Practice Test

Question 1

The primary function of insurance is to:

a) Assume the liability of others
b) Spread the losses of the few among the many
c) Provide protection from perils
d) Provide protection from hazards

Answer 1

B

Question 2

A faulty heating system can be described as:

a) Physical Hazard
b) Peril
c) Hazard
d) Moral Hazard

Answer 2

A

Question 3

In insurance terminology risk is:

a) A hazard
b) Always insurable
c) The chance of loss
d) The same for everyone

Answer 3

C

Question 4

Gambling is considered:

a) Pure risk
b) Speculative risk
c) Fortuitous risk
d) Personal risk

Answer 4

B

Question 5

The price per unit of insurance for a period of one year is called a:

a) Premium
b) Rate
c) Tariff
d) Loading

Answer 5

B

Question 6

The regulation of all insurance intermediaries falls under:

a) Federal and provincial jurisdiction
b) Federal jurisdiction
c) Provincial jurisdiction
d) The Insurance Companies Act

Answer 6

C

Question 7

A binder:

a) Is the capacity to confirm to applicants that they have coverage against certain happenings or events which, if they occur, may cause financial loss
b) Is a confirmation that insurance coverage is in effect
c) Is an all-inclusive insurance package
d) Must always be in writing

Answer 7

B

Question 8

The actual cash value of an item that has been lost or destroyed, can be descried as the:

a) Original purchase price of the item
b) Replacement cost of the item at the time of loss
c) Value of an equivalent item of the same age and condition
d) Item’s value to the insured at the time of loss

Answer 8

C

Question 9

Which of the following is NOT used by insurers to achieve spread of risk?

a) Volume
b) Loss prevention
c) Diversity of risk
d) Diversity of location

Answer 9

B

Question 10

Under the Civil Code of Quebec a mandator is a:

a) Contract
b) Agent
c) Insurance Contract
d) Principal

Answer 10

D

Question 11

Which of the following is not a type of insurance carrier?

a) Organizations that are run by a government department or crown corporation
b) Organizations that operate solely for the benefit of their members
c) Organizations that employ independent business people who operate with one or more insurance companies in order to place business
d) Organizations that operate for the profit of their owners

Answer 11

C

Question 12

Llodys of London is:

a) An insurance market place
b) A group of professional underwriters
c) An insurance syndicate
d) An unlimited liability company

Answer 12

A

Question 13

An unearned premium is that portion of the policy premium that:

a) Has not been paid out as a loss
b) Covers the policy period that has not yet expired
c) Has not been paid out as losses or as agents’ or brokers’ commission
d) Is left over after the payment of all losses, commission and expenses

Answer 13

B

Question 14

A stock insurance company:

a) Has to change the nature of the organization by an Act of Legislature to be able to write business with the general pubic
b) Makes profit from three different sources
c) Is subject to legal provisions that require them to maintain sufficient assets in order to cover off their liabilities
d) Returns surplus profits to the members in the form of dividends

Answer 14

C

Question 15

A mutual insurance company:

a) Cannot insure anyone who is not a member of the community
b) Insurers mostly its shareholders
c) Is owned by its policyholders
d) Is owned by its shareholders

Answer 15

C

Question 16

The Introduction or preamble of a policy contains:

a) The parties to the contract, the effective and expiry date, the premium and the amount of insurance
b) The subject matter of insurance, the perils insured against, the exclusion and the amount of insurance
c) Identifies the insured and insurer, the effective and expiry date and the amount of insurance
d) The application, insuring agreements, the premium and the amount of insurance

Answer 16

A

Question 17

Statutory Conditions are set out by the provincial Insurance Act. Which of the following is incorrect

a) Statutory Conditions are applicable to Automobile, Accident and sickness and Fire insurance
b) They must be printed on interim cover notes and binders
c) These conditions are deemed to apply even if they are not actually mentioned in the policy
d) Statutory Conditions cannot be amended, re-written or omitted from a policy

Answer 17

B

Question 18

An insured loses one of her diamond earrings. Which policy condition would apply to this type of loss?

a) Sue and labour
b) Parts
c) Pair and Set
d) Actual cash value

Answer 18

C

Question 19

With respect to the Termination of Insurance Contracts which of the following is true:

a) The insured can cancel by giving a set number of days notice in writing by registered mail and any premium owing will be calculated on a Short Rate basis
b) The insurer can cancel by hand delivering notice but must return the Pro Rata portion of the premium
c) The Insured can cancel at any time but must refund any premium to the insured based on the Pro Rata calculation
d) The Insured can cancel his policy at any time but is entitled to the Pro Rata portion of the premium

