Final review C81C82

Question 1

What differentiates speculative risk from pure risk?

Select one:

a.
The presence of a hazard

b.
The chance of loss

c.
The chance of profit

d.
The presence of a peril

Feedback
Reference: C81 - Study 1 - LO1

Answer 1

The correct answer is: The chance of profit

Question 2

What is the peril insured against in liability insurance?

Select one:

a.
Negligence

b.
Burglary

c.
Dishonesty

d.
Fire
Feedback
Reference: C81 - Study 1 - LO2

Answer 2

The correct answer is: Negligence

Question 3

Which statement is TRUE about the concept of proximate cause?

Select one:

a.
The remote cause is another name for the proximate cause

b.
It is not the last link in the chain of events

c.
It is not necessarily the last event before the occurrence

d.
The immediate cause is another name for the proximate cause

Answer 3

The correct answer is: It is not necessarily the last event before the occurrence

Question 4

What sets out the arrangements between the insured and the insurer concerning premiums, loss settlement, and the subject of insurance?

Select one:

a.
Contract

b.
Endorsement

c.
Certificate

d.
Ratemaking

Answer 4

The correct answer is: Contract

Question 5

What is the primary function of insurance?

Select one:

a.
A method of profiting after a loss occurs

b.
Providing employment, directly and indirectly, in the industry

c.
Protecting assets and securing credit

d.
A method of sharing the losses of a few people among the many

Answer 5

The correct answer is: A method of sharing the losses of a few people among the many

Question 6

What type of insurance would cover losses arising from libel and slander?

Select one:

a.
Legal expense

b.
Crime insurance

c.
Surety bonds

d.
Liability insurance

Answer 6

Reference: C81 - Study 2 - LO3

The correct answer is: Liability insurance

Question 7

Which type of insurer focuses on loss prevention tactics to reduce fire hazards?

Select one:

a.
Factory mutual

b.
Stock company insurers

c.
Co-operative stock mutual

d.
Reinsurers

Answer 7

Reference: C81 - Study 3 - LO1

The correct answer is: Factory mutual

Question 8

What are actuaries responsible for?

Select one:

a.
Analyzing the validity of claims brought forward by adjusters

b.
Management of branch operations

c.
Scrutinizing a risk and deciding on eligibility for insurance

d.
Analyzing data and performing calculations that determine the rate (price) of various classes of insurance

Answer 8

Reference: C81 - Study 3 - LO2

The correct answer is: Analyzing data and performing calculations that determine the rate (price) of various classes of insurance

Question 9

Reinsurance in which an agreement between the insurer and the reinsurer provides for automatic reinsurance without the insurer having to submit every risk to the reinsurer is known as which one of the following types of reinsurance?

Select one:

a.
Facultative reinsurance

b.
Pro rata reinsurance

c.
Treaty reinsurance

d.
Excess of loss reinsurance

Answer 9

Reference: C81 - Study 3 - LO3

The correct answer is: Treaty reinsurance

Question 10

Which statement best describes the authority of a general agent as granted by an insurance company?

Select one:

a.
To appoint independent brokers and agents within a specific territory

b.
To manage all of the company’s business within the assigned province(s) excluding the handling of claims

c.
To create insurance rates and calculate premiums to be charged for categories of risks

d.
To manage all of the company business within a specified territory including appointing agents and settling claims

Answer 10

Reference: C81 - Study 4 - LO1

The correct answer is: To manage all of the company business within a specified territory including appointing agents and settling claims

Question 11

What happens if a loss occurs before a policy is issued but after it has been bound by the agent/broker?

Select one:

a.
The insured will be required to pay a deductible of twenty percent of the loss as stated on the binder

b.
Half of the claim will be paid immediately, and fifty percent when the policy is issued

c.
The claim will be denied because the policy was not valid at the time of the loss

d.
The loss is covered in the same manner as if the actual policy had already been issued

Answer 11

Reference: C81 - Study 4 - LO2

The correct answer is: The loss is covered in the same manner as if the actual policy had already been issued

Question 12

What are the advantages of video conferencing calls for use in sales?

