RIBO Practice Exam 4

Question 1

What type of insurable risk occurs when the insured is held accountable for the injury, death or damage to property of another?

Select one:

a.
Personal risk

b.
Liability risk

c.
Speculative risk

d.
Property risk

Answer 1

Reference: C81 - Study 1 - LO1

The correct answer is: Liability risk

Question 2

What is an example of a speculative risk?

Select one:

a.
Physical injury

b.
Economic loss

c.
Gambling

d.
Unemployment

Answer 2

Reference: C81 - Study 1 - LO1

The correct answer is: Gambling

Question 3

Which statement is a characteristic of a physical hazard?

Select one:

a.
It can be reduced or eliminated

b.
It may lead to fraud

c.
It can be attributed to the human element of risk

d.
It can grow out of mental attitudes of the insured

Answer 3

Reference: C81 - Study 1 - LO2

The correct answer is: It can be reduced or eliminated

Question 3

What does moral hazard refer to?

Select one:

a.
Conditions attributable to character that are hard to detect and difficult to eliminate

b.
Situations in which there is a chance of loss or a chance of profit

c.
Situations that can be identified by an inspection

d.
Condition of a property that may increase the likelihood of the occurrence of a loss

Answer 3

Reference: C81 - Study 1 - LO2

The correct answer is: Conditions attributable to character that are hard to detect and difficult to eliminate

Question 4

What is the relationship between the risk and the insurance premium?

Select one:

a.
All members of the pool will pay an equal share

b.
Insureds with higher risk will pay a higher premium

c.
Insureds with larger valued property will pay a lower premium

d.
Insureds will pay less premium if the losses are inflated

Answer 4

Reference: C81 - Study 2 - LO1

The correct answer is: Insureds with higher risk will pay a higher premium

Question 5

Which methods contribute to spreading risk?

Select one:

a.
Diversity of risks, premium, and indemnity

b.
Volume, diversity of risks, and diversity of location

c.
Premium, rate, and indemnity

d.
Volume, premium, and diversity of location

Answer 5

Reference: C81 - Study 2 - LO2

The correct answer is: Volume, diversity of risks, and diversity of location

Question 6

Which term is used to refer to insurance that includes both property and casualty?

Select one:

a.
Insurance of compensation

b.
Property and liability insurance

c.
General insurance

d.
General life insurance

Answer 6

Reference: C81 - Study 2 - LO3

The correct answer is: General insurance

Question 6

Which type of insurer offers fire insurance for manufacturing risks?

Select one:

a.
Government insurer

b.
Reinsurer

c.
Loss assessment mutual

d.
Factory mutual

Answer 6

Reference: C81 - Study 3 - LO1

The correct answer is: Factory mutual

Factory mutuals emphasize the reduction of fire hazards through loss prevention technology. Originally known for providing fire insurance on cotton mills in New England, they also provide other types of manufacturing/industrial risks.

Question 6

An insurer that operates to generate profit for its shareholders is the description for which type of insurer?

Select one:

a.
Government

b.
Mutual

c.
Captive

d.
Stock

Answer 6

Reference: C81 - Study 3 - LO1

The correct answer is: Stock

Question 7

Which departments are unique to insurance companies?

Select one:

a.
Human resources, accounting, and marketing

b.
Accounting, claims, and underwriting

c.
Marketing, underwriting, and claims

d.
Actuarial, claims, and underwriting

Answer 7

Reference: C81 - Study 3 - LO2

The correct answer is: Actuarial, claims, and underwriting

Question 7

Who owns the client list when insurance companies market policies through the independent brokerage system?

Select one:

a.
The underwriter

b.
The general agent

c.
The broker

d.
The insurance company

Answer 7

Reference: C81 - Study 4 - LO1

The correct answer is: The broker

Question 8

What relationship do agents and brokers have with the premiums they collect?

Select one:

a.
They hold the funds in trust on behalf of third parties who may submit future claims

b.
They hold the funds in trust on behalf of the insurers

c.
They hold the funds in trust on behalf of themselves

d.
They hold the funds in trust on behalf of the provincial superintendent of insurance

Answer 8

Reference: C81 - Study 4 - LO2

The correct answer is: They hold the funds in trust on behalf of the insurers

Question 9

What is an intermediary doing when tracking expiry dates?

Select one:

a.
Using a tracking method to manage continuation of referrals

b.
Using a prospecting method to acquire other business from existing clients

c.
Using a selling method to ensure continued new business

d.
Using a documentation method to report on their volume of business

Answer 9

Reference: C81 - Study 4 - LO3

The correct answer is: Using a prospecting method to acquire other business from existing clients

Question 9

In larger organizations, who must approve major changes that are proposed through the risk management process?

Select one:

a.
The insurance regulator

b.
The insurer

c.
The firm’s senior management

d.
The broker

Answer 9

Reference: C81 - Study 4 - LO5

The correct answer is: The firm’s senior management

Question 10

A coffee shop is damaged by fire and must close for six weeks while it is being repaired. Which individuals have insurable interest in the coffee shop?

Select one:

a.
The coffee distributor who is unable to sell coffee beans to the shop until the shop re-opens.

b.
A customer who has to walk further and pay more for coffee from a different coffee shop.

c.
An employee who cannot work at the store for six weeks during repairs.

d.
The bank that holds a mortgage on the building in which the coffee shop is located.

Answer 10

The bank that holds a mortgage on the building in which the coffee shop is located.

Question 11

Which statement best describes the principle of indemnity?

Select one:

a.
Repair all damage and include a thirty percent increase to counteract inflation

b.
Place people back into the same financial position that they were in before the loss

c.
Replace all lost or damaged articles with better quality products where possible

d.
Salvage items and offer a cash settlement for fifty percent of the value of any lost articles

Answer 11

Reference: C81 - Study 5 - LO3

The correct answer is: Place people back into the same financial position that they were in before the loss

Question 11

Can an insured collect the full amount of the same loss from two insurance policies?

