto to a stranger whose cheque bounces and then the insured reports it as stolen. (7.2.1#5 not covered) In which situation would your policy apply if an accident occurred? - ANS-A taxi driver friend borrows your vehicle with permission to take his children to school. (Consent personal use)

Details of past claims experience are required on an automobile application for how many years? - ANS-A period of 6 years for the applicant and any other drivers living in the same household. An Ontario Automobile policy covers an insured's auto for accidents occurring where? - ANS-In Canada, the USA and on a vessel traveling between ports of these two countries. OAP 1. T or F: Direct Compensation-Property Damage (DCPD) Liability must be established with respect to who is at fault in an accident. - ANS-True You may be guilty of misrepresentation when you sign an Ontario Application for Automobile insurance and you fail to disclose that? - ANS-The auto is regularly used to deliver pizza in addition to being used for pleasure as an example. An elderly Toronto resident, who does not own an auto but whose spouse does, sustains a broken hip when hit by an unidentified hit and run driver while crossing the street at a designated cross walk. Under the Insurance act, this person may collect benefits from? - ANS-The insurer of the spouses' vehicle. (Always own policy first) An unidentified automobile is one whose? - ANS-Whose driver or owner cannot be determined. (5.1.3) The main purpose of the Family Protection Endorsement (OPCF 44) is to provide coverage for who? - ANS-For an insured person and his/her dependent family when a third party is at fault, but is inadequately insured to cover the insured's claims. Pg 67 A hit and run driver injures a cyclist, who does not own an auto, what can the cyclist do?

• ANS-The cyclist can claim for injuries against the Highway Victims Indemnity Fund. In the event of an accident involving loss or damage to the insured auto, the insured must do what? - ANS-Give notice in writing to the insurer with full particulars of the loss. Income replacement coverage under the OAP1 is limited in its coverage to? - ANS-70% of the injured persons gross weekly income, up to $400 a week. One of your clients asks how he can best keep down his insurance premium cost on an industrial complex that he owns, without jeopardizing his coverage. What would be the best course of action. - ANS-Implement loss prevention measures and improve the risk. The following has no limitation of amount payable under a homeowner's policy if damaged by fire? - ANS-Jewellery and furs. T or F: No coverage applies to temporary substitute vehicles. - ANS-False

OHIP provides coverage for number of days for medical treatment necessary when the insured is out of Canada. - ANS-212 Days T or F: From a travel health policy "Termination Date" means the point at which treatment utilizing the use of life support machines will discontinue and the patient will be left to perish. - ANS-False What is not excluded under a typical travel health policy? - ANS-The hospitalization of a traveler due to a "mugging" or other violent crime against them. What is a question that would most likely not affect the rate or premium charged for a travel health policy? - ANS-Has the insured ever been convicted of a criminal offence? Multi-carrier hotlines have made the claims payment processes much simpler for insurers. Costs are shared at the point of payment when an insured is covered by more than one carrier, They serve all of the following purposes except - ANS-Encourage customers to select a doctor or medical practitioner of their own choice rather than one suggested. Visitors to Canada need travel health insurance because: - ANS-Hospitalization costs for non-residents in Canada can reach as high as $2,800 a day. Visitors to Canada are not covered by provincial health care plans. And In some provinces, newly landed immigrants are subject to a waiting period before they are eligible for provincial health coverage. Ex-patriot insurance is best suited for which people: - ANS-People who reside in another country for periods over 212 days, or visitors to Insurance is - ANS-The undertaking of one party to indemnify the other in the event of a loss. The general purpose of the Liability coverage section is to give the insured coverage for: - ANS-Injuries caused to others when the Insured is found negligent. An insured owns a building valued at $200,000 and insures it for $140,000. The policy carries a 90% coinsurance clause. The building is damaged by fire to an extent of $50,000. How much of the loss will the insurer pay? - ANS-$38, T or F: Joint stock company is a profit making organization and is in effect owned by its shareholders. - ANS-True In many ways an insurance contract is a legal contract. One feature that it does not share with any other contract is: - ANS-Utmost Good Faith. Co-insurance is a clause that: - ANS-Encourages insurance to value.