Select one:

a.
Expands the benefits of a phone call with some of the benefits of reading the client’s body language

b.
Expands the benefits of the in-person meeting to include reading body language

c.
Expands the benefits of the in-person meeting that takes place after hours

d.
Expands the benefits of a phone call through turn taking and conversation pacing

Answer 12

Reference: C81 - Study 4 - LO3

The correct answer is: Expands the benefits of a phone call with some of the benefits of reading the client’s body language

Question 13

What does self-regulation mean regarding licensing and operation of intermediaries?

Select one:

a.
The Personal & Commercial (P&C) industry regulates licensing for intermediaries

b.
Provinces pass legislation that delegates licensing and operation of intermediaries to self-regulatory councils

c.
Federal government approves appointing self-regulatory councils for licensing of intermediaries

d.
The Insurance Brokers Association of Canada regulates the licensing of local brokers

Answer 13

Reference: C81 - Study 4 - LO4

The correct answer is: Provinces pass legislation that delegates licensing and operation of intermediaries to self-regulatory councils

Question 14

For an intermdiary, what is the benefit of using the risk management process?

Select one:

a.
Increased sales

b.
A reason to charge a service fee

c.
A method to pre-screen clients

d.
Client retention

Answer 14

Reference: C81 - Study 4 - LO5

The correct answer is: Client retention

Question 15

How is a meeting of the minds demonstrated in contract law?

Select one:

a.
Offer and Acceptance—offer communicated by one party is accepted by the other party

b.
Capacity to Contract—both parties have legal capacity to enter into a contract

c.
Consideration—Both parties intend to be bound by the contract

d.
Genuine intention—both parties intend to create a legally binding contract

Answer 15

Reference: C81 - Study 5 - LO1

The correct answer is: Offer and Acceptance—offer communicated by one party is accepted by the other party

Question 16

What is it called when individuals have an insurable interest in their own potential responsibility?

Select one:

a.
Legal Capacity

b.
Utmost Good Faith

c.
Indemnity

d.
Legal Liability

Answer 16

Reference: C81 - Study 5 - LO2

The correct answer is: Legal Liability

Question 17

In an insurance contract, who is known as the first party?

Select one:

a.
The insured

b.
The insurer

c.
The agent or broker

d.
Persons with claims against a policy but are not party to it

Answer 17

Reference: C81 - Study 5 - LO2

The correct answer is: The insured

Question 18

When are valued contracts typically used?

Select one:

a.
To insure items for which it would be difficult to determine a true value after a loss has occurred

b.
When the principle of indemnity does not apply to a particular contract and needs to be overridden

c.
To insure items that do not require an appraisal to pre-determine their value

d.
When an insurer wishes to reward customer loyalty because of insureds good loss experience

Answer 18

Reference: C81 - Study 5 - LO3

The correct answer is: To insure items for which it would be difficult to determine a true value after a loss has occurred

Question 19

The sharing of loss or liability between two or more insurance companies covering the same risk is the definition for which term?

Select one:

a.
Contribution

b.
Salvage

c.
Subrogation

d.
Contractual provisions

Answer 19

Reference: C81 - Study 5 - LO4

The correct answer is: Contribution

Question 20

Jimmy runs a business from home, which he did not declare when he was asked during the application for insurance. The insurer does not insure homes with a business, so as soon as they are aware, they cancel the policy. What reason supports their decision?

Select one:

a.
Utmost good faith

b.
Change of use

c.
Misrepresentation

d.
Insurable interest

Answer 20

Reference: C81 - Study 5 - LO5

The correct answer is: Misrepresentation

Question 21

Which document allows for changes to be made to a policy while it is in force?

Select one:

a.
Renewal certificate

b.
Certificate of insurance

c.
New policy

d.
Endorsement

Answer 21

Reference: C81 - Study 5 - LO6

The correct answer is: Endorsement

Question 22

What are the five main sections of a policy?

Select one:

a.
Coverage Summary; Insuring Agreements; Subscription; Statutory Conditions; and Signature Clause

b.
Coverage Summary; Insuring Agreements; Statutory Conditions; Premium Agreements; and Signature Clause

c.
Coverage Summary; Insuring Agreements; Statutory Conditions; Policy Conditions; and Signature Clause

d.
Declarations; Coverage Summary; Statutory Conditions; Policy Conditions; and Signature Clause

Answer 22

Reference: C81 - Study 5 - LO7

The correct answer is: Coverage Summary; Insuring Agreements; Statutory Conditions; Policy Conditions; and Signature Clause

Question 23

Which type of assignment can occur without the consent of the insurer?