Select one:

a.
No, because the concept of coinsurance means that each insurer would only pay their rateable portion of the loss.

b.
No, Because the concept of contribution means that each insurer would only pay their rateable portion of the loss.

c.
Yes, assuming that the insured has paid the premiums for both policies she is entitled to the full amount of loss from both insurers.

d.
Yes, because the concept of subrogation will be used after the claim is paid to seek funds from the second insurer by the first insurer.

Answer 11

Reference: C81 - Study 5 - LO4

The correct answer is: No, Because the concept of contribution means that each insurer would only pay their rateable portion of the loss.

Question 12

Jimmy runs a business from home, which he did not declare when he was asked during the application for insurance. The insurer does not insure homes with a business, so as soon as they are aware, they cancel the policy. What reason supports their decision?

Select one:

a.
Change of use

b.
Utmost good faith

c.
Insurable interest

d.
Misrepresentation

Answer 12

Reference: C81 - Study 5 - LO5

The correct answer is: Misrepresentation

Question 13

What does a certificate of insurance confirm?

Select one:

a.
The coverage changes made by the insured

b.
The correct coverage details to the insurer

c.
The correct coverage details to the insured

d.
The existence of insurance for someone with Insurable interest

Answer 13

Reference: C81 - Study 5 - LO6

The correct answer is: The existence of insurance for someone with Insurable interest

Question 14

Which policy type is composed of unique wordings and is drafted to accommodate the needs of a particular risk?

Select one:

a.
A manuscript policy

b.
A subscription policy

c.
A non-standard policy

d.
A treaty policy

Answer 14

Reference: C81 - Study 5 - LO6

The correct answer is: A manuscript policy

Question 15

When a policy is cancelled early at the request of the insured, how does the insurer determine the correct amount of premium (if any) that should be returned?

Select one:

a.
Full refund of all premium is required

b.
Pro rata cancellation is used to determine any refund

c.
No refund is required

d.
Short rate cancellation is used to determine any refund

Answer 15

Reference: C81 - Study 5 - LO8

The correct answer is: Short rate cancellation is used to determine any refund

Question 15

What is fundamental to maintaining utmost good faith in all insurance transactions?

Select one:

a.
Managing a risk

b.
Subrogation

c.
Ratemaking

d.
Duty of disclosure

Answer 15

Reference: C81 - Study 6 - LO1

The correct answer is: Duty of disclosure

Question 16

Cindy repaired the minor damage to her car that occurred from a collision with a shopping cart. Does she need to declare the loss on her new automobile application?

Select one:

a.
Yes, this is still a loss even though a claim was not made

b.
No, as she paid for it herself, there is no need to mention it

c.
Yes, as the mall might want her to pay to repair the shopping cart

d.
No, past claims are not important to a new application for insurance

Answer 16

Reference: C81 - Study 6 - LO2

The correct answer is: Yes, this is still a loss even though a claim was not made

Question 17

Which section of an insurance application asks the applicant to list or describe the ‘thing’ that is being insured?

Select one:

a.
Request for insurance

b.
Property of insurance

c.
Subject of insurance

d.
Coverage for insurance

Answer 17

Reference: C81 - Study 6 - LO2

The correct answer is: Subject of insurance

Question 18

Why would an underwriter reject a risk?

Select one:

a.
The risk fits the eligibility criteria.

b.
The risk is substandard.

c.
The applicant has a lower-than-average risk of suffering a loss.

d.
The insurer writes that class of business.

Answer 18

Reference: C81 - Study 6 - LO4

The correct answer is: The risk is substandard.

Question 19

Susan’s daughter Maria was injured in an accident when she was 5 years old. When does Maria’s prescription period begin?

Select one:

a.
When all of Maria’s collateral benefits have been exhausted

b.
When Maria is no longer dependant on her parents

c.
When Maria reaches the age of majority

d.
The day that the accident happened

Answer 19

Reference: C81 - Study 7 - LO2

The correct answer is: When Maria reaches the age of majority

For minors, the prescription period is calculated from the date they reach the age of majority.

Question 20

A property is valued at $10,000 with a co-insurance clause of 80%. The policy is insured for $4000 and suffers a loss of $9,000. What would the policy pay?

Select one:

a.
$4500

b.
$4000

c.
$6400

d.
$8000

Answer 20

Reference: C81 - Study 7 - LO2

The correct answer is: $4000

Question 21

A property valued at $750,000 and insured for full value suffers windstorm damage. The damage is $150,000. The policy is subject to a 90% co-insurance clause and a $5,000 deductible. How much will the insurer pay for the damage?

Select one:

a.
$675,000

b.
$145,000

c.
$150,000

d.
$750,000

Answer 21

$145,000

Question 22

What does ‘adequate capacity’ mean?

Select one:

a.
The financial ability to pay for all claims

b.
The ability to provide claims handling advice and service

c.
The ability to offer knowledgeable insurance advice

d.
The ability of an insurance intermediary to provide a full range of insurance products to clients

Answer 22

Reference: C81 - Study 8 - LO4

The correct answer is: The ability of an insurance intermediary to provide a full range of insurance products to clients

Question 23

What does the Highway Traffic Act deal with?

Select one:

a.
Automobile insurance claims and accident protection.

b.
The ownership of motor vehicles, licensing of drivers, and suspension and cancellation of insurance policies.

c.
The registration and licensing of motor vehicles, licensing of drivers, and traffic control of vehicles on highways.

d.
Manufacturer safety features in automobiles.

Answer 23

Reference: C81 - Study 9 - LO2

The correct answer is: The registration and licensing of motor vehicles, licensing of drivers, and traffic control of vehicles on highways.

Question 23

Which statutory condition is unique to automobile insurance?