When an insurer cancels they must: - ANS-Comply with the statutory conditions of the policy. The insured building has an ACV of $200,000 and was insured for $195,000. There is a 90% coinsurance clause on the policy. A fire does $200,000 damage. How much of the loss will the insurer pay? - ANS-$ 195, Rules and agreements concerning the binding of insurance coverage by Brokers are: - ANS-Set and agreed upon between the insurance company and the broker. A peril is an event which causes a loss to occur. Are Slippery stairs a peril? - ANS-Nope The primary function of insurance is: - ANS-Spread of risk Within a broker's/agent's office you may find which of the following functions being conducted - ANS-Premium collection. A loss that has already happened but the insurance company is unaware of it is: - ANS- AN IBNR. An assessment mutual collects funds by: - ANS-Having members sign a premium note to be drawn only if needed. A material fact is: - ANS-A fact that changes the insurer's decision regarding coverage or premium. When calculating the net-worth of an insurance company, what is not considered to be a liability? - ANS-Earned premiums. Is Transfer and consent agreement part of an insurance policy? - ANS-Nope A legal process by which an insurer who has paid a loss pursues any rights of recovery against a responsible third party is called: - ANS-Subrogation. If the insured is concerned that he/she may not be compensated adequately for a special possession, you as an agent or insurer may be able to offer a(n): - ANS-Valued contract. There are numerous reasons for an insurance company to reinsure, what is an incorrect reason: - ANS-Collect more money. When the insurer cedes 25% of a risk to a re-insurer and pays the re-insurer 25% of the total premium this is: - ANS-Proportional reinsurance. To provide education for members of the property - casualty insurance industry is the purpose of which organization? - ANS-Insurance Institute of Canada.

An insured has purchased more than one policy to cover his home; in the event of a loss the insurers will apply which processes to settle the claim: - ANS-Contribution. Canadian Insurance companies are federally regulated. The minimum amount of capital required to start up an insurance company is: - ANS-Ten million dollars The amount of Error & Omissions and Fidelity insurance every member must maintain is: - ANS-$1,000,000 & $100, 000. Business Interruption insurance may be described as coverage that will Protect the Insured for: - ANS-The indirect loss of income which results when there is a shutdown of this business due to occurrence of a peril insured against and normal operations cannot be carried on. T or F: A mortgagor is similar to a lessee - ANS-True Which of the following is usually excluded from an Electronic Data Processing Package policy? - ANS-Damage by electrical disturbances other than lightning Product Liability covers - ANS-When the product is no longer in the care and custody of the insured The unearned premium reserve fund is a fund for the protection of the public that: - ANS-Pays to a client the unearned premium if an insurer goes bankrupt or becomes insolvent. In general, when an insurance company indemnifies an insured, it tries to: - ANS-Put the insured back in the same financial position he was just prior to the loss occurring Is there insurable interest with a person who expects to inherit property on the death of a relative. - ANS-Nope In an insurance contract, the definition of consideration refers to: - ANS-The premium. Your insured's vehicle is in the shop being repaired and he/she would like to borrow a friend's car. What would you advise? - ANS-Provided the friend gives consent, the insurance the owner has on the vehicle is primary; however should there be a lack of coverage by the owner, the insured's policy will respond accordingly. T or F: The personal articles coverage includes protection for property newly acquired, providing there is at least one article of that particular type already covered on the floater schedule, subject to a stated maximum amount and for a specified period of time. - ANS-True

The raging fire burns a properly insured home to the ground. The limit of the policy was $175,000 which reflected the full cost of current construction for this home. The insured immediately begins construction of a new home on the vacant lot he had in the country.

