Practice Questions

Question 1

Which of the following is the best example of how insurance benefits society through economic stimulation?

Question 2

Which of the following is a TRUE statement? A premium is

Question 3

Discuss the contrasts between a hard market and a soft market.

Question 4

Premium financing is generally available to assist insureds with premium payment. Although legal requirements for plans provided through a finance company may differ provincially, general procedures are similar. The general procedures include which of the following?

Question 5

Which of the following statements is TRUE? A loss ratio is

Question 6

Compare and contrast mediation and arbitration.

Question 7

Reinsurance allows an insurer to write a higher level of risk and to accept larger amounts than it otherwise could. Which of the following is an advantage of reinsurance?

Question 8

Compare and contrast treaty reinsurance and facultative reinsurance

Question 9

The Insurance Bureau of Canada (IBC) provides communication, support, and information to consumers on important insurance matters. It is best known

Question 10

Which of the following statements is correct with respect to binding authority? Binding authority a) will be stipulated in the agency agreement

Question 11

A broker has a fiduciary responsibility when handling insurance premiums. Even when there is no explicit legal or contract requirements to keep funds separate, a brokerage should

Question 12

Your client, Goutsis Contracting Inc., calls you early Monday morning to report a loss that occurred over the weekend. One of their cranes toppled over at a project site. Which of the following functions will you immediately do?

Question 13

Which of the following is TRUE regarding a Level 2 Certificate of Authority?

Question 14

Canadian insurance regulators developed guidelines for fair treatment of customers which must be observed by agents and brokers. The guidelines include 12 customer outcomes and expectations. Which of the following is NOT included in the guidelines?

Question 15

) Identify two reasons why errors and omissions insurance is needed

Question 16

A major cause of an errors and omissions claim is failure to provide the correct coverage. This occurs when

Question 17

When must an errors and omissions insurer be notified of a claim?

Question 18

Differentiate between pure and speculative risk. Provide an example of each.

Question 19

Northern Textiles Inc. has invited you to provide an insurance quotation for their business. As part of the risk identification process, you carefully consider all loss exposure categories. Which of the following is NOT an exposure under the Human Assets category?

Question 20

According to the law of large numbers, as the number of exposure units is increased:

Question 21

What is the difference between a funded and an unfunded reserve?

Question 22

The implementation step of the risk management process requires many decisions to be made. Deciding what should be done is a

Question 23

An emergency response plan focuses on

Question 24

A requirement for an individual to renew his or her Certificate of Authority is that he or she must:

Question 25

The Office of the Superintendent of Financial Institutions (OSFI) is responsible for

Question 26

Which of the following is NOT an ethical practice expected of an insurance agent or broker?

Question 27

Define “private information” and provide five examples of private information relevant to an insurance office.

Question 28

One of ten privacy protection principles set out by PIPEDA respects limiting the collection of personal information to

Question 29

Identify and compare the two systems of civil law in Canada.

Question 30

Explain how an insurance contract is a legally binding contract. The answer will include the identfcaton of necessary contract elements.

Question 31

Insurance contracts are based on indemnity. Which of the following insurance concepts does not relate to the principle of indemnity?

Question 32

John agrees to buy Bill’s car for $10,000. Before he pays Bill and picks up the vehicle, Bill is in an accident which completely destroys the car. The contract is discharged due to

Question 33

Which of the following is an objective of “no-fault” automobile insurance?

Question 34

In which two provinces of Canada is the right to sue for automobile accidents prohibited?

Question 35

With respect to the standard application form for owners of automobiles, which of the following statements is TRUE?

Question 36

You are insured in Alberta. If you had an automobile accident in a province where the minimum liability coverage required is $500,000 and you only carried $200,000 Section A coverage, how much would your insurer pay?

Question 37

Under the Standard Automobile Policy (SPF 1), accident benefits are payable to

Question 38

Which of the following statements is FALSE with respect to minor injuries?

Question 39

Under Section C—Additional Agreements of the Insurer, the insurer agrees to

Question 40

If two vehicles are insured on the same policy (SPF 1—Owners Form) but for different limits under Section A, what amount would apply to a non-owned vehicle being driven by the insured?

Question 41

Under Statutory Condition 4—Requirements Where Loss or Damage to the Automobile, of an SPF 1, which of the following is NOT a requirement of the insured?

Question 42

The Legal Liability for Damage to Non-owned Vehicles Endorsement (SEF 27) covers

Question 43

The Facility Association manages risk sharing pools in Alberta. In Alberta, two pools operate. One is called the Grid Pool. The Grid Pool

Question 44

A 21A Monthly Reporting Endorsement is frequently used on fleet automobile insurance policies for premium calculation. Which of the following statements is true regarding this endorsement?