Select one:

a.
Termination

b.
Notice

c.
Replacement

d.
Incorrect classification

Answer 23

Reference: C81 - Study 9 - LO3

The correct answer is: Incorrect classification

The statutory condition which address incorrect classification is unique to automobile insurance.

Question 23

After a privacy breach has occurred how can an organization prevent future breaches from occurring?

Select one:

a.
Determining how the breach happened and taking disciplinary action against those responsible

b.
Determining how the breach happened and take steps to stop it from happening again

c.
Develope better privacy policies

d.
Contact the provincial ombudsperson or commissioner to find out how to prevent future privacy breaches

Answer 23

Reference: C81 - Study 9 - LO5

The correct answer is: Determining how the breach happened and take steps to stop it from happening again

Question 24

Under what circumstances may an agent or broker share a client’s personal information with others in the office?

Select one:

a.
When the insurer says it is okay to share the client’s personal information

b.
Agents and brokers can never share a client’s personal information even with others in the office

c.
When the other agents or brokers are related to the client

d.
When others are assisting in arranging insurance for that client

Answer 24

Reference: C81 - Study 9 - LO5

The correct answer is: When others are assisting in arranging insurance for that client

Agents and brokers can never share information about a client with anyone else, including others within the office, unless those people are assisting in arranging insurance for that client.

Question 24

Which is one of the 5 reasons insurers need to reinsure?

Select one:

a.
To prevent an insurer from ceasing operations
Insurers need to reinsure for many reasons.

b.
To meet risk selection requirements

c.
To prevent underwriting losses

d.
To meet government solvency requirements

Answer 24

Reference: C81 - Study 3 - LO3

The correct answer is: To meet government solvency requirements

One reason is to maintain an appropriate balance between reserves and liabilities which in-turn allows them to meet solvency requirements established by government.

Question 25

How do insureds judge the quality of their insurance policy and satisfaction with their insurer?

Select one:

a.
It is based on the strength of the insurer’s financial statements.

b.
It is based on their claims experience and interaction with the adjuster.

c.
It is based on the number of product options offered by the agent or broker during the sales conversation.

d.
It is based on the number of complaints reported annually to the ombudsman.

Answer 25

Reference: C81 - Study 7 - LO3

The correct answer is: It is based on their claims experience and interaction with the adjuster.

Adjusters have an extremely important function in securing and maintaining the goodwill of the insuring public. Often, they are the only representative of an insurer that an insured will ever meet. Insureds judge their insurers and the quality of their insurance policy by they way their claims are handled. The demeanour of the adjuster can be a strong positive or negative influence on an insured.

Question 25

A homeowner’s will indicates that her adult son is to inherit the home. Which statutory condition allows for automatic consent of the insurance policy?

Select one:

a.
Notice

b.
Material Change

c.
Change of Interest

d.
Property of Others

Answer 25

Reference: C81 - Study 9 - LO4

The correct answer is: Change of Interest

Certain changes of interest receive automatic consent (i.e. the insurer is not required to approve the change in interest). Changes of title due to death is one of those instances.

Question 26

Property valued at $200,000 is insured for $144,000. If the policy is subject to a 90% co-insurance clause and the damage is $100,000 how much will the insured pay?

Select one:

a.
$20,000

b.
$10,000

c.
$90,000

d.
$80,000

Answer 26

Reference: C81 - Study 7 - LO2

The correct answer is: $20,000

Did = $144,000, Should = $180,000, Loss = $100,000 Solution 144,000/180,000 - .80, .80 x100,000 = $80,000 paid by insured leaving $20,000 to be paid by the insured.

Question 26

Coverage under the residential extended coverage (EC) endorsement is similar to coverage under which policy?

Select one:

a.
Named-perils policy

b.
All-Risk policy

c.
Broad form policy

d.
Comprehensive policy

Answer 26

Reference: C82 - Study 4 - LO1

The correct answer is: Named-perils policy

Coverage provided by the residential extended coverage (EC) endorsement is similar, in some cases identical to, coverage provided by a named-perils policy.

Question 27

Which statement describes how coverage is provided by a comprehensive homeowners policy?

Select one:

a.
It provides all-risks coverage on buildings and named-perils coverage on contents.

b.
It provides coverage for new construction homes, but not resale homes.

c.
There are no exclusions contained in the policy.

d.
It is an all-risks policy and coverage is determined by the listed exclusions.

Answer 27

Reference: C82 - Study 4 - LO2

The correct answer is: It is an all-risks policy and coverage is determined by the listed exclusions.

Comprehensive home insurance policies provide coverage against all-risks of direct physical loss or damage subject to the exclusions and conditions stated in the policy.

Question 28

Why do special limits apply to some types of property under the personal property section of a comprehensive homeowners policy?

Select one:

a.
The items are portable and easily stolen.

b.
The insured has added the items to a separate endorsement.

c.
The items are insured under a separate policy.

d.
The insured has had many theft claims.

Answer 28

Reference: C82 - Study 4 - LO2

The correct answer is: The items are portable and easily stolen.

Special monetary limits apply to various types of personal property that are portable and attractive to thieves. Example: jewellery, furs, stamp and coin collections, manuscripts, collectible cards, and bicycles. Higher limits can be purchased using a valued endorsement for an additional premium.

Question 29

Most comprehensive homeowners policies consider a building where all occupants have moved out with no intention of returning to be which of the following?

Select one:

a.
Empty

b.
Uninsurable

c.
Unoccupied

d.
Vacant

Answer 29

Reference: C82 - Study 4 - LO2

The correct answer is: Vacant

Question 30

Which additional condition of a comprehensive homeowners policy prevents the insured from claiming the loss of one or more portions of an item as loss of the whole item?

Select one:

a.
Pair and Set

b.
Parts

c.
Basis of settlement

d.
Sue and Labour

Answer 30

Reference: C82 - Study 4 - LO4

The correct answer is: Parts

The parts clause is similar to the pair and set clause but it prevents the insured from claiming the loss to one or more parts of an item as loss of the whole item. Whereas the pair and set clause deals specifically with items that are a matched pair.