• ANS-The insurer pays the actual cash value of the house less the deductible. Under the all risk homeowners/condo/tenant policy there is coverage for personal property temporarily removed: - ANS-For up to the policy limit specified for personal property. An insured may cancel his/her homeowner's policy: - ANS-At any time in relation to an all risk homeowners policy, is this statement incorrect, "Perils are listed." - ANS-The statement is incorrect While playing near the freezer your son accidentally disconnects the electrical cord. You notice the following week when you go to get something out for dinner. Which statement is true? - ANS-No coverage exists. You have gone away for the weekend and accidentally left the window open in your bedroom. Over the weekend a severe rainstorm occurs. Rain has damaged the Oriental rug in the bedroom. - ANS-No coverage exists. When an insurance company and an insurance broker enter into a contractual agreement in most cases the broker is authorized to do all but one of the following: - ANS-Be registered as an insurance agent. The Registered Insurance Brokers Act of Ontario requires an individual to be registered if they: - ANS-On behalf of another, negotiate an insurance contract and receive compensation. A building worth $250,000 is insured for $50,000. There is an 80% co-insurance clause. Fire damage amounts to $50,000. How much will the insurer pay? - ANS-$12, would your Homeowners Liability apply if your electric wheelchair runs into your neighbors fence. - ANS-Yep An insurance broker must provide evidence that an insurance contract is in place once the client and the broker have reached agreement on the coverage. This evidence is provided by: - ANS-Providing a policy or binder to your client within 21 days after placing the insurance. Most insurance policies contain both Statutory Conditions and Policy Conditions, which one only Policy Provisions: - ANS-Commercial General Liability Policy. The term "Indemnity" is often used in insurance to describe situations where: - ANS-The insured is placed in the same financial position they were in prior to the loss.

A deductible clause in a residential policy: - ANS-Specifies the amount in excess of which an insurer will pay. The attempt to recover by an insurer from a third party who it considers responsible for causing the loss, is referred to as: - ANS-Subrogation. As an insurance broker "restricted to act under supervision" : - ANS-You may not act as a sole proprietor, control trust funds, or act as a designated individual. A mortgage clause is needed when: - ANS-A mortgagee has financial interest in the insured's property and wishes to protect their position under the insurance contract. A vacancy permit is required to continue residential insurance policy on a home when: - ANS-The premises are unoccupied and all the contents have been removed. A building worth $120, 000 is insured for $60, 000 under a residential policy with an 80% co-insurance clause. The building sustains a $24, 000 worth of damage in a fire. How much will the insurer pay? - ANS-$15,000. Given the same values and co-insurance requirements, the building sustains $104, damage. What will be the amount of this claimant's settlement? - ANS-$60, T or F: Special damages are for out of pocket items such as medical expenses, loss of earnings or damage to property, which do not have to be substantiated. - ANS-False An insured peril that may be added to a personal property policy for an additional premium is: - ANS-Loss or damage caused by earthquake. A fiduciary is one who: - ANS-Holds goods on behalf of another. A lessee is: - ANS-The one to whom the property is leased. A mortgagor is: - ANS-The one who owes money. The term Actual Cash Value means: - ANS-Replacement cost less depreciation. It is often confusing to an insured when discussing co-insurance obligations and the replacement cost clause. As an insurance professional you would advise your client: - ANS-First determine the Replacement Cost of the property to be insured. What is an example of a loss that is covered by a Tenants policy: - ANS-Which of the following losses is covered by a Tenants policy: Under a tenants policy are personal property normally kept at the cottage you rent covered as the tenants own property? - ANS-Nope

