Multiple-Choice Questions & Answers Flashcards
Study for the C11 Principles and Practice of Insurance Final Exam.
Insurance was developed as a result of the existence of:
(A) hazard.
(B) indemnity.
(C) loss.
(D) risk.
(D) risk
Chapter 1, page 3: Insurance is based on risk. If there is no risk there can be no insurance. For example, we risk being responsible for injury to others when we drive an automobile.
Legal liability does not arise from:
(A) contracts.
(B) obligations to others.
(C) criminal acts.
(D) negligence.
(A) contracts.
The main purpose of insurance is to:
(A) provide compensation.
(B) provide security.
(C) share losses of a few people among the many.
(D) create investment income.
(C) share the losses of a few people among many.
Chapter 1, page 14: Insurance is the method of sharing the losses of the few individuals in a group who suffer them among the many members of that group who do not.
Which of the following is not a contract of indemnity?:
(A) a fire insurance policy.
(B) a medical insurance policy.
(C) a liability insurance policy.
(D) a life insurance policy.
(D) A life insurance policy.
Chapter 9, page 6: Life insurance contracts are contracts of compensation. Policies of compensation are not contracts of indemnity.
Which of the following is not a hazard?:
(A) an icy parking lot.
(B) poorly maintained heating systems.
(C) a residence without a security system.
(D) a high-crime neighbourhood.
(C) A residence without a security system. (Not sure why this is correct.)
The largest single class of general insurance sold in Canada is:
(A) automobile insurance.
(B) commercial property insurance.
(C) health insurance.
(D) personal property insurance.
(A) automobile insurance.
Chapter 2, page 7: Automobile insurance is the largest single class of general insurance sold in Canada. It provides coverage for legal liability to third parties, accident benefits for the insured, and direct damage to the described vehicle. Automobile insurance is actually a combination of three distinctly different coverages - liability, accident and disability, and property damage.
Which of the following does not fall into the category of general insurance?:
(A) business interruption
(B) crime insurance.
(C) hail insurance.
(D) health insurance.
(D) health insurance.
Chapter 2, page 9: Life and health insurance is its own main category of insurance that provides coverage relating to life, accident, sickness and disability.
Inland marine insurance:
(A) applies to real property only.
(B) deals with movable items only.
(C) includes an element of “transportation” or “communication” exposure.
(D) is not offered under most property and casualty policies.
(C) includes an element of “transportation” or “communication” exposure.
Chapter 2, page 9: inland transportation insurance also covers bridges, wharves… such items are considered to be instruments of transportation or communication.
Which of the following is not used by insurers to achieve spread of risk?:
(A) diversity of location.
(B) diversity of type of risk.
(C) loss prevention.
(D) volume.
(C) loss prevention.
Chapter 2, pages 11-12: list diversity of location, type of risk, and volume all as ways of spreading risk. Which leaves loss prevention, which is about reducing or preventing losses, not spreading risk.
The law of large numbers:
(A) indicates the likelihood of an occurrence.
(B) indicates the probability of an event occurring.
(C) means the predictability increases with the number of cases.
(D) refers to the number of losses actually occurring divided by the number of losses that could have occurred.
(C) means the predictability increases with the number of cases.
Chapter 3, page 4: the law of large numbers is the principle that the reliance to be placed upon a given probability is increased when the number of trials or cases is increased.
The statutory conditions under common law are:
(A) binding on the insurer but not on the insured.
(B) determined and designed by each individual insurer.
(C) required on all policies.
(D) required on those policies insuring certain classes of risk.
(D) required on those policies insuring certain classes of risk.
Chapter 10, page 10: statutory conditions (common law provinces) are conditions legislated into being by provincial legislatures. They must form part of every insurance policy covering certain classes of risks.
The primary responsibility of an underwriter is to:
(A) obtain the business at the best possible price.
(B) provide the correct and proper policy wording.
(C) select the risks to insure.
(D) sell an applicant the most appropriate policy.
(C) select the risks to insure.
Chapter 3, page 8: underwriting is the selection of risks.
An underwriter, who is considering the insurer’s exposure under a policy, is calculating the:
(A) perils insured under the policy.
(B) hazards a risk would attract.
(C) number of losses that the policy should experience in a term.
(D) sum total of values insured under a policy.
(D) sum total of values insured under a policy.
Chapter 3, page 13: exposure is also the sum total of values insured under a policy; in other words, the total amount the insurer could become liable for under a policyh.