Question 31

Which additional condition under homeowners policies reinforces the requirement of insurable interest, and provides that “no more than the insured’s financial interest in the property will be paid”?

Select one:

a.
Sue and Labour

b.
No Benefit to Bailee

c.
Basis of Settlement

d.
Subrogation

Answer 31

Reference: C82 - Study 4 - LO4

The correct answer is: Basis of Settlement

Question 32

Which item may be scheduled on a personal articles endorsement?

Select one:

a.
A violin borrowed from the school

b.
An employer issued laptop

c.
A snowmobile

d.
Silverware

Answer 32

Reference: C82 - Study 4 - LO5

The correct answer is: Silverware

Question 32

What is required if you are moving property insured under a fine arts floater?

Select one:

a.
There is a separate policy required when moving these items

b.
The policy specifically excludes coverage for these items while being moved

c.
The policy requires that the packing and unpacking be done by professional packers

d.
The policy requires that professional movers be used

Answer 32

Reference: C82 - Study 4 - LO5

The correct answer is: The policy requires that the packing and unpacking be done by professional packers

Question 33

When a large stamp collection is insured, what do insurers expect of the insured?

Select one:

a.
To schedule each item in the collection

b.
To keep the collection in a vault or have a burglar alarm system

c.
To split the collection up to protect it from total loss

d.
To have the collection appraised annually

Answer 33

Reference: C82 - Study 4 - LO5

The correct answer is: To keep the collection in a vault or have a burglar alarm system

When large collections are involved, insurers expect the insured to protect this property by keeping it in a safe or vault or by having a burglar alarm system. While a catalogue of the collection is ideal, most insurers insist that single items over a certain value are scheduled.

Question 34

What is another name for the Increased Cost-Demolition or Construction endorsement?

Select one:

a.
The rezoning endorsement

b.
The reconstruction endorsement

c.
The bylaw endorsement

d.
The demolition endorsement

Answer 34

Reference: C82 - Study 4 - LO6

The correct answer is: The bylaw endorsement

The increased cost-demolition or construction endorsement is also known as the bylaw endorsement. It is concerned with the effects of any bylaws in force at the time of a loss caused by an insured peril.

Question 35

The insurance industry generally breaks water damage coverage into which four (4) perils?

Select one:

a.
Flood, rising water, tsunami, ground water

b.
Flood, tidal waves, sewer backup, rising water

c.
Flood, high tides, sewer backup, ground water

d.
Flood, sewer backup, overland water, ground water

Answer 35

Reference: C82 - Study 4 - LO6

The correct answer is: Flood, sewer backup, overland water, ground water

Question 36

Water found beneath the earth’s surface is the description for which term?

Select one:

a.
Ground water

b.
Overland water

c.
Flood water

d.
Septic water

Answer 36

Reference: C82 - Study 4 - LO6

The correct answer is: Ground water

Question 36

Which coverage is part of a homeowner’s policy, but is NOT included in a tenant’s insurance policies?

Select one:

a.
Additional living expenses

b.
Personal property

c.
Personal liability

d.
Dwelling building

Answer 36

Reference: C82 - Study 5 - LO1

The correct answer is: Dwelling building

Tenants rent space from the homeowner, so tenant’s policies do not include insurance for a dwelling building.

Question 36

Which tenants policy extensions of coverage is defined as indirect damage resulting from physical damage to dwelling by an insured peril causing a change in temperature?

Select one:

a.
Property temporarily removed

b.
Loss due to temperature change

c.
Vandalism and malicious mischief

d.
Additional living expenses

Answer 36

Reference: C82 - Study 5 - LO1

The correct answer is: Loss due to temperature change

Question 37

How is the limit for additional living expense established in a tenants policy?

Select one:

a.
As a dollar amount requested by the insurer

b.
Aa a dollar amount requested by the insured

c.
As a percentage of the personal property insurance limit

d.
As apercentage of the value of the dwelling building

Answer 37

Reference: C82 - Study 5 - LO1

The correct answer is: As a percentage of the personal property insurance limit

An additional living expense insurance limit under a tenants policy is equal to a percentage of the personal property insurance limit, usually 20%. For the homeowner’s policy, it is a percentage of the dwelling building insurance limit.

Question 38

What do condominium unit purchasers own?

Select one:

a.
Shared interest in a specific unit within a building and a shared interest in the common elements

b.
Clear and full ownership of a specific unit within a building and a shared interest in the common elements

c.
Clear and full ownership of a specific unit within a building and full ownership of the common elements

d.
Shares in a corporation that owns the condominium building

Answer 38

Reference: C82 - Study 5 - LO2

The correct answer is: Clear and full ownership of a specific unit within a building and a shared interest in the common elements

Question 39

In which situation would a condominium unit owner’s loss assessment coverage apply?

Select one:

a.
If the condominium corporation sues the unit holder as he caused the loss

b.
If the amount available under the condominium corporation’s policy is insufficient to provide complete coverage in the event of a loss

c.
If the condominium corporation does not approve the unit owner’s improvements or betterments

d.
If the amount available under the unit owner’s liability coverage is insufficient to provide complete coverage in the event of a loss

Answer 39

Reference: C82 - Study 5 - LO2

The correct answer is: If the amount available under the condominium corporation’s policy is insufficient to provide complete coverage in the event of a loss

Loss assessment coverage provides protection for condominium unit holders if their condominium corporation’s insurance policy is insufficient to cover a loss and the corporation levies special assessments against each unit holder.

Question 39

What type of manufactured home might be listed on an automobile policy?

Select one:

a.
A mobile home set on a foundation

b.
A seasonal home available all year round

c.
A specialized trailer temporarily parked

d.
A unit that remains mobile

Answer 39

Reference: C82 - Study 5 - LO3

The correct answer is: A unit that remains mobile

Question 40

An insured with a comprehensive homeowners policy is being sued. The insured has proof that she is innocent but is concerned about the legal costs to defend herself. Will the liability coverage of her policy respond, and why?