Your client's nephew named Bill, a licensed driver from Alberta is involved in an "at-fault accident: with your client's car. Bill had your client's permission to drive and has his own insured automobile in Calgary. A third party is injured in the accident, how will the claim be settled: - ANS-The client's policy would pay. What is one example of something that is not paid under the OAP 1 for Accident Benefits - ANS-Uninsured Motorists Benefits. When a Standard Mortgage is attached to a policy: - ANS-The insurer could be called upon to pay a loss to the Mortgagee even though the insured violated a condition of the policy. Coinsurance clauses are designed to: - ANS-Force the insured to bear a portion of any partial loss if under-insurance exists. A sign fell and injured your client. The sign was installed 6 months ago by a sign contractor. Your client is suing the contractor under his liability policy. Which liability policy will protect the contractor: - ANS-Commercial General liability. You client operates a Bingo hall and just experienced a theft of money by one of his employees, you advise him that the following will provide adequate coverage: - ANS-A fidelity policy. Your client has just purchased a new snowmobile, to properly insure it you advise your client that you will: - ANS-Cover it on an OAP 1. The Family Protection Endorsement OPCF 44 will: - ANS-Protect the insured and any eligible claimants in the auto from another party whose auto liability insurance is insufficient to cover their claims for damages. Automobile insurance in Canada contains certain no-fault elements. Which coverage presently available in all provinces and territories has some no-fault features? - ANS- Accident benefits. Under Third Party Liability coverage, insurers would not be liable under the Absolute Liability Law for bodily injury to a third party if the insured allows someone to drive, - ANS-Who has misplaced their drivers license. Temporary insurance must be cancelled how? - ANS-Must be cancelled in the same way as a policy of similar type would be cancelled. Under the terms of a fire policy which of the following is not part of the definition of fire?

• ANS-Scorching.

Before an insured can recover a loss under a fire insurance policy, it is necessary that: - ANS-An insurable interest exists. Negligence is: - ANS-The failure to exercise the care that a reasonable person would take in a similar set of circumstances. An insured operates an automobile dealership and sells vehicles on consignment from the manufacturer. What policy will he need to cover the vehicles he has for sale against fire loss: - ANS-Non Owned Automobile Policy (#6). The property damage section of the basic Homeowners Policy covers: - ANS-Dwelling building, detached private structures, personal property and additional living expenses. Insurance to value means: - ANS-Insurance in the amount that the item is worth. A homeowner's policy consists of how many totally distinct sections? - ANS-Two Smoke damage is not covered if it results from: - ANS-Lack of maintenance of a furnace over a period of time. Is it true to say that 'it always benefits the insured' with respect to the Homeowners Comprehensive policy - Basis of Claim Payment? - ANS-Its false When a loss occurs: - ANS-Any person to whom any part of the insurance money is payable may give notice. Is collision with a tree covered under the specified perils section (auto)? - ANS-Nope Is it true that uninsured motorist coverage will come into force only when the insured is not at fault? - ANS-Yep Salvage Disposition is - ANS-Disposition can be negotiated between the insured and the insurer. On an OAP#1 policy there are three sections of coverage that include a form of Loss of Use coverage, these sections are: - ANS-Direct compensation, uninsured automobile and loss or damage. And we will pay an additional amount of Coverage C of your share of any special assessment due to liability if the assessment is valid under the condominium corporation's governing rules. Your insured calls to tell you that his 3 year old son accidentally flushed his wife's wedding ring down the toilet. He has a tenants comprehensive package with a $ deductible. The ring was appraised for $8000. What would you advise him regarding coverage? - ANS-$2,