Answer 19

B

Question 20

Temporary Insurance:

a) Must be terminated by telephone call to the broker who issued it
b) Must be terminated by registered letter when a policy is issued
c) Must be terminated in the same way as a policy of similar type would be terminated
d) Once issued, cannot be terminated - it remains in force until a policy replaces it

Answer 20

C

Question 21

Law, in general terms, can be described as:

a) The relationship between private individuals
b) Legal wrongs
c) The expressed will of society governing relationships among members of that society
d) A body of well-defined legal principles set out in thousands of court decisions over hundreds of years

Answer 21

C

Question 22

Which element of the contract determines enforce-ability?

a) Agreement, Consideration and Genuine Intentions
b) Consideration, Capacity to contract and Genuine Intentions
c) Consideration, Legality of purpose and Capacity to contract
d) Genuine Intentions, Legality of purpose and Capacity to contract

Answer 22

C

Question 23

Precedent is:

a) A legal decision serving as an authoritative guide for future, similar cases
b) An act of the legislature declaring or prohibiting something
c) Codified law
d) Statutory law

Answer 23

A

Question 24

The Civil Code of Quebec is:

a) A system of inherited laws
b) Law enacted by the National Assembly of Quebec
c) The only law in Quebec
d) The Quebec equivalent of the common law

Answer 24

D

Question 25

A valued insurance contract:

a) Implies that, because of the higher premium, the contract is a valued one
b) Implied that the amount to be paid in the event of a loss is determined when the policy is written
c) Is a life insurance policy under which an agreed amount will be paid on the death of the insured
d) Is a replacement cost contract

Answer 25

B

Question 26

A contract of compensation:

a) Is the equivalent of a contract of indemnity
b) States that a present amount is payable when an event occurs
c) States that an amount is predicated on the values at the time of the loss
d) States that an employer must pay a specific amount when an employee is injured

Answer 26

B

Question 27

The proximate cause of a loss is the

a) Effective cause in a chain of events leading to the loss
b) Final cause in a chain of events leading to the loss
c) First cause in a chain of events leading to the loss
d) Remote cause in a chain of events leading to the loss

Answer 27

A

Question 28

A material fact is information that

a) An insurer should know without being told about it by the applicant
b) Could affect how an underwriter assesses a particular risk
c) Is applicable to all risks of the same general class
d) An applicant for insurance must disclose only if asked

Answer 28

B

Question 29

Which of the following is not a unique element of an insurance contract:

a) Salvage
b) Indemnity
c) Insurable Interest
d) Utmost Good Faith

Answer 29

A

Question 30

Co-insurance clauses are designated to:

a) Encourage insured’s to carry adequate amount of insurance
b) Make claims handling easier
c) Encourage Insured’s to carry the right kind of insurance
d) Apply to all dwelling risks

Answer 30

A

Question 31

A building is insured for $100,000 and has an 80% co-insurance clause. The building suffers a $50,000 loss. If the building is valued at $200,000 how much will the insurer pay?

a) $31,250
b) $40,000
c) $50,000
d) $18,750

Answer 31

A

Question 32

A house worth $300,000 is insured for $200,000. The house suffers a $100,000 loss and policy has a 90% co-insurance clause. What amount will the insured receive?

a) $70,000
b) $100,000
c) $66,667
d) $74,074

Answer 32

D

Question 33

Your clients’ property is valued at $500,000 but only insured for $300,000. If there is an 80% co-insurance requirement and he suffers a loss of $250,000 how much will your client receive from the insurance company?

a) $250,000
b) $200,000
c) $187,500
d) $150,000

Answer 33

C

Question 34

The basic fire policy:

a) Usually covers fire, lightning and specified types of explosion
b) Is required by law to cover fire, windstorm and lightning
c) Covers fire, explosion and windstorm
d) Is required by law to cover at least fire, lightning, and specified types of explosion

Answer 34

D

Question 35

The extended coverage endorsement:

a) Does not affect the basic fire policy perils but does add new perils
b) Does not increase the dollar amount of coverage on the basic fire policy
c) Is very important since it provides theft coverage
d) Provides cover if a frame home has to be replaced with a brick home

Answer 35

B

Question 36

Statutory Conditions are set out by:

a) The Federal Insurance Act
b) The Provincial Insurance Act
c) Individual insurance companies
d) Both the Federal and Provincial Insurance Acts

Answer 36

B

Question 37

The fire policy states it will pay the least of three amounts in the event of a claim. Which of the following does not enter into this calculation?

a) The actual cash value
b) The original price of the property
c) The insured’s interest in the property
d) The policy limit

