Practice Questions Flashcards
Which of the following is the best example of how insurance benefits society through economic stimulation?
Which of the following is a TRUE statement? A premium is
Discuss the contrasts between a hard market and a soft market.
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?
Which of the following statements is TRUE? A loss ratio is
Compare and contrast mediation and arbitration.
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?
Compare and contrast treaty reinsurance and facultative reinsurance
The Insurance Bureau of Canada (IBC) provides communication, support, and information to consumers on important insurance matters. It is best known
Which of the following statements is correct with respect to binding authority? Binding authority a) will be stipulated in the agency agreement
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
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?
Which of the following is TRUE regarding a Level 2 Certificate of Authority?
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?
) Identify two reasons why errors and omissions insurance is needed
A major cause of an errors and omissions claim is failure to provide the correct coverage. This occurs when
When must an errors and omissions insurer be notified of a claim?
Differentiate between pure and speculative risk. Provide an example of each.
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?
According to the law of large numbers, as the number of exposure units is increased:
What is the difference between a funded and an unfunded reserve?
The implementation step of the risk management process requires many decisions to be made. Deciding what should be done is a
An emergency response plan focuses on
A requirement for an individual to renew his or her Certificate of Authority is that he or she must:
The Office of the Superintendent of Financial Institutions (OSFI) is responsible for
Which of the following is NOT an ethical practice expected of an insurance agent or broker?
Define “private information” and provide five examples of private information relevant to an insurance office.
One of ten privacy protection principles set out by PIPEDA respects limiting the collection of personal information to
Identify and compare the two systems of civil law in Canada.
Explain how an insurance contract is a legally binding contract. The answer will include the identfcaton of necessary contract elements.
Insurance contracts are based on indemnity. Which of the following insurance concepts does not relate to the principle of indemnity?
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
Which of the following is an objective of “no-fault” automobile insurance?
In which two provinces of Canada is the right to sue for automobile accidents prohibited?
With respect to the standard application form for owners of automobiles, which of the following statements is TRUE?
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?
Under the Standard Automobile Policy (SPF 1), accident benefits are payable to
Which of the following statements is FALSE with respect to minor injuries?
Under Section C—Additional Agreements of the Insurer, the insurer agrees to
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?
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?
The Legal Liability for Damage to Non-owned Vehicles Endorsement (SEF 27) covers
The Facility Association manages risk sharing pools in Alberta. In Alberta, two pools operate. One is called the Grid Pool. The Grid Pool
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?
The SEF 30—Excluding Operation of Attached Machinery Endorsement
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?
Identify four coverage choices available under Section C of the Garage Automobile policy (SPF 4).
A non-owned automobile policy (SPF 6) is recommended for any firm
Under the SPF 9 (Transportation Network Policy), third party liability coverage is provided
Briefly describe three differences between a personal lines and commercial insurance policy.
Which of the following benefits will apply when a loss payee is added to a property insurance policy?
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
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?
Moral hazard
Identify four conditions which must be satisfied in order for an insured to receive replacement cost on a damaged or destroyed building.
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?
Identify and briefly describe three common deductible applications used in property insurance policies.
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?
List the four property subsections on a homeowner policy.
Which of the following claims would be covered under a homeowner basic form? Assume no special endorsements have been added to the policy.
Which of the following claims would NOT be covered under the water damage peril on a homeowner policy?
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
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?
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?
Which of the following exclusions usual to homeowner policies is NOT found on a homeowner basic form?
The lock replacement extension of coverage on a homeowner policy
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?
Which of the following is TRUE of a fine arts floater?
Which of the following statements is FALSE respecting tenant insurance?
Under Coverage D—Additional Living Expenses on a tenants policy,
Which of the following exclusions are NOT found on a tenants form?
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?
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?
U3—Unit Additional Protection coverage of a condominium unit owners form insurance policy insures the individual unit, excluding improvements and betterments, if
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
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?
Which of the following statements is TRUE regarding insurance coverage for machinery and equipment usual to a farm operation?
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?
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?
A subscription policy is one that
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?
A Peak Season Endorsement
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
Which of the following exclusions is found only on the commercial building, equipment, and stock broad form and not the named perils form?
The inflation protection endorsement increases the building policy limit during an annual period to reflect increases in costs due to inflation. The increase
Under a glass rider, which of the following is TRUE?
Which of the following is NOT excluded on an equipment breakdown or boiler and machinery policy?
Which of the following statements is CORRECT with respect to a Contractors Equipment Floater policy?
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
Marine insurance is needed to
A labour and materials bond
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
What is the PRIMARY difference between a profits form and a gross earnings form?
An extra expense policy
Which of the following insurance forms is a contingent business interruption form?
A bylaw endorsement on a business interruption insurance policy provides coverage for
The insurance industry is very particular about specific definitions describing crime perils. Which of the following would be considered a robbery loss?
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
An endorsement covering damage to the building by burglary or robbery protects
Which of the following is an example of the tort of negligence?
In which of the following situations might contributory negligence apply?
Damages awarded for loss of future earnings would be classified as
Keeping a pet tiger on one’s premises which then escapes and causes harm would result in an application of
Joint and several liability
List the coverage subsections found in the personal liability coverage provided by a homeowner package policy.
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
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
Coverage J—Loss Assessment included in a condominium unit owners policy provides coverage for a special assessment levied against an insured
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
Regarding an umbrella liability policy, which of the following is TRUE?
The tenants legal liability exposure is
Under common law, a property owner or occupier owes the highest duty of care to
The Commercial General Liability policy agrees to pay “compensatory damages.” These damages do NOT include
Which of the following is NOT covered by the Personal Injury coverage of the Commercial General Liability policy?
Under a Commercial General Liability insurance policy, which of the following statements is TRUE with respect to contractual liability?
Which of the following statements is TRUE with respect to tenants legal liability coverage provided by a Commercial General Liability policy?
Which of the following exclusions applies to all coverages under a Commercial General Liability policy?
A cross liability clause means that
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
Which of the following insurance policies is a type of professional liability policy?
Identify four differences between an umbrella liability insurance policy and an excess policy.
Coverage for “disposition of remains” if an insured dies while travelling includes
“Injury” as typically defined in medical travel policies
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?