Select one:

a.
Assignments when property is sold

b.
Assignments when the insured decides they want to

c.
Assignments under the Insurance Act

d.
Assignments under the Bankruptcy Act

Answer 23

Reference: C81 - Study 5 - LO8

The correct answer is: Assignments under the Bankruptcy Act

Question 24

What can be a consequence of an applicant who misrepresents material facts on the application for insurance?

Select one:

a.
A loss could be denied, or the insurance policy could be voided

b.
The broker could be charged a penalty fee by the insurer

c.
The applicant could be charged with criminal fraud

d.
A premium penalty could be charged

Answer 24

Reference: C81 - Study 6 - LO1

The correct answer is: A loss could be denied, or the insurance policy could be voided

Question 25

Which special class of loss payee has a registered interest on real property offered as security for the money that they have loaned the property owner?

Select one:

a.
Named insured

b.
Mortgagee

c.
Insured

d.
Lessee

Answer 25

Reference: C81 - Study 6 - LO2

The correct answer is: Mortgagee

Question 26

What is the premium cost on a home valued at $750,000 when the insurer is using 25 cent rates?

Select one:

a.
$750 annually

b.
$2,500 annually

c.
$1,250 annually

d.
$1,875 annually

Answer 26

Reference: C81 - Study 6 - LO3

The correct answer is: $1,875 annually

Question 27

What is pure premium?

Select one:

a.
Rate or unit of premium required

b.
Premium required to meet the inflated anticipated losses

c.
Premium required to meet losses that occur

d.
Total premium required by the insurance company

Answer 27

Reference: C81 - Study 6 - LO3

The correct answer is: Premium required to meet losses that occur

Question 28

What is required of underwriters to be successful in their role?

Select one:

a.
Communication, internet, and brokerage knowledge

b.
A licence to adjust claims

c.
Effective communication with claimants

d.
Claims, industry, and product knowledge

Answer 28

Reference: C81 - Study 6 - LO4

The correct answer is: Claims, industry, and product knowledge

Question 29

What is a claim?

Select one:

a.
The sharing of the losses of a few among the many

b.
A demand made by the insured against the insurer for indemnity or restitution

c.
It is a promise to indemnify an insured for a loss

d.
A demand made by the insured against the insurer for the return of their unearned premium

Answer 29

Reference: C81 - Study 7 - LO1

The correct answer is: A demand made by the insured against the insurer for indemnity or restitution

Question 30

What is the term for the period within which an insured must make a claim?

Select one:

a.
Forfeiture

b.
Subrogation

c.
Contribution

d.
Prescription

Answer 30

Reference: C81 - Study 7 - LO2

The correct answer is: Prescription

Question 31

Which task is the duty of a broker in a claims situation?

Select one:

a.
Assist clients in reporting their losses to their insurers

b.
Advise clients how to make the required repairs

c.
Write a cheque for the claim amount

d.
Make repairs to damaged property

Answer 31

Reference: C81 - Study 7 - LO3

The correct answer is: Assist clients in reporting their losses to their insurers

Question 32

For a complex claim, who makes the final decision about whether a large loss is covered or not?

Select one:

a.
Independent adjuster

b.
Staff adjuster who represents insurer

c.
Staff adjuster

d.
Claims manager or supervisor

Answer 32

Reference: C81 - Study 7 - LO4

The correct answer is: Claims manager or supervisor

Question 33

What is a consequence of an agent or broker who does NOT pay the premiums collected to the insurer?

Select one:

a.
The agent or broker will be fined as outlined in the Insurance Act

b.
The agent or broker will be charged interest by the insurer

c.
The agent’s or broker’s licence may be suspended or revoked

d.
The agent or broker may be charged a penalty by the insurer

Answer 33

Reference: C81 - Study 8 - LO1

The correct answer is: The agent’s or broker’s licence may be suspended or revoked

Question 34

Which statement describes the standards of ethical behaviour expected of brokers and agents?

Select one:

a.
Brokers and agents must comply with the provisions of the various insurance acts and be competent and trustworthy.

b.
Brokers and agents are self-regulated so do not have to comply with government regulation.

c.
Brokers and agents are exempted from liability for unethical behaviour.

d.
Brokers and agents have duties to clients but do not have duties to insurers.