Select one:

a.
No; the policy would not respond unless the insured is found negligent

b.
Yes; the policy will respond if the insured chooses her own lawyer

c.
No; the policy would not respond because the insured is innocent

d.
Yes; the policy will respond by paying to defend even when the charges are groundless

Answer 40

Reference: C82 - Study 7 - LO2

The correct answer is: Yes; the policy will respond by paying to defend even when the charges are groundless

Question 41

Which situation would be covered by the personal liability section of a homeowners policy?

Select one:

a.
The insured is negligent when flying his small single engine airplane.

b.
While driving a golf cart on the course, the insured accidentally runs over and injures another golfer.

c.
The insured is negligent during his business activities.

d.
A criminal trips and breaks his leg during a break-in at the insured’s home.

Answer 41

Reference: C82 - Study 7 - LO2

The correct answer is: While dirivng a golf cart on the course, the insured accidentally runs over and injures another golfer.

Question 42

What are the glass insurance exclusions?

Select one:

a.
Windstorm, war, and nuclear damage

b.
Windstorm, fire, and smoke

c.
Fire, war, and riot

d.
Fire, war, and nuclear damage

Answer 42

Reference: C82 - Study 6 - LO2

The correct answer is: Fire, war, and nuclear damage

Question 42

Which situation would give rise to a personal injury claim under a Commercial General Liability (CGL) policy?

Select one:

a.
Injury to an employee’s leg while fabricating parts for the business’s product

b.
Injury to an employee’s career because of being terminated by the company

c.
Injury to a person’s arm while using the business’s product

d.
Injury to a person’s character by such things as false arrest or malicious prosecution

Answer 42

Reference: C82 - Study 7 - LO3

The correct answer is: Injury to a person’s character by such things as false arrest or malicious prosecution

Personal injury and advertising liability, covers sums that the insured is legally obligated to pay as compensatory damages because of personal injury caused by an offence arising out of the insured’s business activities. Typical coverages include: False arrest or malicious prosecution, among others.

Question 43

What is a contract when one party guarantees the performance of certain obligations of a second party to a third party?

Select one:

a.
Coinsurance Clause

b.
An Obligee

c.
A Principal

d.
Surety Bond

Answer 43

Reference: C82 - Study 6 - LO6

The correct answer is: Surety Bond

Question 44

Which category of endorsement must include the signature of the insured?

Select one:

a.
Providing Permission

b.
Altering Policy Terms

c.
Restricting or Excluding Coverage

d.
Extending Coverage

Answer 44

Reference: OAS - Study 10 - LO1

The correct answer is: Restricting or Excluding Coverage

Question 44

Why might an insurer want to add an endorsement that RESTRICTS or EXCLUDES coverage?

Select one:

a.
To lower the likelihood of a loss occurring and reduce their exposure

b.
To manage the expectations of the insured prior to any claims

c.
To lower premium costs and have fewer claims

d.
To restrict certain automobiles due to high repair costs

Answer 44

Reference: OAS - Study 10 - LO3

The correct answer is: To lower the likelihood of a loss occurring and reduce their exposure

Question 45

Hunter becomes a paraplegic as after an accident where he was not at-fault. A judge awards him $1,200,000 for his lifelong care. The at-fault driver carries the legal minimum of $200,000 liability. Hunter’s OAP 1 has liability up to $1,000,000 with OPCF 44R. How will Hunter collect what he is entitled to?

Select one:

a.
$200,000 from the third party’s policy; $800,000 from his own policy; $200,000 from the third party directly

b.
$1,200,000 from the third party’s insurer

c.
$200,000 from the third party’s policy, $1,000,000 from the Unsatisfied Judgement Fund

d.
$200,000 from the third party’s policy; $1,000,000 from his own policy

Answer 45

Reference: OAS - Study 10 - LO4

The correct answer is: $200,000 from the third party’s policy; $800,000 from his own policy; $200,000 from the third party directly

OPCF 44R is sold on every insurance policy in Ontario to safeguard the insured from drivers that might be at-fault and underinsured.

Question 46

Gary has had two car fires in the last three years and is concerned about rising rates. Which endorsement would his broker add to reduce the severity of future fire claims?

Select one:

a.
OPCF 40—Fire Deductible

b.
OPCF 25—Coverage for Emergency Road Service

c.
OPCF 16—Suspension of Coverage

d.
OPCF 29—Reducing Coverage for Named Persons

Answer 46

Reference: OAS - Study 10 - LO5

The correct answer is: OPCF 40—Fire Deductible

Question 46

Who is responsible for servicing a policy, including settling claims, once it has been transferred into the risk sharing pool?

Select one:

a.
The company who has the highest number of policies in the risk sharing pool

b.
The Superintendent of Insurance

c.
The Facility Association

d.
The company who issues the initial policy

Answer 46

Reference: OAS - Study 11 - LO3

The correct answer is: The company who issues the initial policy

Question 47

Which regulation deals with the registration and licensing of vehicles and drivers?

Select one:

a.
The Compulsory Automobile Insurance Act

b.
The Insurance Companies Act

c.
The Highway Traffic Act

d.
The Insurance Act of the provinces

Answer 47

Reference: OAS - Study 1 - LO2

The correct answer is: The Highway Traffic Act

The Highway Traffic Act also plays a role in automobile insurance regarding proof of safety and financial responsibility.

Question 48

What is the main purpose of the automobile application?

Select one:

a.
To ensure that all automobile applications are written and signed

b.
To collect the applicant’s information and submit to regulators for approval

c.
To collect information needed to underwrite, rate and issue the policy

d.
To ensure all relevant information is collected from the insured to process a claim

Answer 48

Reference: OAS - Study 2 - LO1

The correct answer is: To collect information needed to underwrite, rate and issue the policy

The automobile application form is a regulator approved standard form used by all private insurers in Ontario to collect applicant information needed to underwrite, rate, and issue the policy.