Following registration as an insurance broker, an individual must: - ANS-Must notify the Registered Insurance Brokers of Ontario if any information on the original application for registration or renewal has become obsolete, including a change in employer, and file a notice correcting that information within thirty (30) days of the change. Upon successful completion of the examination you may qualify for registration as an insurance broker. If issued, the registration will be "restricted to acting under supervision". The conditions under which you may act as an insurance broker under supervision are - ANS-You may not act as a sole proprietor, nor be a "Principal Broker" as the term is used in the regulation, nor may you control trust funds. The RIBO Code of Conduct is stated in Ontario Regulation 991, Section 14. Three (3), does it say to maintain a Trust Account for all trust money received. - ANS-Nope An individual who acts or aids in any manner in soliciting, negotiating or procuring the making of any contract of insurance is required to be registered as an insurance broker if he or she: - ANS-Deals directly with the public and receives compensation. RIBO Regulations stipulate that brokers must provide a policy or certificate of insurance to an insured within a certain period after insurance has been placed. What is the length of that period? - ANS-Twenty-one (21) days. An Insurance Broker whose registration is restricted to acting under supervision may: - ANS-Solicit insurance from members of the public anywhere in Ontario. An individual is required to be registered as an insurance broker if he/she: - ANS-For compensation, provides risk management and loss prevention services on behalf of another. The RIB Act grants to the Discipline Committee of RIBO power to impose penalties on members found guilty of misconduct, which is defined under Section 15(1) of Ontario Regulation 991. Does this include using an illustration, circulation or memorandum to represent the terms, benefits or advantages of any policy or contract of insurance? - ANS-Nope What would NOT be considered a peril under a Tenant's Comprehensive Policy? - ANS- Earthquake. (Need an Endorsement) What does NOT have an insurable interest in a building owned by the insured which is mortgaged? - ANS-A prospective purchaser of the property. (Have not purchased it yet) Is the following statements is TRUE about insurers: Lloyd's of London is NOT an insurance company. - ANS-True, its a marketplace for insurance When an insured is indemnified by an insurer after a loss, it means: - ANS-The insured received the amount of his/her loss.

Where there is a co-insurance clause in a replacement cost policy, it is necessary to determine: - ANS-The replacement cost of the property. (How coverage A is calculated) If an insured requests mid-term cancellation of a policy, the insurer will: - ANS-Allow a short rate refund of a portion of the premium. What is an example of a hazard as it pertains to insurance? - ANS-Bare electrical wires. It Physical Characteristics A fiduciary is: - ANS-One who holds money or property in trust. (C82 Study 8, page 30) T or F: Loss or damage caused by earthquake, perils may be insured under a property insurance policy? - ANS-True The Sue and Labour Clause in an insurance policy is designed to: - ANS-Point out to the insured their duty to take all reasonable steps in and about the recovery of the property in return for agreement that the insurer will contribute to the cost. (Property Wording pg.63) Laws regulating the zoning, demolition, repair or construction of buildings and their related services can increase costs of repair to buildings. These increased costs are insurable if: - ANS-Insurable if specified in a property policy. (Add an endorsement) A building worth $100,000 is insured for $60,000 under a policy with 80% coinsurance Clause. Fire damages the building to the extent of $90,000. How much would the insurer pay? - ANS-$60,000. (60,000/100,000*90,000=67,500. Only 60,000 purchased) Freezer foods coverage provides for payment of loss caused by spoilage of frozen foods contained in your food freezer on your premises. - ANS-It covers only loss caused by mechanical breakdown of the freezer or outside power interruption. (residential wording Page 8) The Facility Association: - ANS-Is a pooling arrangement of all automobile insurers who share the loss experience of the pool. (BB Chapter 10, Page 3) The following class of insurance is intended to indemnify a business for loss of income due to fire damage to building, stock and equipment? - ANS-Business interruption insurance. (Profit and Earnings C82 S8 pg 17) The following would protect your client against a loss due to the dishonesty of an employee? - ANS-A fidelity policy. (C82 Study 8 Page 23) Replacement cost and actual cash value are two different basis of indemnification for loss, Actual cash value is the depreciated value shown True or False? - ANS-Incorrect,