Answer 34

Reference: C81 - Study 8 - LO2

The correct answer is: Brokers and agents must comply with the provisions of the various insurance acts and be competent and trustworthy.

Question 35

Which of the following is a major cause for errors and omissions (E&O) claims for insurance intermediaries?

Select one:

a.
Failure to bind coverage for which authority was not granted

b.
Failure to defend an errors and omissions (E&O) case well enough in court

c.
Failure to up-sell an umbrella insurance policy to the client

d.
Failure to provide coverage in time

Answer 35

Reference: C81 - Study 8 - LO3

The correct answer is: Failure to provide coverage in time

The major cause of E&O claims is inadequate cover, caused by failure to (1) provide cover for exposures; (2) explain the effects of exclusions, exemptions, and restrictions; (3) place cover at all; (4) provide correct cover; or (5) provide cover in time.

Question 36

How can an intermediary find out if the client is satisfied with their service and the service given by the insurer’s claims department?

Select one:

a.
By contacting the insurers underwriting department

b.
By surveying clients whose claims have been settled

c.
By surveying the claims adjuster who handled the claim

d.
By contacting the repair facility whom the client used

Answer 36

Reference: C81 - Study 8 - LO4

The correct answer is: By surveying clients whose claims have been settled

Must clients judge the quality of their insurance policy by the way their claim was handled. A survey of clients whose claims have been settled will help determine what kind of service the client was provided with.

Question 37

What three main areas does the Insurance Companies Act regulate?

Select one:

a.
Capacity during operation, licensing of executive officers, and reporting of loss results to a general insurance statistical agency

b.
Establishment of an insurance company, prerequisites to operation, and supervision during operation

c.
Establishment of an insurance company, prerequisites to operation, and licensing of executive officers

d.
Establishment of an insurance company, capacity during operation, and licensing of executive officers

Answer 37

Reference: C81 - Study 9 - LO1

The correct answer is: Establishment of an insurance company, prerequisites to operation, and supervision during operation

Question 38

Who governs the registration and licensing of motor vehicles, licensing of drivers, and traffic control of vehicles on highways?

Select one:

a.
The Insurance Act

b.
The Insurance Companies Act

c.
The Facility Association (FA)

d.
The Highway Traffic Act

Answer 38

Reference: C81 - Study 9 - LO2

The correct answer is: The Highway Traffic Act

Question 39

What is the overall purpose of the statutory conditions in insurance contracts?

Select one:

a.
They establish the rights and obligations of only the insured relating to the insurance contract.

b.
They establish the rights and obligations of only the insurer and ensure a consistent approach regarding claims handling.

c.
They establish the rights and obligations of all parties to the insurance contract and ensure a consistent approach regarding claims handling.

d.
They provide suggested wording to insurers to include in policies regarding their rights and obligations as related to customer claims.

Answer 39

Reference: C81 - Study 9 - LO3

The correct answer is: They establish the rights and obligations of all parties to the insurance contract and ensure a consistent approach regarding claims handling.

Question 40

What does the fire Statutory Condition—Replacement, require when an insurer chooses to repair, rebuild, or replace property instead of making a payment following a loss?

Select one:

a.
Insurer must restore the property to its original state but can limit its costs to the limit of insurance.

b.
Insurer must restore the property to its original state even if the cost is in excess of the amount of insurance.

c.
Work must be completed within 30 days of the date of loss.

d.
Insurer must notify the insured within seven days giving reasons for its decision.

Answer 40

Reference: C81 - Study 9 - LO4

The correct answer is: Insurer must restore the property to its original state even if the cost is in excess of the amount of insurance.

Question 41

Which statement describes the requirements under the fire Statutory Condition—Termination, when the insured requests the termination of insurance?

Select one:

a.
The insured must provide at least five days’ advance notice to the insurer.

b.
The insured is entitled to a premium refund as soon as practicable from the insurer, calculated on a short-term rate premium basis.

c.
The insurer is required to send written confirmation of cancellation to the insured, including any premium refund as soon as practicable for the insurer.

d.
The insured has 15 days to arrange other coverage.

Answer 41

Reference: C81 - Study 9 - LO4

The correct answer is: The insured is entitled to a premium refund as soon as practicable from the insurer, calculated on a short-term rate premium basis.