Question 48

Which of the following is an example of when the insured is the registered and the actual owner of the vehicle?

Select one:

a.
Lee is a business owner and his business is the registered owner of a vehicle, but it is parked at Lee’s employee’s home and the employee drives the vehicle.

b.
Lee owns a vehicle; his mothers name is listed on the registration, but he is the only driver of the vehicle.

c.
Lee drives a company vehicle; the registration is in the business name, but it is parked at his home and he is the only driver of the vehicle.

d.
Lee owns a vehicle; his name is listed on the registration and he is the only driver of the vehicle.

Answer 48

Reference: OAS - Study 2 - LO2

The correct answer is: Lee owns a vehicle; his name is listed on the registration and he is the only driver of the vehicle.

Question 49

What is the ONLY coverage available to an injured driver when he has taken the car without the owner’s consent?

Select one:

a.
All perils

b.
Uninsured motorist

c.
Accident benefits

d.
Third-party liability

Answer 49

Reference: OAS - Study 3 - LO1

The correct answer is: Accident benefits

Question 49

Which endorsements are included in the commercial policy for carsharing services?

Select one:

a.
OPCF 44R, OPCF 43, and OPCF 20

b.
OPCF 44R, OPCF 43, and OPCF 5

c.
OPCF 44R, OPCF 43, and OPCF 23

d.
OPCF 44R, OPCF 43, and OPCF 2

Answer 49

Reference: OAS - Study 3 - LO2

The correct answer is: OPCF 44R, OPCF 43, and OPCF 20

Carsharing commercial policy provides coverage during the delivery and rental periods. The endorsements included are OPCF 44R—Family Protection (limit of 2 million), OPCF 43—Waiver of Depreciation (1,000 deductible), and OPCF 20—Transportation Replacement ($75 per day up to a $500 occurrence limit).

Question 50

Which peril is an exclusion under third-party liability coverage of an automobile policy?

Select one:

a.
Explosion

b.
Windstorm

c.
Nuclear hazards

d.
Falling object

Answer 50

Reference: OAS - Study 4 - LO1

The correct answer is: Nuclear hazards

Question 50

Which cost would be covered by the additional agreements of the insurer of the OAP 1?

Select one:

a.
Defense and investigation costs for the insured’s own lawyer

b.
All judgement costs charged against the insured

c.
Immediate medical care for the insured and anyone in their household

d.
The full judgement amount against the insured

Answer 50

Reference: OAS - Study 4 - LO2

The correct answer is: All judgement costs charged against the insured

The additional agreements of the insurer in the OAP 1 state that the insurer will pay all costs taxed against the insured and interest on any part of the judgement that is within the limits of the policy.

Question 51

Injured parties can sue for non-economic loss if an impairment they suffer due to an automobile accident meets which threshold?

Select one:

a.
Temporary impairment requiring at least 24 months to improve.

b.
Permanent serious impairment of an important physical, mental or psychological function.

c.
Temporary impairment requiring at least 12 months to improve.

d.
Permanent minor impairment of a body part.

Answer 51

Reference: OAS - Study 4 - LO3

The correct answer is: Permanent serious impairment of an important physical, mental or psychological function.

Question 51

What is a main purpose of the accident benefits provided by automobile insurance?

Select one:

a.
To reduce insurance industry operational costs

b.
To protect the insured against lawsuits

c.
To provide timely medical assistance to automobile accident victims

d.
To remove the need for the assignment of fault in an automobile accident

Answer 51

Reference: OAS - Study 5 - LO1

The correct answer is: To provide timely medical assistance to automobile accident victims

Question 52

Where are the details of accident benefits coverages found?

Select one:

a.
Statutory Accident Benefits Schedule

b.
Statutory Conditions

c.
The Civil Code

d.
Highway Traffic Act

Answer 52

Reference: OAS - Study 5 - LO1

The correct answer is: Statutory Accident Benefits Schedule

Question 53

Optional benefits allow the standard $400 weekly income replacement amount to be increased to which amounts?

Select one:

a.
$600, $800, or $1,000 weekly gross earnings

b.
$600, $800, or $1,000 monthly gross earnings

c.
$600, $800, or $1,000 monthly net earnings

d.
$600, $800, or $1,000 weekly net earnings

Answer 53

Reference: OAS - Study 5 - LO2

The correct answer is: $600, $800, or $1,000 weekly gross earnings

Question 54

Which accident benefits are insurers NOT required to pay to persons whose actions exclude them from coverage?

Select one:

a.
Funeral or death benefits

b.
Caregiver; medical, rehabilitation, and attendant care benefits

c.
Rehabilitation, case manager, and attendant care benefit

d.
Income replacement or non-earner; educational expenses; expenses of visitors; housekeeping; and home maintenance

Answer 54

Reference: OAS - Study 5 - LO3

The correct answer is: Income replacement or non-earner; educational expenses; expenses of visitors; housekeeping; and home maintenance

Insurers are not required to pay income replacement or non-earner benefits, educational expense, expenses of visitors, and housekeeping and home maintenance expenses to persons whose actions or behaviour exclude them from coverage. For example (but not limited to), those who drive without a valid driver’s licence, a driver who drives even though s/he is listed as an excluded driver on the policy, refusing to provide a breath sample, etc.

Question 55

What are sources of entitlement for compensation for injuries, outside of the automobile policy called?

Select one:

a.
Collateral benefits

b.
Medical coverage

c.
Worker compensation

d.
Employee benefits

Answer 55

Reference: OAS - Study 5 - LO4

The correct answer is: Collateral benefits

Question 56

If a Canadian driver is injured in an accident in the US and is unable to recover losses from the uninsured responsible third party, from whom can the Canadian driver recover losses?

