Fundamentals of Insurance - Practice Exam

Three Main Categories Of Risk

1) Personal Risk

2)Property Risk

3)Liability Risk

What are the FIVE elements of a contract?

A) Agreement, Risk, Loss, Consideration, Legality

B) Legal Capacity, Legality of Object, Consideration, Agreement, Genuine Intention

C) Agreement, Legal Capacity, Risk, Loss, Consideration.

D) None of the above

B) Legal Capacity, Legality of Object, Consideration, Agreement, Genuine Intention

What is needed for an agreement to exist?

An offer made; AND an unconditional acceptance of the terms of that offer

What do these abbreviations stand for?

1) T/a

2)D/b/a

3)O/a

1) Trading as

2) Doing Business as

3) Operating as

How long are insurance contracts usually written for?

A) 6 Months

B) 3 Years

C) 1 Year

D) For life unless cancelled and reissued

C) 1 Year

An insurer is not required to provide coverage when losses are caused by:

A) Application of heat

B) Lightening / Electrical surges that cause damage to electrical devices

C) Contamination by radioactive material

D) All of the Above

E) A and C

D) All of the Above

The onus to prove Misrepresentation rests with:

A) The Insured

B) The Insurer

C) The Police

D) A Bailee for hire

B) The Insurer

Material Facts can include:

A) Details concerning previous claims

B) Details regarding previous cancellation or refusal of Insurance

C) Details concerning existing property protection systems

D) All of the Above

E) A and B

D) All of the Above

The following are examples of the Statutory Condition Requirements After Loss EXCEPT:

A) Required to give a complete inventory of destroyed or damaged property

B) Stating when and how the loss occurred

C) Stating the loss did not occur due to a negligent or willing act

D) All of the above

D) All of the above

Which of the following is NOT a Statutory Condition of Insuring the peril of fire?

A) Termination

B) Fraud

C) Salvage

D) Risk Summary

D) Risk Summary

When the insured and insurer cannot agree on the value of the property after a loss, what Statutory condition is in place to settle this matter?

A) Termination

B) Action

C) Appraisal

D) When loss is payable

C) Appraisal

Under Statutory Condition When Loss is Payable what is the time frame the loss is payable within?

A) 60 days after completion of proof of loss

B) Less than 60 days after proof of loss if stated in contract

C) 90 days after completion of proof of loss

D) All of the above

E) A and B

E) A and B

E&O claims are the result of:

A) Failure to advise clients of exclusions

B) Failure to place coverage or placing it too late

C) Providing the incorrect coverage

D) Incorrect advice about coverage available

E) All of the above

E) All of the above

Insurers have the right to expect that brokers:

A) Will not make mistakes

B) Will tell the truth about the risks they submit

C) Will not withhold or conceal important information

D) A and B

E) B and C

E) B and C

What are the two types of hazards:

A) Hostile Hazards, Physical Hazards

B) Moral Hazards, Physical Hazards

C) Moral Hazards, Hostile Hazards

D) None of the above

B) Moral Hazards, Physical Hazards

When a broker submits an application to the insurer, who makes the decisions?

The Underwriter

TRUE OR FALSE: Physical hazards are observable and once identified can be reduced

True

Applicants who are not prepared to take measures to reduce the chance of loss because "everything is insured" are a:

A) Moral Hazard

B) Physical Hazard

C) None of the above

A) Moral Hazard

TRUE OR FALSE: Claims adjusters settle claims

True

Brokers, Adjusters, and Insurance Companies will often refer to an Insurance contract as:

A) Form

B) Wording

C) Policy

D) All of the above

D) All of the above

What is a Named Peril Policy?

When a loss happens that was not by a peril named in the policy it will not be covered.

What is a Broad Policy?