Question 42

What type of customer information may be disclosed by a broker or agent to the insurer?

Select one:

a.
All customer information may be divulged without the customers permission.

b.
Information about other property the customer owns but is insured by another insurer.

c.
Information about other liability policies the customer has with other insurers.

d.
Information required to renew or amend a policy during policy negotiations.

Answer 42

Reference: C81 - Study 9 - LO5

The correct answer is: Information required to renew or amend a policy during policy negotiations.

Question 43

The original residential fire insurance policy provided coverage for which perils?

Select one:

a.
Fire, lightning, and limited explosion and the resultant damage caused by smoke and water

b.
Fire, lightning, and explosion

c.
Fire, lightning, and theft

d.
Fire, direct damage by lightning and limited explosion

Answer 43

Reference: C82 - Study 4 - LO1

The correct answer is: Fire, lightning, and limited explosion and the resultant damage caused by smoke and water

Question 44

Why is the loss of items such as jewelry, and furs, subject to special limits of insurance by comprehensive homeowners policies?

Select one:

a.
To encourage coinsurance

b.
To allow for subrogation

c.
To provide coverage for their full value

d.
Because they are portable and often stolen

Answer 44

Reference: C82 - Study 4 - LO2

The correct answer is: Because they are portable and often stolen

Question 45

How is the loss of food in a fridge or freezer addressed by a comprehensive homeowners policy?

Select one:

a.
The loss is not covered unless a personal property endorsement has been purchased.

b.
The loss is covered if the fridge/freezer is on the insured premises and the loss was a result of an accidental interruption of power or the freezer’s breakdown.

c.
The loss is covered regardless of the fridge/freezer’s location and the loss was a result of any interruption of power.

d.
The loss is not covered as loss of food in a fridge or freezer is excluded.

Answer 45

Reference: C82 - Study 4 - LO2

The correct answer is: The loss is covered if the fridge/freezer is on the insured premises and the loss was a result of an accidental interruption of power or the freezer’s breakdown.

Question 46

Which theft loss would be covered by a basic homeowners policy?

Select one:

a.
Theft by tenants or from parts of the dwelling rented to tenants.

b.
Theft of personal property from insured’s principal dwelling and damage to the building due to attempted theft.

c.
Theft of property or building materials from properties under construction.

d.
Theft from secondary locations if insureds are not residing there.

Answer 46

Reference: C82 - Study 4 - LO3

The correct answer is: Theft of personal property from insured’s principal dwelling and damage to the building due to attempted theft.

Question 47

Who is a bailee?

Select one:

a.
A person to whom goods or property are entrusted for a stated purpose.

b.
A person who provides insurance protection for someone’s goods or property.

c.
A person who will share in the loss of goods or property.

d.
A person who is liable for loss of or damage to others property.

Answer 47

Reference: C82 - Study 4 - LO4

The correct answer is: A person to whom goods or property are entrusted for a stated purpose.

Question 48

Which clause requires the insured, in the event of a loss, to do whatever is reasonably necessary to protect the insured property?

Select one:

a.
Time and manner of payment of insurance money

b.
Cost of removing debris

c.
Sue and labour

d.
Termination

Answer 48

Reference: C82 - Study 4 - LO4

The correct answer is: Sue and labour

Sue and labour, is a commonly found clause in the Additional Conditions of a homeowners policy. Cost of removing debris is found in the Extensions of Coverage. Termination and Time and Manner of Payment of Insurance Money are not additional conditions, but Statutory Conditions.

Question 49

What is required if you are moving property insured under a fine arts floater?

Select one:

a.
The policy requires that the packing and unpacking be done by professional packers

b.
There is a separate policy required when moving these items

c.
The policy requires that professional movers be used

d.
The policy specifically excludes coverage for these items while being moved

Answer 49

Reference: C82 - Study 4 - LO5

The correct answer is: The policy requires that the packing and unpacking be done by professional packers

Question 50

Your client will be using his bicycle, which is insured on a sports equipment floater, in a race. What do you advise him with respect to coverage?

Select one:

a.
Breakage because of use during sporting events are subject to special limits

b.
Coverage for the bicycle is subject to a deductible

c.
Loss or damage from breakage, while in use, is on a named-perils basis

d.
Loss or damage from breakage while in use may be excluded

Answer 50

Reference: C82 - Study 4 - LO5

The correct answer is: Loss or damage from breakage while in use may be excluded

Question 51

What is the purpose of the anti-concurrent causation clause?