Select one:

a.
The Canadian driver’s own policy can step in to provide coverage in these instances.

b.
The Canadian driver will have to sue the US federal government for the losses.

c.
The Canadian driver will have to sue the US state where the accident occurred for the losses.

d.
Each state has Motor Vehicle Accident Claims Fund from which the Canadian driver can recover losses.

Answer 56

Reference: OAS - Study 6 - LO1

The correct answer is: The Canadian driver’s own policy can step in to provide coverage in these instances.

Question 56

Brenda is in an accident in Ontario with a driver that is identified but uninsured. The accident causes $25,000 in property damage and $250,000 in bodily injuries. What maximum amounts will be paid under the priority of payments in Ontario?

Select one:

a.
Nothing for the property damage and a maximum of $200,000 for bodily injury

b.
A maximum of $10,000 for property damage, and a maximum of $190,000 for bodily injury

c.
A maximum of $30,000 for property damage, and a maximum of $170,000 for bodily injury

d.
A maximum of $20,000 for property damage, and a maximum of $180,000 for bodily injury

Answer 56

A maximum of $10,000 for property damage, and a maximum of $190,000 for bodily injury

Question 56

What is a tort?

Select one:

a.
A criminal harm committed against another person.

b.
The legal process where the insurer can recover the amount of a loss from those found legally liable.

c.
A declaration made under statutory authority before a commissioner of oaths, asserting knowledge of facts.

d.
A civil wrong committed against another person.

Answer 56

Reference: OAS - Study 7 - LO1

The correct answer is: A civil wrong committed against another person.

Question 57

A valet driver is negligent and caused damage to the insured’s vehicle while parking it. Once the insured is compensated by his/her insurer, does DCPD permit the insurer to subrogate against the responsible party?

Select one:

a.
Yes, because the damage was caused by someone in the business relating to automobiles.

b.
No, because under DCPD rules, subrogation is NOT permitted.

c.
No, because the OAP 1 excludes coverage for garage employees.

d.
Yes, because the insured gave permission to the valet to operate the automobile.

Answer 57

Reference: OAS - Study 7 - LO2

The correct answer is: Yes, because the damage was caused by someone in the business relating to automobiles.

Question 58

Which example of theft would be covered if the insured purchased all perils coverage?

Select one:

a.
Missing from airport parking lot

b.
Employee borrows without consent

c.
Vehicle lost in a wager

d.
Teenagers joyriding

Answer 58

Reference: OAS - Study 8 - LO1

The correct answer is: Employee borrows without consent

Question 58

In Ontario, under Section 7—Loss or Damage Coverage, what limit(s) applies for claims related to electronic accessories & equipment attached to the vehicle that are not factory installed?

Select one:

a.
$1500 limit for electronic equipment

b.
Full coverage only if the insured presents the receipt of purchase

c.
Maximum coverage is $2,500 if installed after the vehicle is purchased

d.
$500 limit regardless of the type of equipment

Answer 58

Reference: OAS - Study 8 - LO2

The correct answer is: $1500 limit for electronic equipment

Question 59

What are the three ways used to calculate actual cash value?

Select one:

a.
Fair Market Value; Consideration of salvage; Cost to repair or replace less consideration

b.
Cost to repair or replace less depreciation; Actual cash value; Consideration of salvage

c.
Consideration of all value of the damaged property; Cost to repair or replace less consideration; Actual cash value

d.
Cost to repair or replace less depreciation; fair market value, consideration of all value of the damaged property

Answer 59

Reference: OAS - Study 8 - LO4

The correct answer is: Cost to repair or replace less depreciation; fair market value, consideration of all value of the damaged property

Actual cash value (ACV) is usually calculated in one of three ways: (1) cost to repair or replace, less depreciation; (2) fair market value; or (3) consideration of all relevant evidence of the value of the damaged property.

Question 59

What is the name of the amount of premium that the insurer keeps when a policy is cancelled?

Select one:

a.
Minimum retained premium

b.
Premium quotation

c.
Cancellation fee

d.
Pure Ppremium

Answer 59

Reference: OAS - Study 9 - LO1

The correct answer is: Minimum retained premium

Question 59

Under the automobile Statutory Condition—Requirements Where Loss or Damage to Persons or Property what should an insured NOT do after a loss?

Select one:

a.
Promptly notify the insurer about the accident

b.
Forward any documents to the insurer

c.
Make an effort to secure evidence

d.
Assume or admit liability

Answer 59

Reference: OAS - Study 9 - LO1

The correct answer is: Assume or admit liability

Question 60

What is the purpose of the automobile Statutory Conditions?

Select one:

a.
Establishes clear rules and regulations that the insured and the insurer must follow.

b.
Provides guidelines that help the insurer and the broker handle situations that may arise under the contract.

c.
Provides clear language automobile wordings.

d.
Provides guidelines that help the insurer and insured handle situations that may arise under the contract.

Answer 60

Reference: OAS - Study 9 - LO1

The correct answer is: Establishes clear rules and regulations that the insured and the insurer must follow.

Question 61

What is the minimum number of days an Ontario resident must be physically in Ontario in a 12-month period to ensure OHIP coverage?

Select one:

a.
213 days

b.
153 days

c.
212 days

d.
183 days

Answer 61

Reference: ON Travel Health Supplement - Study 1 - LO3

The correct answer is: 153 days

Question 62

Three (3) of the following are common policy exclusions found in travel health insurance policies. Which is the EXCEPTION?

Select one:

a.
Benefits are not payable for elective surgery.

b.
Travel health policies do not cover eye glasses or contact lenses.

c.
Travel health policies do not cover medical treatment where the policy is sought specifically to obtain such treatment.

d.
Senior citizens are only eligible for travel health insurance if they travel with an immediate family member.

Answer 62

Reference: ON Travel Health Supplement - Study 2 - LO3

The correct answer is: Senior citizens are only eligible for travel health insurance if they travel with an immediate family member.

