Book 1 Study 4

Question 1

Which of the following is not part of the insuring agreement of a policy?

a) insured perils
b) premiums
c) exclusions
d) description of property insured

Answer 1

b) Premiums

Question 2

An endorsement cannot be used to

a) vary the terms of the policy.
b) over rule any wording in the policy
c) amend the statutory conditions
d) reduce coverage under the policy.

Answer 2

c) amend the statutory conditions

Question 3

If a policy is subject to an 80% coinsurance clause, what amount of insurance is necessary to provide full coverage in case at the total loss of a building valued at $100,000?

a) $100,00
b) $80,000
c) $70,000
d) none of the above

Answer 3

a) $100,000

Question 4

Which of these statements is false?

a) temporary insurance is limited to a fixed term.
b) binder are usually insured by insurers.
c) cover notes are usually insured by brokers.
d) oral binders are effective and legal.

Answer 4

a) temporary insurance is limited to a fixed term.

Question 5

Which of the following statements is true?

a) to void a policy is the same as cancelling it.
b) when an insurer terminates a policy, return premium is calculated on a short date basis.
c) nondisclosure maybe a valid reason for voiding a policy.
d) losses that occurred before a policy was declared void must me paid.

Answer 5

c) nondisclosure maybe a valid reason for voiding a policy.

Question 6

Which of these statements is false. If an insurer issues a policy that differs from the application?

a) the insurer must notify insured of the difference.
b) notification of the difference must be in writing.
c) if insured does not object within a specified time period (no time limit in Quebec) the policy stand as written
d) the policy is null and void.

Answer 6

d) the policy is null and void.

Question 7

A building policy is subject to 90% coinsurance. The building is valued at $200,000 and insured for $170,000. The loss is $130,000. What will the insurer pay?

a) $180,000
b) $122,778
c) $130,000
d) $117,000

Answer 7

b) $122,778

Question 8

A mortgage clause

a) gives the same protection as a loss payable clause.
b) bestows rights and obligations on mortgages and insured’s.
c) entitles mortgages to payment even when insured have prejudiced their own rights under the policy.
d) is an agreement between the mortgage and the insured.

Answer 8

c) entitles mortgages to payment even when insured have prejudiced their own rights under the policy.

Question 9

A material fact

a) is the subject of insurance.
b) is any fact that relates to the item insured.
c) need only be divulged if insured is asked about it.
d) is anything that could affect the premium charged or acceptability of the risk.

Answer 9

d) is anything that could affect the premium charged or acceptability of risk.

Question 10

Which statement is false as it relates to insurance contracts?

a) insurance contracts are personal contracts.
b) proceeds under insurance contracts maybe assigned without insurer’s permission.
c) insurance contracts maybe assigned without insurer’s permission if insured and assignee agree.
d) assignment under the Bankruptcy Act does not require an insurer’s consent.

Answer 10

c) insurance contracts maybe assigned without insurer’s permission if insured and assignee agree.

Question 11

Very large risks are often insured by means of

a) extension policies
b) prescription policies
c) subscription policies
d) endorsements

Answer 11

c) subscription policies

Question 12

A deductible

a) cannot be used to reduce the premium on a policy.
b) may disappear if the amount of a loss exceeds the deductible.
c) must apply individually to each item on a policy.
d) is used to encourage clients to carry adequate insurance.

Answer 12

b) may disappear if the amount of a loss exceeds the deductible.

Question 13

The failure to disclose a fact which is important for making an underwriting or rating decision is

a) a material fact.
b) concealment.
c) misrepresentation.
d) utmost good faith.

Answer 13

b) concealment.

Question 14

Utmost good faith

a) is an essential of all contracts.
b) means an insured must answer all questions on an application.
c) applies to the insured and the intermediary only.
d) is a superior standard of honesty.

Answer 14

d) is a superior standard of honesty.

Question 15

Temporary insurance

a) must me cancelled when the policy is issued.
b) cannot be cancelled.
c) must be cancelled in the same way a policy of similar type would be cancelled.
d) maybe cancelled verbally in all cases.

Answer 15

c) must be cancelled in the same way a policy of similar type would be cancelled.

Question 16

Is there a difference between reading and interpreting a policy?

Answer 16

Yes - more detailed answers in book 1 study 4 pages 30-31

Question 17

List six items of information that should be contained in a document providing temporary insurance.

Answer 17

1. name and address of insured
2. address at which risk is located (if relevant)
3. Time and date of the commencement of the coverage
4. time and date of the expiry of coverage
5. amount of insurance bound (broken down into items or classes of property where applicable)
6. name of insurer bound.
7. exact type and form of contract under which risk is bound
8. any special term, such as deductibles

Question 18

An insurance policy is like a story list 7 things that it tells you.

Answer 18

1. who is covered.
2. what property is covered.
3. what perils are covered.
4. where does the coverage apply.
5. what are the exclusions.
6. what are the extension of coverage.
7. what are the conditions of coverage.
8. is there anything else to consider.