Select one:

a.
To increase limits should more than one water damage peril occur within a year.

b.
To add coverage should more than one water damage peril occur simultaneously.

c.
To limit coverage should more than one water damage peril occur simultaneously.

d.
To decrease limits should more than one water damage peril occur within a year.

Answer 51

Reference: C82 - Study 4 - LO6

The correct answer is: To limit coverage should more than one water damage peril occur simultaneously.

Question 52

If sewer drains within a home back up, what other condition must also exist for available sewer back up coverage to apply?

Select one:

a.
Ground and/or surface waters are on the insured’s property or outside the home.

b.
Maintenance of the sewer system must have been a contributing factor to the backup.

c.
The back up occurred within 72 hours of a heavy downpour.

d.
Ground and/or surface waters are NOT on the insured’s property or outside the home.

Answer 52

Reference: C82 - Study 4 - LO6

The correct answer is: Ground and/or surface waters are NOT on the insured’s property or outside the home.

Question 53

Which tenants policy extensions of coverage is defined as indirect damage resulting from physical damage to dwelling by an insured peril causing a change in temperature?

Select one:

a.
Loss due to temperature change

b.
Vandalism and malicious mischief

c.
Property temporarily removed

d.
Additional living expenses

Answer 53

Reference: C82 - Study 5 - LO1

The correct answer is: Loss due to temperature change

Question 54

What is one reason tenants need insurance when they do not own the dwelling building?

Select one:

a.
To add additional living expenses

b.
Lease agreements require the tenant to carry insurance

c.
They might decide to buy the building later

d.
For the cost of repairing and replacing damage

Answer 54

Reference: C82 - Study 5 - LO1

The correct answer is: Lease agreements require the tenant to carry insurance

Question 55

Lightning strikes the building where Miriam rents an apartment and causes fire damage to her unit and several others making them temporarily uninhabitable. How would Miriam’s tenant’s insurance respond to her claim?

Select one:

a.
It would provide coverage for additional living expense and structural damage to the building.

b.
It would provide coverage for only her loss of contents.

c.
There is no coverage under her policy because the damage is to the building so the building owner’s insurance would respond.

d.
It would provide coverage for her lost/damaged contents and additional living expenses.

Answer 55

Reference: C82 - Study 5 - LO1

The correct answer is: It would provide coverage for her lost/damaged contents and additional living expenses.

Question 56

What do condominium unit purchasers own?

Select one:

a.
Shared interest in a specific unit within a building and a shared interest in the common elements

b.
Shares in a corporation that owns the condominium building

c.
Clear and full ownership of a specific unit within a building and a shared interest in the common elements

d.
Clear and full ownership of a specific unit within a building and full ownership of the common elements

Answer 56

Reference: C82 - Study 5 - LO2

The correct answer is: Clear and full ownership of a specific unit within a building and a shared interest in the common elements

Question 57

The condominium corporation is responsible for snow and ice removal on the property. A guest falls and sues the corporation for his injuries. The corporation’s policy liability limit is $2,000,000, however the plaintiff is awarded $2,500,000 by the court. How does the unit owner’s loss assessment insurance coverage apply?

Select one:

a.
The unit owner’s policy will pay the entire settlement if the injury occurred on the unit owner’s driveway.

b.
The unit owner will be assessed on their share of the shortfall of $500,000 and can claim it on their unit owner’s policy.

c.
The unit owner’s policy pays nothing as the unit owner is not responsible for snow and ice removal.

d.
The unit owner’s policy pays nothing as the unit owner was not sued.

Answer 57

Reference: C82 - Study 5 - LO2

The correct answer is: The unit owner will be assessed on their share of the shortfall of $500,000 and can claim it on their unit owner’s policy.

Question 58

A condominium unit owner installs custom-made closet organizers in every closet in her unit. In the event of a loss which section of her insurance would provide coverage?

Select one:

a.
The unit owner’s improvements and betterments coverage

b.
The condominium corporation’s loss assessment coverage

c.
The condominium corporation’s master property policy

d.
The unit owner’s personal property coverage

Answer 58

Reference: C82 - Study 5 - LO2

The correct answer is: The unit owner’s improvements and betterments coverage

Question 59

What is the purpose of tie-downs for a manufactured home?