There is a specific exclusion for Eyeglasses, hearing aids and prosthetic devices unless they are damaged as a result of an insured claim. There is a specific exclusion when the “intent” of the travel is to receive medical treatment there is a specific exclusion for “Elctive Treatment:. Sickness or injury that is not a medical emergency, as defined, is not covered.

Question 62

Your client, a professional football player, is planning a trip to Mexico that includes a scuba diving adventure. Which coverage limitations should be discussed with him?

Select one:

a.
The policy will have to be endorsed to cover scuba diving.

b.
He will not be covered while scuba diving because he is a professional athlete.

c.
There are no coverage limitations to discuss with him. He will be covered.

d.
Scuba diving may be considered a high-risk activity and excluded, but some insurers may offer this coverage for additional premium.

Answer 62

Reference: ON Travel Health Supplement - Study 2 - LO3

The correct answer is: Scuba diving may be considered a high-risk activity and excluded, but some insurers may offer this coverage for additional premium.

Question 62

When discussing travel health insurance with anyone, you would be wise to point out:

Select one:

a.
senior citizens are only eligible for travel health insurance if accompanied by an immediate family member.

b.
benefits are payable for elective surgery.

c.
travel health policies may limit coverage and benefits for sickness or injury which does not relate directly to an emergency.

d.
travel health policies do not provide accidental death benefits.

Answer 62

Reference: ON Travel Health Supplement - Study 2 - LO3
The correct answer is: travel health policies may limit coverage and benefits for sickness or injury which does not relate directly to an emergency.

Sickness or injury that is not a medical emergency, as defined, is not covered. Thus, the expenses arising from such sickness or injury are not covered if it would have been reasonable under the circumstances to delay treatment until the insured returned home.

Question 63

For an applicant with pre-existing medical conditions, what does the completed medical questionnaire assist insurers in determining?

Select one:

a.
The coverage limit for elective treatment the client is travelling to receive.

b.
The waiting period for sickness and injury.

c.
The stability period for the pre-existing condition and the required premium.

d.
The trip length limitation.

Answer 63

Reference: ON Travel Health Supplement - Study 3 - LO1

The correct answer is: The stability period for the pre-existing condition and the required premium.

Question 63

The Rib Act grants power to the Discipline Committee of RIBO to impose penalties on members found guilty of misconduct, which is defined under Section 15(1) of Ontario Regulation 991. Which one (1) of the following is NOT defined as “misconduct”?

Select one:

a.
Paying a referral fee or finder’s fee to any person who is not a registered insurance broker or who is not registered or licensed under the laws of any jurisdiction to act as an intermediary for insurance, other than life insurance

b.
Providing false or misleading information to RIBO

c.
Using an illustration, circulation, or memorandum to represent the terms, benefits, or advantages of any policy or contract of insurance

d.
Failing to carry on business in a manner consistent with the Code of Conduct

Answer 63

Reference: RIBO RIBACT Regulations

The correct answer is: Using an illustration, circulation, or memorandum to represent the terms, benefits, or advantages of any policy or contract of insurance

Question 64

The RIBO Code of Conduct is stated in Ontario Regulation 991, Section 14. Indicate which one (1) of the following provisions is NOT contained in the Code.

Select one:

a.
To be competent to perform the services which the member undertakes on the client’s behalf

b.
To maintain a trust account for all trust money received

c.
To be both candid and honest when advising the member’s client

d.
Not to charge or accept any fee which is not fully disclosed prior to the service being rendered

Answer 64

Reference: RIBO RIBACT Regulations

The correct answer is: To maintain a trust account for all trust money received

Question 64

Which of the following actions are NOT prohibited under the RIB Act?

Select one:

a.
Giving a policyholder a box of chocolates at Christmas

b.
Offering a prospect tickets to a live theatre show if he or she purchases insurance from the broker

c.
Charging 10% less than the premium shown on the policy because the client can get it cheaper elsewhere

d.
All of the above

Answer 64

Reference: RIBO RIBACT Regulations

The correct answer is: Giving a policyholder a box of chocolates at Christmas

Question 65

The RIB Act requires that evidence of coverage must be provided to the buyer within which of the following periods?

Select one:

a.
Within 21 days

b.
Within 14 days

c.
Within 30 days

d.
Within 72 hours

Answer 65

Reference: RIBO RIBACT Regulations

The correct answer is: Within 21 days

Question 65

An insurance broker whose registration is restricted to acting under supervision may NOT do which of the following?

Select one:

a.
Solicit insurance except in the presence of their supervisor

b.
Sign letters to members of the public recommending insurance coverage

c.
Collect premiums on behalf of the insurance broker by whom they are employed

d.
Deposit insurance premiums in their own trust bank account

Answer 65

Reference: RIBO RIBACT By-Laws

The correct answer is: Deposit insurance premiums in their own trust bank account

Question 66

Following registration as an insurance broker, an individual

Select one:

a.
is required to ensure that any change in his/her status is included in the next position report filed by his/her employer.

b.
is required to report any changes in status only at each renewal of registration.

c.
must notify the Registered Insurance Brokers of Ontario within thirty (30) days of any change of information in the original application for registration or renewal.

d.
must confirm, in writing, every three months to the Registered Insurance Brokers of Ontario, that there has been no change in information originally filed

Answer 66

Reference: RIBO RIBACT By-Laws

The correct answer is: must notify the Registered Insurance Brokers of Ontario within thirty (30) days of any change of information in the original application for registration or renewal.

Question 67

In addition to completing an application for renewal of registration annually, insurance brokers must also advise RIBO of which of the following?

Select one:

a.
Whenever there is a change in their earnings

b.
When they receive a promotion

c.
when they change employment from one brokerage to another

d.
If they commence to write commercial lines insurance

Answer 67

Reference: RIBO RIBACT By-Laws

The correct answer is: when they change employment from one brokerage to another