Answer 37

B

Question 38

Section 1 - Property Coverage of the Comprehensive Homeowner’s Policy covers:

a) Dwelling building, detached private structures, personal property and additional living
b) Dwelling building, personal property, and seasonal residence
c) Dwelling building, contents, scheduled items and liability
d) Dwelling building, personal property, glass and outboard motors/boats

Answer 38

A

Question 39

An insured decides to renovate their home and as a result they have to maintain a temporary residence until the work is completed. The Comprehensive Homeowner’s Policy will pay:

a) None of the expenses
b) As stated in the policy
c) Will cover normal living expenses
d) Will cover only a percentage of the expenses

Answer 39

A

Question 40

Which of the following coverage’s are not applicable to a Condominium Unit Owner?

a) Assessments made by the Condominium Corporation for direct loss to the common elements owned collectively
b) Coverage for Assessments made by the condominium Corporation for a deductible
c) Improvements and betterment’s to the unit made by the insured or paid for by the insured
d) Unit coverage if there is no insurance on the collective interest of the owners or if such insurance is inadequate, or not in force

Answer 40

B

Question 41

A fire completely destroys a dwelling that is insured to 100% of the replacement value. The insured immediately begins construction of a new home on the vacant lot he had in the country

a) The insurer pays for the full claim on a replacement basis less his deductible
b) The insurer pays for the full claim on a replacement basis and waives the deductible
c) The insurer refuses to pay anything
d) The insurer pays the actual cash value of the home less the deductible

Answer 41

D

Question 42

How does insurance coverage keep up to date with inflation

a) Pro-Rata Distribution clause
b) Inflation Protection
c) Co-insurance clause
d) All risk riders

Answer 42

B

Question 43

Unit improvements and betterment’s under a Condominium Unit Owners Policy are covered

a) Up to $100,000
b) With no maximum limit
c) Up to an additional 100% of the limit of insurance on coverage A1
d) Up to $100,000 or the limit specified in the declaration

Answer 43

C

Question 44

Unit improvements and betterment’s under a Tenants Policy are covered

a) Up to $100,000
b) With no maximum limit
c) Up to an additional 100% of the limit of insurance on coverage A1
d) Up to $100,000 or the limit specified in the declaration

Answer 44

B

Question 45

An insured loses her diamond ring valued at $50,000. She has purchased the comprehensive homeowner’s policy and has a $500 deductible. How much could she recover from the insurance company?

a) $2,000
b) $1,500
c) $49,500
d) $0; as losing the ring is not an insured peril

Answer 45

A

Question 46

Replacement cost for personal property would apply to

a) A 40 year old solid oak dining room set
b) An antique piano
c) A one of a kind vase
d) An old TV, which the insured uses as a decorative table

Answer 46

A

Question 47

Fire department charges incurred after the fire department attends an insured’s residence would be covered up to

a) $2,000
b) $500
c) This indirect loss would not be covered
d) $1,000

Answer 47

D

Question 48

Which of the following motorized vehicles would not be insured under the comprehensive homeowner’s policy

a) A remote controlled caddies
b) A wheelchair
c) A vespa scooter
d) Lawn mower

Answer 48

A

Question 49

Which of the following is false of all risk property policies?

a) A peril or property not excluded is covered
b) Insurance coverage, as qualified, is against all risks of direct loss or damage
c) The exclusions limit coverage to that of a named perils form
d) The extent of coverage is determined by the exclusions

Answer 49

C

Question 50

Which of the following would not be covered by liability insurance?

a) Damages awarded for pain and suffering, total or partial disability and disfigurement
b) Damages awarded to compensate plaintiff for some kind of loss
c) Damages awarded for the purpose of punishing the defendant, in order to deter others from acting in the same manner
d) Damages for out of pocket medical expenses, loss of earning or damage to property

Answer 50

C

Question 51

A house worth $280,000 is insured for $180,000. The house suffers a $90,000 loss and policy has an 80% co-insurance clause. What amount will the insured receive?

a) $90,000
b) $144,000
c) $66,667
d) $72,321

Answer 51

D

Question 52

Which of the following statements about liability insurance is true?

a) Punitive damages awarded by a court are usually covered by liability insurance
b) Under liability insurance, the party making the claims is someone outside the policy
c) Costs incurred in defending a legal action in cases where liability is disputed are generally not covered by liability insurance
d) Liability insurance limits total payments under the policy to the insured amount

Answer 52

B

Question 53

Compensatory damages are

a) Sums designed to make a third party whole financially with respect to injury
b) Costs of complying with a mandatory injunction
c) Meant solely to punish the insured for acts of gross negligence
d) Gratuitous payments to a third party

