Mock Test

Question 1

Types of Damages Covered by Liability (SGCP)

Answer 1

1. Special (ex: Medical expenses)
2. General (e.g., pain & suffering, disability)
3. Compensatory Collectively Special and General damages
4. Punitive (punishment, deterrent, lesson)

Question 2

Liability Damages insurance is concerned with (SGC)

Answer 2

1. Special
2. General
3. Compensatory

Question 3

What is included in the Coverage Summary Page (PCPA)

Answer 3

1. parties to the contract
2. commencement date,
   term, expiry date
3. premium and rate

4.amount insured

Question 4

Which party makes a claim against liability?

Answer 4

Third party (someone outside of the insurance contract)

Question 5

What are the unique elements of an insurance contract? (IIU)

Answer 5

1. Insurable Interest
2. Indemnity
3. Utmost Good Faith

Question 6

What are compensatory damages for?

Answer 6

Compensatory Damages are a sum of money to which a plaintive is entitled that makes amends for an actual loss (nothing more nothing less)

Question 7

What does fiduciary mean?

Answer 7

“Trust”

-a person to whom the administration of something is entrusted for the benefit of another; a trustee; someone appointed to oversee another

Question 8

What does premises mean under the liability section of the policy wording?

Answer 8

Premises - means all premises where the person(s) named as insured in the declarations, or their spouse, maintains a residence, including seasonal and other residences, provided such premises are specifically described in the Declarations

Question 9

What does insured mean under the liability section of the policy wording?

Answer 9

Insured - person(s) named as Insured on the Cover Summary Page and while living in the same household:
-their spouse
-the relatives of either
-any person under 21 in their care

Question 10

What is legal liability?

Answer 10

Legal Liability = Negligence

Legal Liability pays for harm done to third parties

Question 11

What is Negligence?

Answer 11

-failure to use the degree of care expected from a reasonable and prudent person

So, negligence is:
-Doing something unreasonable

-Omitting to do something a reasonable person would do

Question 12

How is defense, settlement, and supplementary payments paid out? Are they paid from the limit of insurance or are they paid beyond the limit of insurance?

Answer 12

If you fight a charge in court, the policy will pay for the lawyers and court stuff over and above the policy limit.
Defense cost settlement payments do not deplete from your coverage.

Question 13

How is weekly indemnity paid out in Coverage H?

Answer 13

2/3 of residence employee’s weekly wage at the date of the accident, up to $100 per week.

Formula will be:
weekly wage / 3 x 2

(weekly wage divided by 3, multiply by 2)

Question 14

Define actual cash value.

Answer 14

*Replacement Cost – Depreciation

*The current cost of replacing an article with a similar one of the same condition, taking into account factors that may augment or lower value

Question 15

Exclusions of Coverage G.

Coverage G is Voluntary Payment for Damage to Property

Answer 15

a. damage to property you or your tenants own or rent

b. damage to property which is insured under Section I

c. claims resulting from the loss of use, disappearance, or theft on property

Question 16

How is temporary insurance terminated?

Answer 16

It’s terminated just like an actual insurance.

Question 17

What is the purpose of Statutory Conditions?

Answer 17

Provide insureds with a consistent approach to having their claims settled and bind the insured and insurer, establishing certain rights and obligations for both parties.

Question 18

What optional perils are available under a property policy?

Answer 18

1. Personal articles
2. Watercraft, outboard, motor trailer and Miscellaneous Equipment Coverage
3. Freezer Foods
4. Fine Arts
5. Fine Arts Breakers
6. Earthquake
7. Personal COmputer
8. Residence Glass
9. Sewer Back Up / Water Escape
10. Mass Evacuation
11. Vacancy Permit

Question 19

If someone wants a higher amount of coverage on expensive jewelry, what would you suggest purchasing

Answer 19

Personal Articles Coverage (Endorsement/Rider)

Question 20

What is a standard mortgage clause?

Answer 20

It protects the mortgagee from the actions of the insured.

It creates a separate agreement between the bank and insurance company. The bank will get their money even if the insured has done something that breached a Statutory Condition and is not getting indemnified.

Question 21

Review the Additional Conditions section in the policy wording booklet

Answer 21

1. Notice to Authorities - notify the police or other authorities immediately if the loss is due to malicious acts, burglary, robbery, theft or attempted theft.
2. No Benefit to Bailee - it is warranted by insured that insurance should not benefit any other carrier or bailee
3. Pair and set - articles which are part of a set or pairs if lost or damaged, the measure of loss should be a reasonable and fair proportion to the total value, but will not mean total loss of set
   (ex: if one earring is damaged - it does not mean insurance will pay for the value of the pair)
4. Parts -

Question 22

What is GLACC and what is LCC?

Answer 22

Genuine Intent
Legality of Purpose
Agreement
Capacity to Contract
Consideration

LCC determines enforceability

Question 23

Manuscript Policies

Answer 23

A Manuscript policy is specially designed for a particular risk.

A manuscript policy does not use standard preprinted wording but rather is an individual manuscript; it must incorporate all elements of a normal policy.

These are used for unique risk; manually put together.

Question 24

Subscription policy

Answer 24

A subscription policy usually comes into play with large risks.

It is one large risk insured by multiple insurance companies.

Question 25

What is the primary function of insurance?

Answer 25

Spread the loss of a few amongst the many

Question 26

Who is the mortgagor?

Answer 26

Mortgagor is the person who holds the mortgage

-This is the person who owns the house

Question 27

Who is the mortgagee?

Answer 27

A Mortgagee is the person who provides the mortgage (usually a bank)

Question 28

How do insurers achieve spread of risk? (VDD)

Answer 28

3 considerations to achieve spread of risk are:

1. Volume – insure a large number of risks
2. Diversity of type of risk – insure as many different kinds of risk as possible
3. Diversity of location – insure as many different locations as practicable

Question 29

What is Proximate Cause?

Answer 29

the immediate and effective cause of loss, which in a chain of circumstances leads naturally and directly to the loss – not necessarily the last event before the occurrence.

– An insured peril must be the proximate cause!

Question 30

Pure risk

Answer 30

can only offer loss, not gain

Only pure risk is insurable

Question 31

Speculative risk

Answer 31

offers the chance for loss or profit

Question 32

Mutual Insurance Companies

Answer 32

Mutual insurance companies are owned by their policyholders.

They are a form of co-operative enterprise.

Question 33

Assessment or Premium Note Mutual Insurance Co

Answer 33

Founded on mutual aid; each policyholder is a member

Question 34

Factory Mutuals

Answer 34

Specialize in fire prevention, expertise makes them good at fire prevention

Question 35

Stock mutuals

Answer 35

Started as pure assessment then incorporated to write participating policies with the public

Question 36

Co-operative stock mutuals

Answer 36

Members are policyholders; capital comes from member shareholders who are also the insureds

Question 37

Quebec Term - Mandate

Answer 37

Contract

Question 38

Quebec Term - Mandator

Answer 38

Principal

Question 39

Quebec Term - Mandatory

Answer 39

Agent

Question 40

What is the price of a unit of insurance for a period of one year called?

Answer 40

Rate

Question 41

The regulation of all insurance intermediaries falls under.

Answer 41

Provincial Jurisdiction