Broad policies insure against all risks of direct physical loss or damage, but are subject to conditions and exclusions

Which of the following facts are true of Statutory conditions:

A) They are in All property policies insuring the peril of fire

B) They are in accident and sickness insurance

C) They are established in statute and are legally binding to all parties

D) All of the above

E) B and C

D) All of the above

What happens when the insured breaches warranty:

A) There is no coverage

B) Rates Increase

C) Contract Nullified

D) All of the Above

E) A and C

E) A and C

How long can property be vacant before it falls under Property Exclusion?

A) 60 days

D) 15 days

C) 30 days

D) 45 days

C) 30 days

Some examples of property exclusions are Evidences of debt or title, Securities, Automobiles, Books of Accounts and Vacant property; Select another example of property exclusions:

A) Money, Aircraft, Watercraft

B) Aircraft, Shrubs, Private Structures

C) Money, Shrubs, Private Structures

D) None of the above

A) Money, Aircraft, Watercraft

What is the Rationale behind a deductible?

A deductible charged to all losses helps to keep insurance affordable.

If the deductible on the policy is stated to be $500 and there is a loss resulting in $1500 of damage; the insurer is responsible for how much of the claim:

A) $1500

B) $500

C) $1000

D) $2000

C) $1000 - the Insured is required to absorb $500 of the cost as that is the amount of their deductible

How is Actual Cash Value is calculated ?

ACV= Replacement Cost - Depreciation

The Underwriter has the option to:

A) Reject a risk

B) Accept the risk on basis presented

C) Accept the risk with increased premium

D) Accept the risk with increased deductible

E) All of the above

E) All of the above

A Mortgagee is anyone having: *(Select best answer)*

A) Money lent to them

B) An Insurable interest in the insured property

C) A Mortgage on a house

D) None of the above

B) An Insurable interest in the insured property

Who is insured? Select the exclusion:

A) Spouse/Common Law Partner

B) Relatives of the named insured

C) Anyone under 21 in the care of the named insured

D) Students attending school (financially dependent)

E) Roomates

E) Roomates

When an insured peril in the area makes it unsafe for you to be on the premises, how long are you covered under "Coverage C- Additional living expenses":

A) 1 Month

B) 2 weeks

C) As long as required

D) 45 days

B) 2 weeks

IBC Homeowners forms were introduced in:

A) Mid-1960s

B) Mid-1950s

C) Mid-1990s

D) Mid-1980s

A) Mid-1960s

What form is IBC 1151?

Homeowners Basic Form

What form is IBC 1153?

Homeowners Broad Form

What form is IBC 1155?

Homeowners Comprehensive Form

What is the most common Homeowners form?

A) Homeowners Basic Form

B) Homeowners Broad Form

C) Homeowners Comprehensive Form

C) Homeowners Comprehensive Form

In order to be classified as Common Law what is the timeline required (with and without child) ?

Must be either:

A) living together in a conjugal relationship outside of marriage continuously for three years

*OR*

B) living together with child (natural or adoptive) for one year

Who would be considered insured under the a homeowners contract? Select all the apply:

A) The insured grandmother who lives in the basement

B) Spouses 25 year old daughter who is away for school and not returned

C) A 20 year old exchange student staying with the insured temporarily

D) The insured roommate

A) and C)

Under extension of coverage of a basic homeowner policy, Removal of Debris is covered:

A) Up to 5% of Dwelling limit

B) Within the limit of insurance and 5% above the policy limit

C) Without limitation

D) Within the policy limit

B) Within the limit of insurance and 5% above the policy limit

Under extension of coverage of a basic homeowner policy, Property Removed provides coverage for:

A) 7 days or until policy expiry

B) 60 days or until policy expiry

C) 15 days or until policy expiry

D) 30 days or until policy expiry

D) 30 days or until policy expiry

TRUE OR FALSE: Under extension of coverage of a basic homeowner policy, Moving to another home coverage is restricted to Canada and the USA

False - Restricted to Canada

Under extension of coverage of a basic homeowner policy, Fire Department Expenses provide up to:

A) $2000 with no deductible

B) $1000 with no deductible

C) $1500 with no deductible

D) $600 with no deductible

B) $1000 with no deductible

Which of the following is NOT covered under extensions of coverage, Freezer Food:

A) Power Failure

B) Accidental or Deliberate Disconnection of Power

C) Mechanical Breakdown

D) None of the Above

B) Accidental or Deliberate Disconnection of Power

What is the Coverage Limit for Credit or Debit Cards, Forgery and Counterfeit Money, under extensions of coverage:

A) $1000

B) $2000

C) $5000

D) $8000

A) $1000

What is the purpose behind having only a $200 Limit for Money insured under a homeowners form?