Actual cash value is the depreciated value shown in the Balance Sheet of a Financial Statement. An insurer wishing to terminate an insurance policy may do so by: - ANS-Giving the insured 15 days notice by registered mail and refunding the unearned premium. (Wording Stat Condition #11 or 5) Subrogation is Following what? - ANS-Following payment of a loss to the insured, the right of the insurer to seek recovery from any other party responsible. Nearly every insurance policy has Policy Conditions which are common to all policies issued in a particular class. Some policies contain Statutory Conditions. Which insurance has Statutory Conditions? - ANS-Fire insurance policy. (Fire, auto & Accident and sickness) An insurer believes an insured has deliberately misrepresented a risk which it would not have written had the insurer known the true facts. The premium has been paid in full and the policy has been in force for three months. In voiding the policy the insurer would: - ANS-Refund the entire premium as to the property of which the misrepresentation was made. (Statutory condition 1) What is the purpose of a contract between an insurer and an insurance broker (company/broker agreement)? - ANS-To formalize in writing what the broker and the insurer expect from each other. (Agent Authority C81 study 2 page 5) The insurance industry is very particular about specific definitions describing various perils under crime coverage. What would be considered an example of a robbery loss? - ANS-A group of violent people entered your insured's store, threatened the clerks on duty with a gun and carried away several items of stock and all the cash in the cash register. The insured, under a property policy, goes bankrupt and there is a loss shortly thereafter is the the insurer is liable to pay the trustee in bankruptcy? - ANS-Yes, under stat conditions. In insurance terms, a peril is frequently described as a cause of loss. Is Gasoline a peril? - ANS-No, Its a hazard Where a loss occurs under an insurance binder before a policy has been issued, the insurer will: - ANS-Pay the claim in accordance with the coverage bound. (C81 study 4 page 7) The contents of a building are insured for $45,000 but valued at $100,000. The policy contains a 90% co-insurance clause along with a $2,500 deductible clause. If fire damages the contents to the extent of $8,000, how much would the insurer pay? - ANS- $1,500. (45,000/90,000*80,000=4,000-2,500=1,500)

The deductible clause in an insurance policy Specifies what? - ANS-the amount in excess of which an insurer will pay a loss. A building owned by A is sold for cash to B. Two days after the sale, a fire destroys the building causing a loss of $100,000. Neither the broker nor the insurer was notified of the change in ownership. The insurer would pay: - ANS-Nothing. (when you sell your house, you don't transfer insurance) A valued policy is one which: - ANS-Establishes, at the time the policy is issued, the amount of insurance the insurer will pay in the event the property is totally damaged, lost or destroyed. The lessor of an automobile is: - ANS-The lessor of an automobile is: Remember the Lessor is Ford Leasing and the Leasee is the customer An insured's house is destroyed by fire and due to local by-laws, has to be rebuilt with more expensive materials. In the absence of a special endorsement indicate if the Homeowners Comprehensive policy covers: - ANS-The cost to rebuild in the same manner and with the same general materials as existed before the loss. Is Profits Insurance a type of Business Interruption insurance? - ANS-Yep, Profit & Earnings approach The insured decides to install a recreation room in the basement of the house. How may this affect coverage under the insured's Homeowners Comprehensive Policy? - ANS- Coverage under the policy will not be affected. (No a major reno job) Loss or damage caused by earthquake is: - ANS-A coverage which may be added to a property policy for an additional premium. (Wording Page 53) What is NOT the subject of a statutory condition in a property policy? - ANS-Co- insurance penalties. The agreement or contract between an insurance broker and an insurer usually authorized the broker to do what? - ANS-Bind the insurer on acceptable risks. the following liability coverage is intended to protect an insured who is planning to build a new home and will be sub-letting part of the contract to subcontractors? - ANS- Owner's or contractors protective liability insurance. A building worth $120,000 is insured for $60,000 under a fire policy with an 80% co- insurance clause. Fire damages the building to the extent of $104,000. How much would the insurer pay? - ANS-$60,000.

