Study 2 Multiple Choice Practice Questions

Question 1

How can insurance be an aid to credit?
Select one:
a. By reducing or preventing losses
b. By being a source of employment for many Canadians
c. By substituting a certain premium payment in place of an uncertain loss payment
d. Because it is virtually impossible to obtain credit without having insurance on the item concerned

Answer 1

d. Because it is virtually impossible to obtain credit without having insurance on the item concerned

Insurance is an aid to credit because it is virtually impossible to obtain credit without having insurance on the item concerned.

Question 2

How can insurance be an aid to security?
Select one:
a. By reducing or preventing losses
b. By being a source of employment for many Canadians
c. By substituting a certain premium payment in place of an uncertain loss payment
d. Because is virtually impossible to obtain credit without having insurance on the item concerned

Answer 2

c. By substituting a certain premium payment in place of an uncertain loss payment

Insurance provides peace of mind by substituting a certain premium payment in place of an uncertain loss payment.

Question 3

How can risk be spread?
Select one:
a. By volume, diversity of risks, and diversity of location
b. By premium, rate, and indemnity
c. By volume, premium, and diversity of location
d. By diversity of risks, premium, and indemnity

Answer 3

a. By volume, diversity of risks, and diversity of location

Risk can be spread by volume, diversity of risks, and diversity of location

Question 4

What does it mean to indemnify?
Select one:
a. To determine what price the insurer should charge for providing each class of coverage
b. To provide compensation for loss or expenses incurred
c. To calculate the premium an insured should pay
d. To review an application for insurance and decide whether to cover the risk

Answer 4

b. To provide compensation for loss or expenses incurred

To indemnify means to provide compensation for loss or expenses incurred.

Question 5

What is the premium?
Select one:
a. The financial amount provided to compensate an insured for loss or expenses incurred
b. The amount paid to a broker as commission
c. The amount paid to the provincial insurance regulator for tax purposes
d. The price of insurance protection for a specified risk for a specified period of time

Answer 5

d. The price of insurance protection for a specified risk for a specified period of time

The premium is the price of insurance protection for a specified risk for a specified period of time.

Question 6

What is the specific risk covered by life insurance?
Select one:
a. The death of the insured
b. The death of the beneficiary
c. The bankruptcy of the insured
d. The lapse of the policy

Answer 6

a. The death of the insured

Life insurance covers the death of the insured.

Question 7

What is unearned premium?
Select one:
a. The part of the premium that has not been used or earned; premium representing the unexpired portion of a policy
b. The portion of premium earned or charged for the period of time a policy remained effective
c. The penalty charged for cancelling an insurance policy early
d. The cost for insuring a category of risk

Answer 7

a. The part of the premium that has not been used or earned; premium representing the unexpired portion of a policy

Unearned premium is the part of the premium that has not been used or earned; premium representing the unexpired portion of a policy.

Question 8

What type of insurance covers goods in transit on land?
Select one:
a. Aviation
b. Marine
c. Inland transportation
d. Fire

Answer 8

c. Inland transportation

Inland transportation insurance covers goods in transit on land

Question 9

What type of insurance covers loss resulting from various criminal activities?
Select one:
a. Life
b. Crime
c. Health
d. Fire

Answer 9

b. Crime

Crime insurance covers loss resulting from various criminal activities.

Question 10

What type of insurance would cover losses arising from libel and slander?
Select one:
a. Crime insurance
b. Accident insurance
c. Liability insurance
d. Surety bonds

Answer 10

c. Liability insurance

Liability insurance covers the entire spectrum from personal liability to liability resulting from ownership of premises, operations, products, rendering of professional services, libel, slander, and virtually any other situation where one individual might hold another responsible for some action or lack of action that resulted in injury or damage to that individual or that person’s property