Question 45

The SEF 30—Excluding Operation of Attached Machinery Endorsement

Question 46

Automobile owners policies commonly exclude exposures arising from the sale, repair, service, storage, or parking of automobiles. Your client, Westview Honda (an automobile dealership), requires coverage for these exposures. You recommend an SPF 4 Garage Automobile policy which covers three main classes of vehicles: owned automobiles, customers’ automobiles, and non-owned automobiles. Owned automobiles include which of the following?

Question 47

Identify four coverage choices available under Section C of the Garage Automobile policy (SPF 4).

Question 48

A non-owned automobile policy (SPF 6) is recommended for any firm

Question 49

Under the SPF 9 (Transportation Network Policy), third party liability coverage is provided

Question 50

Briefly describe three differences between a personal lines and commercial insurance policy.

Question 51

Which of the following benefits will apply when a loss payee is added to a property insurance policy?

Question 52

While applying for fire insurance on her house, Janice failed to mention that she teaches art classes and stores art supplies in her home. This would be an example of

Question 53

The Turcotte family goes away for the weekend. While they are away, their house is broken into. On returning home, they discover that some of their belongings have been vandalized. A beautiful tiffany-style lamp has been smashed. It is one of a set of three matching lamps (two table lamps and a floor lamp). Which of the following conditions will most likely apply to this loss?

Question 54

Moral hazard

Question 55

Identify four conditions which must be satisfied in order for an insured to receive replacement cost on a damaged or destroyed building.

Question 56

Three insurance policies exist on a commercial building. Each policyis insured by a different insurer. Insurer A has a policy limit of $100,000; Insurer B has a policy limit of $250,000; and Insurer C has a policy limit of $150,000. Rateable proportion is applied to a loss of $300,000. Disregarding any applicable deductibles, how much of the loss will Insurer A be responsible for?

Question 57

Identify and briefly describe three common deductible applications used in property insurance policies.

Question 58

Jones owns a restaurant building valued at $100,000. He has a limit of insurance of $50,000 with an 80% coinsurance clause. A fire loss results in damages of $40,000. How much will the insurer pay for the loss?

Question 59

List the four property subsections on a homeowner policy.

Question 60

Which of the following claims would be covered under a homeowner basic form? Assume no special endorsements have been added to the policy.

Question 61

Which of the following claims would NOT be covered under the water damage peril on a homeowner policy?

Question 62

Your client, Lilli Mercer, expresses concern about some personal property items she owns. She wishes to insure these items on a comprehensive homeowner form but wants confirmation that replacement cost will be the basis of settlement for these items. You assure Lilli that losses will be settled at replacement cost except for

Question 63

The dwelling building coverage on a homeowner form includes an optional extension of coverage to be applied towards trees, plants, or shrubs on the premises. Which of the following perils does the extension NOT apply to?

Question 64

The personal property coverage on a homeowner form provides coverage for contents of the dwelling which are owned, worn, or used by the insured, usual to the ownership or maintenance of the dwelling. Which of the following items is NOT covered?

Question 65

Which of the following exclusions usual to homeowner policies is NOT found on a homeowner basic form?

Question 66

The lock replacement extension of coverage on a homeowner policy

Question 67

The personal articles floater insures against all-risks of direct physical loss or damage. Which of the following is TRUE about the personal articles floater?

Question 68

Which of the following is TRUE of a fine arts floater?

Question 69

Which of the following statements is FALSE respecting tenant insurance?

Question 70

Under Coverage D—Additional Living Expenses on a tenants policy,

Question 71

Which of the following exclusions are NOT found on a tenants form?

Question 72

123456 Condominium Corporation suffers a severe fire loss caused by a careless smoker. The insurer indemnified the corporation and the rights of subrogation are transferred to the insurer. In which of the following cases has the insurer waived its rights of subrogation?

Question 73

Jayne Hudson owns a unit in a condominium complex. When she purchased the condominium unit, she had extensive renovations made to the kitchen. Fire damage occurs to the condominium building. Which of the following insurance coverages would restore Jayne’s kitchen to its renovated state?

Question 74

U3—Unit Additional Protection coverage of a condominium unit owners form insurance policy insures the individual unit, excluding improvements and betterments, if

Question 75

Mobile home policies generally exclude losses arising from moving the home unless the building is moved in an emergency to protect it from an insured peril. Since a mobile home can be moved, the policy also generally excludes loss due to

Question 76

Your client, John Simms, has a seasonal dwelling insurance policy for his lakefront cottage. Which of the following statements is TRUE with respect to seasonal dwelling insurance policies?

Question 77

Which of the following statements is TRUE regarding insurance coverage for machinery and equipment usual to a farm operation?

Question 78

Alex Barowski, a potential client, requires coverage for his farmhouse and outbuildings. He has farm equipment and machinery as well as livestock. A rebuilding clause applies to the policy. Which of the following statements is INCORRECT with respect to this clause?