the following coverage under a Homeowners Comprehensive policy including Inflation Protection is NOT automatically increased in amount at the anniversary date of the policy? - ANS-Liability coverage. (Wording Page 32 Ext of coverages) Improvements and Betterments made to a Condominium Unit by its owner are insured: - ANS-Improvements and Betterments made to a Condominium Unit by its owner are insured: (Wording pg 58) Your clients advise you they have just purchased a set of matching antique candlesticks, valued at $2,500 each. They have Canadian historical significance and they wish to insure them specifically. You would recommend they: - ANS-Insure the items by means of a Fine Arts coverage endorsement added to the Homeowners policy. In a seasonal residence building and/or contents policy, 10% of the amount of insurance on the dwelling may be applied to insure detached private structures. If there are two or more detached private structures, the maximum which can be claimed for loss of any of these structures is: - ANS-Determined by dividing the amount of insurance in the proportions that the value of each structure has to the total value of all structures at the time of loss. (Page 40 optional extension of coverage #2) The Homeowners Comprehensive policy provides coverage for Voluntary Property Damage when cause unintentionally by an insured person. This extension of coverage does NOT apply where: - ANS-The damaged property is rented from an establishment which rents equipment on a daily basis. (=Legal Liability (wording pg 19 #3)) Under Tenants Comprehensive policy, all of the following, EXCEPT ONE covers the tenant's own property. What is the EXCEPTION. - ANS-Damage to the exterior of the building directly caused by vandalism or malicious acts. (Ext of coverage Pg 8 #4) What does the Homeowners Comprehensive policy automatically cover? - ANS-Private structures on the insured's premises. (Coverage B) Your insured has a Condominium Unit Owners Comprehensive Policy with ABC Insurance Company. While smoking in bed, he negligently causes a fire in his unit. The fire spreads to the adjoining unit and the occupant is overcome by smoke and dies. Under which section of the policy would ABC Insurance Company respond if a claim were made by the relatives of the deceased person? - ANS-Personal Liability Coverage (Coverage E). (Pays to others) An insurer has issued a vacancy permit on a vacant property. Which losses would continue to be insured by the policy covering the property? - ANS-Windstorm damage to the roof. (Wording Page 58 #7) A Homeowners Comprehensive policy provides coverage for Voluntary Payment for Damage to Property. This applies to which situation? - ANS-Property of other damaged

unintentionally by the insured, even though the insured is not legally liable. (Coverage G page 21) Your insured is employed at a local garage as a mechanic. The garage premises are burglarized and the insured's tools and tool box are stolen. Under your insured's Homeowners Comprehensive policy this type of loss would be: - ANS-This type of loss would be covered only while on the insured's premises. Your insured owns one of each of the vehicles listed and seeks advice concerning coverage. What is covered under the Liability section of the Homeowners Comprehensive policy? - ANS-A motorized wheelchair. (Wording Page 25 #6) Your insured advises he and his wife are moving to another city and intend to place their furniture in storage while they look for a new apartment. They ask for advice about coverage under the Tenants Comprehensive policy. You advise them: - ANS-Their Tenants Comprehensive policy will cover all their property in the storage warehouse for 30 days but only against theft after that period. (Wording Page 8 #2) the following events would result in an Additional Living Expenses claim NOT being covered under a Homeowners Comprehensive policy? - ANS-The insured's home is infested with carpenter ants and the insured must move out until the extermination procedures are completed. Exclusion 20 T or F: Replacement cost coverage applicable to both the building and personal belongings insured under the policy is basic coverage. In regards to the Replacement Cost Coverage under a Homeowners Comprehensive policy. - ANS-False (Wording Pg. 15/16) Insurance under OAP 1 Owner's Form, Section 7, Loss or Damage Coverages, is usually subject to a deductible. It does not apply to damage caused by: - ANS-Fire. (OAP1 Pg 30 7.3 last Paragraph) Uninsured Automobile coverage can cover: - ANS-accidental damage to the insured's automobile, provided the uninsured owner or driver of the other automobile is identified. (OAP1 Page 30 Section 5 5.2.3) Your insured belongs to a car pool and uses her automobile to transport the other three members to work every fourth week. One of the other members drives each of the other three weeks. As her insurance broker, what would you recommend to make sure your client is covered against claims from passengers for injuries? - ANS-The standard policy automatically covers the situation. No change is necessary. (OAP1 Pg 12 Section 2 2.2.1) Under the "What Automobiles Are Covered" section of the OAP 1 Owner's Form, a newly acquired automobile is automatically covered for a period of 14 days. This automatic coverage is limited to: - ANS-Those coverage which applied to the vehicle