Select one:

a.
Reduces risk of theft by adding security

b.
Reduces risk of loss by improving wind resistance

c.
Increases similarity between mobile and brick and mortar homes

d.
Increases ability for ease of transportation

Answer 59

Reference: C82 - Study 5 - LO3

The correct answer is: Reduces risk of loss by improving wind resistance

Question 60

Which example does NOT qualify as a secondary location?

Select one:

a.
Cottage

b.
Short-term rental

c.
Commuter home

d.
Four-seasons lodge

Answer 60

Reference: C82 - Study 5 - LO3

The correct answer is: Short-term rental

Question 61

Alister is a retired tailor who began to make masks in his home for friends and family. If he decides to expand this to a business venture. Does he need a commercial policy to insure his home for this new business venture?

Select one:

a.
Yes, a commercial endorsement will be added to his personal-lines policy

b.
No, insurers will generally extend his homeowners policy as long as he continues to have customers shopping at his home

c.
Yes, a commercial policy is required as long as he has no customers coming to his home

d.
No, insurers will generally extend the homeowners policy as long as he has no customers coming to his home

Answer 61

Reference: C82 - Study 6 - LO1

The correct answer is: No, insurers will generally extend the homeowners policy as long as he has no customers coming to his home

Question 62

What are the components of power in equipment breakdown insurance (EBI)?

Select one:

a.
Steam, Oil, and Electricity

b.
Explosion, Expansion, and Power

c.
Pressure, Movement, and Electricity

d.
Electricity, Interaction, and Capacity

Answer 62

Reference: C82 - Study 6 - LO2

The correct answer is: Pressure, Movement, and Electricity

In EBI, power is defined by steam boiler (pressure), running engine wheel (movement), and an electric motor (electricity).

Question 63

Which type of business is best suited for the coverage provided by a small-business package policy?

Select one:

a.
An independent hair salon

b.
A shopping mall

c.
A factory that produces automobile parts

d.
A single location of a multi-national franchise restaurant operation

Answer 63

Reference: C82 - Study 6 - LO2

The correct answer is: An independent hair salon

Many insurers offer a pre-set package policy to small- and medium-sized enterprises, such as retail stores, realty offices, small contractors, and salons.

Question 64

How does a dairy farm manage their responsibility if their output becomes contaminated?

Select one:

a.
Temperature controlled warranty

b.
First-party pollution

c.
Umbrella liability policy

d.
Milk contamination endorsement

Answer 64

Reference: C82 - Study 6 - LO3

The correct answer is: Milk contamination endorsement

Dairy farms require milk contamination endorsement which covers contamination of the dairy’s output and its liability for contaminating milk from other dairies during transport.

Question 65

How does a rebuilding clause–deferred payment affect a claim settlement?

Select one:

a.
When a building is damaged to more than two-thirds of its value, the insurer will initially pay only 50 percent of the total payable, the remainder is paid when the insured rebuilds within the time frame and distance specified

b.
If a building is damaged to more than two-thirds of its value, insureds must sign a sworn declaration of their intent to rebuild and file it with the court to receive the claim settlement

c.
If a building is damaged to more than fifty percent of its value, the claim will not be paid until after the building is fully rebuilt

d.
If a farm building is a total loss, the claim payment will be divided into four equal payments paid at six-month intervals

Answer 65

Reference: C82 - Study 6 - LO3

The correct answer is: When a building is damaged to more than two-thirds of its value, the insurer will initially pay only 50 percent of the total payable, the remainder is paid when the insured rebuilds within the time frame and distance specified

The insurance company will pay initially only 50 percent of the total claim amount payable. To collect the remainder, the insured must rebuild within 9 to 12 months of the loss and within 200 feet (approximately 60 metres) of the damaged building.

Question 66

Cheery Balloons has a profits business interruption policy with a 100% coinsurance clause and current revenue of $250,000. How will they calculate an adequate limit of insurance?

Select one:

a.
Considering future sales projections

b.
With current sales minus 20% to recognize declining sales

c.
Through quarterly adjustments to reflect real numbers

d.
Using current sales plus 20% in anticipation of growth

Answer 66

Reference: C82 - Study 6 - LO4

The correct answer is: Considering future sales projections

Sum insured must be based on the expected future income to ensure that a large enough limit is purchased to comply with the coinsurance requirement.