Question 79

Joe Green has a farm insurance policy for his mixed-farming operation. He has over 100 head of cattle and he grows wheat, barley, and oats. Joe has purchased livestock coverage but is concerned that the coverage may not be adequate. He is considering livestock mortality insurance. Which of the following perils would be covered on a livestock mortality policy, but is not typically provided by the livestock coverage common to a farm insurance policy?

Question 80

A subscription policy is one that

Question 81

Insurance Bureau of Canada wordings commonly used to insure commercial buildings, equipment, and stock are available on a broad form or named perils basis. The difference between these two forms is which of the following?

Question 82

A Peak Season Endorsement

Question 83

Your commercial client, Abe’s Renovations and Repairs, is insured under a commercial building, equipment, and stock commercial policy. Under a labour agreement, the company has an obligation for the safekeeping of employees’ clothing and tools. These items would

Question 84

Which of the following exclusions is found only on the commercial building, equipment, and stock broad form and not the named perils form?

Question 85

The inflation protection endorsement increases the building policy limit during an annual period to reflect increases in costs due to inflation. The increase

Question 86

Under a glass rider, which of the following is TRUE?

Question 87

Which of the following is NOT excluded on an equipment breakdown or boiler and machinery policy?

Question 88

Which of the following statements is CORRECT with respect to a Contractors Equipment Floater policy?

Question 89

Bob’s Trucking Ltd. is a common carrier who offers his services for hire. He purchases an all-risk motor truck cargo policy from your brokerage. No endorsements are added to the policy. The coverage will provide protection

Question 90

Marine insurance is needed to

Question 91

A labour and materials bond

Question 92

The business interruption insurance (gross earnings form) contains a coinsurance clause which specifies that the insured must bear a portion of any loss unless the amount insured is at least

Question 93

What is the PRIMARY difference between a profits form and a gross earnings form?

Question 94

An extra expense policy

Question 95

Which of the following insurance forms is a contingent business interruption form?

Question 96

A bylaw endorsement on a business interruption insurance policy provides coverage for

Question 97

The insurance industry is very particular about specific definitions describing crime perils. Which of the following would be considered a robbery loss?

Question 98

An insurance agent recommends fidelity insurance to a client, a large mail order firm. No specific extensions are purchased. Fidelity insurance is designed to protect the client against

Question 99

An endorsement covering damage to the building by burglary or robbery protects

Question 100

Which of the following is an example of the tort of negligence?

Question 101

In which of the following situations might contributory negligence apply?

Question 102

Damages awarded for loss of future earnings would be classified as

Question 103

Keeping a pet tiger on one’s premises which then escapes and causes harm would result in an application of

Question 104

Joint and several liability

Question 105

List the coverage subsections found in the personal liability coverage provided by a homeowner package policy.

Question 106

Under the “other insurance” section of the personal liability coverage provided by a homeowner package policy, if there is other insurance in force at the time which would cover the accident or occurrence, the insurer would be liable for

Question 107

Section II of a homeowner policy provides coverage for personal liability. Which of the following statements is FALSE with respect to the coverage provided? The policy

Question 108

Coverage J—Loss Assessment included in a condominium unit owners policy provides coverage for a special assessment levied against an insured

Question 109

Business operations or use of the premises for business purposes are excluded under the liability coverage provided on a homeowner, tenants, or condominium unit owners form unless

Question 110

Regarding an umbrella liability policy, which of the following is TRUE?

Question 111

The tenants legal liability exposure is

Question 112

Under common law, a property owner or occupier owes the highest duty of care to

Question 113

The Commercial General Liability policy agrees to pay “compensatory damages.” These damages do NOT include

Question 114

Which of the following is NOT covered by the Personal Injury coverage of the Commercial General Liability policy?

Question 115

Under a Commercial General Liability insurance policy, which of the following statements is TRUE with respect to contractual liability?

Question 116

Which of the following statements is TRUE with respect to tenants legal liability coverage provided by a Commercial General Liability policy?

Question 117

Which of the following exclusions applies to all coverages under a Commercial General Liability policy?

Question 118

A cross liability clause means that

Question 119

The insured has the following limits under a Commercial General Liability policy: Coverage A—$1,000,000 with a general aggregate limit of $4,000,000. The injured third party has been awarded the following amounts: pain and suffering $900,000; special damages $100,000; court costs $200,000; post-judgment interest $100,000; and exemplary/punitive damages of $200,000. The total amount paid by the insurer is

Question 120

Which of the following insurance policies is a type of professional liability policy?

Question 121

Identify four differences between an umbrella liability insurance policy and an excess policy.

Question 122

Coverage for “disposition of remains” if an insured dies while travelling includes

Question 123

“Injury” as typically defined in medical travel policies

Question 124

Trip cancellation insurance provides coverage when an insured cancels their trip prior to departure. Which of the following reasons are typically covered by a trip cancellation policy?