replaced or which apply to all of the insured's vehicles if it is an additional automobile insured with the same company. (OAP1 Page12 section 2 2.2.1) All clients should be counselled regarding the availability of optional benefits available under OAP 1 Owner's Form. Is Excess economic loss endorsement available? - ANS- No, it does not exist Indicate the correct way to insure a snowmobile: - ANS-Through an OAP 1 Owner's Form to cover all the exposures to be insured. (OAP1 page 1 1.3) An insured request that the limit of liability in his automobile policy OAP 1 be reduced. What is the minimum amount he must carry under Ontario law? - ANS-$200,000 inclusive. A client phones to tell you she has bought a high-end stereo system costing $5,000 which has just been installed in her car. What should you tell her? - ANS-To provide you with a copy of the invoice so you can have her OAP 1 Owner's Form endorsed to cover its full value. (1500 non factory installed BB Study 1 App, OAP1 page 52) In the following statements about Section 6-Direct Compensation-Property Damage-of the OAP 1 Owner's Form is it true that the accident may occur anywhere in Canada and at least one of the other automobiles involved is insured under an automobile insurance policy? - ANS-No (OAP1 Page 37 Section 6 6.1) Which one (1) of the following accidents would be considered a loss under Section 7.1.2 B, Comprehensive of an OAP1 Owner's Form policy? - ANS-Your insured's windshield was smashed by a falling boulder while the insured was driving through a rock-slide area. (Falling or flying Object) The basic lncome Replacement Benefit payable under OAP1 Owner's Form, Section 4-- Accident Benefits coverage is $400 per week. The actual amount is based on: - ANS- 70% of gross income. Electronic accessories or equipment are covered under OAP 1 Owner's Form for: - ANS-For their full actual cash value if factory installed. (OAP1 Pg52 S7, 7.7) How would you describe to your policyholder the purpose of OPCF 44 Family Protection Coverage? It is designed to: - ANS-Indemnify an insured, up to the limit of the insured's policy, for an amount he is legally entitled to recover for bodily injury or death from an inadequately insured Third Party. (OAP1 pg67, insuring agreement) Insurance under Section 7 of OAP 1 Owner's Form, Loss or Damage Coverages, is usually subject to a deductible. It does not apply to loss or damage caused by: - ANS- Lightning. (OAP1 PG 48 Section 7 7.3)

Your insured calls to report that while ice fishing on Lake Simcoe, her automobile went through the ice. She has OAP 1 Owner's Form with Liability, Accident Benefits and Comprehensive coverage. The insurer would: - ANS-Would pay the claim less the deductible. (OAP1 PG44 Section 7 7.1.2) Is the following statement True or False: Profit commission is paid based on the level of business produced. - ANS-False A subscription policy is: - ANS-Usually used to insure large risks. "Offer" and "acceptance" is best described as being: - ANS-Unconditional- communicated-same manner-within time limit What is NOT the subject of a Statutory Condition in a property policy? - ANS-Perils covered by the policy (All risk policy) The main difference between unoccupied premises vs. vacant premises is: - ANS-The intent to return (Wording Page 40 definition) This form provides all risks coverage for building and named perils coverage for contents. - ANS-Homeowners broad form The full average clause allows an insured to underinsure using an average ACV settlement for the type of property, true or false. - ANS-False What is an example of improvement and betterments? - ANS-Replacing the standard carpet with high quality hardwood flooring. Diamonds are often described by the four "C's". They are: - ANS-Cut-colour-clarity- carat. The two sections of a residential policy are: - ANS-Property and liability. (Section 3= optional only if you buy it) Is a question about Lot size found on an insurance application? - ANS-Nope Your insured stops his automobile on the street to permit a passenger to get out. The passenger opens the left-hand rear door into the side of a passing vehicle. Your insured asks you about his coverage for his vehicle and you advise that: - ANS-The insured's own policy would cover it, if they had purchased collision coverage.