Question 67

Which type of business interruption insurance is preferred if the business will still be affected by the loss even after it has reopened?

Select one:

a.
Business Income; Profits

b.
Income Replacement; Earnings

c.
Extra Expense; Earnings

d.
Income Replacement; Profits

Answer 67

Reference: C82 - Study 6 - LO4

The correct answer is: Income Replacement; Profits

The suitable approach depends on the answer to this question: Would the results of the business still be affected by the loss even after the business has reopened? If the answer is yes, then the profits approach is more suitable.

Question 68

Which coverages are generally included in cyber risk insurance?

Select one:

a.
Third-party liability; Extra expenses; Business interruption

b.
Business interruption; Extra expense; Directors and officer’s liability

c.
Third-party liability; Equipment breakdown; Business interruption

d.
Business interruption; Professional liability; Extra expense

Answer 68

Reference: C82 - Study 6 - LO5

The correct answer is: Third-party liability; Extra expenses; Business interruption

Question 69

Who is an obligee in a surety bond?

Select one:

a.
One who guarantees the performance of one party to another

b.
Person or corporation whose performance is guaranteed by a suretyship

c.
Person or corporation under a surety bond who is the beneficiary under the terms of the bond

d.
One who purchases insurance from a corporation

Answer 69

Reference: C82 - Study 6 - LO6

The correct answer is: Person or corporation under a surety bond who is the beneficiary under the terms of the bond

An obligee is a person or corporation under a fidelity or surety bond who is the beneficiary under the terms of the bond. In surety bonds, one party (the guarantor or surety) promises to make good any defaults if the second party (the principal) fails to meet certain stated obligations to the third party (the obligee).

Question 70

What is owed to a person who steps onto land or into a building by the land or building owner?

Select one:

a.
Insurable interest

b.
Legal liability

c.
A duty of care

d.
Indemnity

Answer 70

Reference: C82 - Study 7 - LO1

The correct answer is: A duty of care

Question 71

Which sections of a homeowners policy may be used at the discretion of the insured even though there is no legal liability for damage or injury?

Select one:

a.
Coverage E – Legal Liability and Coverage G – Payment for Damage to Property

b.
Coverage E – Legal Liability and Coverage F – Medical Payments

c.
Coverage F – Medical Payments and Coverage G–Payment for damage to property

d.
Coverage E – Legal Liability and Umbrella Insurance

Answer 71

Reference: C82 - Study 7 - LO2

The correct answer is: Coverage F – Medical Payments and Coverage G–Payment for damage to property

Question 72

What type of business activities are covered by a commercial general liability (CGL) policy?

Select one:

a.
Any new business activity the insured is engaged in if the insurer is notified within 12 months of the start of the new business.

b.
All business activities the insured is engaged in.

c.
All business activities disclosed to the insurer and listed on the declarations page.

d.
Any new business activity the insured is engaged in if the insurer is notified within 6 months of the start of the new business.

Answer 72

Reference: C82 - Study 7 - LO3

The correct answer is: All business activities disclosed to the insurer and listed on the declarations page.

Question 73

A window installer damages a customer’s floor while installing new windows. Which section of a CGL would provide coverage for the damage?

Select one:

a.
Contractual liability insurance

b.
Operations liability

c.
Third-party liability insurance

d.
Awarded damages insurance

Answer 73

Reference: C82 - Study 7 - LO3

The correct answer is: Operations liability

Question 74

What type of insurance provides protection from professional negligence to people who hold themselves out as having a special body of knowledge or skill?

Select one:

a.
Umbrella liability insurance

b.
Commercial general liability insurance

c.
Professional liability insurance

d.
Directors and officers liability insurance

Answer 74

Reference: C82 - Study 7 - LO4

The correct answer is: Professional liability insurance

Question 75

What feature contained in an umbrella policy could provide coverage for a loss if there is no coverage from the underlying policy?

Select one:

a.
Additional insuring agreements

b.
Extended coverage endorsement

c.
Drop-down coverage

d.
Policy enhancements

Answer 75

Reference: C82 - Study 7 - LO5

The correct answer is: Drop-down coverage