Answer 53

A

Question 54

A liability policy written on an occurrence basis will respond for injury or damage

a) Prior to the inception of the policy and discovered during the policy term
b) Prior to the inception of the policy and reported during the policy term
c) During the policy period and reported after the expiry of the policy term
d) Prior to the policy term but discovered and reported during the policy term

Answer 54

C

Question 55

Which of the following is not included in the definition of premises under a liability policy

a) Individual or family cemetery plots or burial vaults
b) Land in Canada where an independent contractor is building a one, two, or three family residence to be occupied by the insured
c) Vacant land in Canada the insured owns or rents, including any farmland
d) Premises where the insured is residing temporarily or using temporarily as long as the insured is not the owner or a tenant of the premises under an agreement, which is longer than 90 consecutive days

Answer 55

C

Question 56

Doing something that a responsible person would not do or omitting to do something that a reasonable person would do is considered

a) Carelessness
b) Negligence
c) Neglect
d) Gross Negligence

Answer 56

B

Question 57

Doing something that a responsible person would not do or omitting to do something that a reasonable person would do is considered

a) Carelessness
b) Negligence
c) Neglect
d) Gross Negligence

Answer 57

B

Question 58

Defense, settlement, and supplementary payments are

a) Covered up to the limit of insurance purchased for a liability policy
b) Covered up to $1,000,000 or nay higher limit purchased for a liability policy
c) Not covered
d) Covered above and beyond the limit of insurance purchased for a liability policy

Answer 58

D

Question 59

Under coverage H - Voluntary compensation for residence employees weekly indemnity means

a) 100% of your residence employee’s weekly wage at the date of the accident but will not pay more than $100 per week
b) One half of your residence employee’s weekly wage at the date of the accident but will not pay more than $100 per week
c) Two thirds of your residence employee’s weekly wage at the date of the accident but will not pay fore than $100 per week
d) Reimbursement for lost wages if employee is injured or dies accidentally while working for you

Answer 59

C

Question 60

Coverage G - Voluntary Payment for damage to property excludes

a) Damage caused intentionally by all insured persons
b) Damage to stained glass windows
c) Claims resulting from the loss of use, disappearance or theft on property
d) Damage to property which is not insured under section 1

Answer 60

C

Question 61

Statutory Conditions:

a) Outline the rules of conduct between the insured and the insurer
b) Specify the coverage provided by a fire insurance policy
c) State the right of a third party
d) Are not expressly required by law

Answer 61

A

Question 62

Lloyds of London is

a) An insurance market place
b) A group of professional underwriters
c) An insurance syndicate
d) An unlimited liability company

Answer 62

A

Question 63

Which peril can be insured under a property policy?

a) Loss or damage cause by nuclear incident as defined in the Nuclear Liability Act
b) Loss or damage cause by earthquake
c) Loss or damage caused by intentional or criminal acts of the insured
d) Loss or damage caused by war or invasion

Answer 63

B

Question 64

A building is insured for $100,000 and has an 80% co-insurance clause. There is a $500 deductible. The building suffers a $150,000 loss. If the building is valued at $200,000 how much will the insurer pay?\

a) $79,500
b) $93,250
c) $50,000
d) $80,000

Answer 64

B

Question 65

What type of insurance policy would you recommend to a client who wishes to cover a large schedule of expensive jewelry?

a) A comprehensive homeowner’s policy
b) A fine arts floater
c) Personal effects floater
d) Personal Articles Coverage

Answer 65

D

Question 66

The Standard Mortgage Clause

a) Could be regarded as the basic agreement of contract between the mortgagee and the mortgagor
b) Protects the mortgagee in case the owner or occupant violates the insurance policy without the knowledge of the mortgagee
c) Require that the mortgagee be given advance notice if the fire insurance policy is terminated during the policy term
d) Indicates in general the rights and obligations of the Mortgage Company and the rights of the insured

Answer 66

B

Question 67

Watercraft, Outboard Motor, Trailer and Miscellaneous Equipment Coverage is an optional coverage provided by the comprehensive homeowner’s policy because:

a) Some clients own water crafts that exceed the $1,000 limits provided by the comprehensive homeowners policy
b) The standard deductible under the comprehensive homeowners policy is $500 and the watercraft, outboard motor, trailer and miscellaneous equipment coverage offers a $100 deductible
c) Coverage for watercraft is limited to specific perils, including theft or attempting theft under the comprehensive homeowner’s policy and coverage is extended to all risk under the watercraft, outboard motor, trailer and miscellaneous
d) All of the above

Answer 67

D