To encourage people to use financial institutions for safe keeping

Which of the following statements are true of the Special Limits of Insurance if they are stolen:

A) Jewellery, Watches, Fur garments etc. have up to $2000 of coverage

B) Numismatic Propertys have up to $200 of Coverage

C) Collectible Cards and Manuscripts etc. have up to $1000 of coverage

D) Bicycles and their equipment have up to $500 of coverage

E) All of the Above

E) All of the Above

What is Form IBC 1165?

Condominium Unit Owners Package Form

For Mobile home insurance the description of dwelling has been amended to include coverage for:

A) Appliances, Furniture, and Equipment forming a permanent residence

B) Transportation of Mobile Home

C) Awning, Skirting, Porches and Tie-down Equipment

D) Both A) and C)

Both A) and C)

When an insurer uses the term "Contents" It includes:

A) Stock and Equipment

B) Building, Stock and Equipment

C) Building and Stock

D) Building and Equipment

A) Stock and Equipment

When an insurer uses the term "All Property" It includes:

A) Stock and Equipment

B) Building, Stock and Equipment

C) Building and Stock

D) Building and Equipment

B) Building, Stock and Equipment

What Form is IBC 4036?

Named Perils Form

What Form is IBC 4037?

Broad Form

There are how many named perils in IBC 4036?

A) 10

B) 13

C)15

D) 8

D) 8

The Declaration page of a policy indicates: select the best answer

A) The Limit of Insurance Provided

B) The Claims History

C) The Fire Hazards/ Risks

D) All of the above

A) The Limit of Insurance Provided

How do you calculate the Premium?

Premium calculation is:

Basic rate of fire/ $100 of insurance

Example: if the building was $500,000 with a basic rate of fire of .70

.70 X 500,000 = $3,500

The Minimum limits of insurance required to be purchased is usually set by the insurer at no less than what percent of the ACV of the property?

A) 60%

B) 70%

C) 80%

D) 90%

C) 80%

What is the formula to calculate the amount of a settlement?

Did/Should X Amount of Loss = Settlement

Did = Amount of insurance purchased

Should = % of Insurance required

Insureds with property protection systems must notify the insurer immediately if:

A) There is interruption, flaw or defect with system

B) Contract providing monitoring or maintenance services for system has not been renewed

C) Provided a notice of the suspension of police services in response to their system

D) All of the above

D) All of the above

What Form is IBC 4042?

The Builder's Risk - Broad Form

The Builders Risk - Broad Form provides coverage for:

A) Contractors Tools and Equipment

B) The building while in the course of construction

C) Debris blown onto property from other property not insured by the insured

D) None of the above

B) The building while in the course of construction

When purchasing the Builders Risk - Broad Form, The Insureds are required to purchase the amount of insurance which is equivalent to:

A) The Cost of Material

B) The Cost of Labor

C) Its Completed Value

D) Both A) and B)

C) Its Completed Value

Business Interruption Insurance pays for loss caused by:

A) Same perils named in property policy

B) Direct damage only

C) Fire only

D) Flooding Only

A) Same perils named in property policy

Which of the following are types of Business Interruption Insurance:

A) Earning Form

B) Profits Form

C) Extra Expense Insurance

D) All of the Above

E) Only A) and B)

D) All of the Above

TRUE OR FALSE: With Earning Forms, Coverage commences at the time of loss until the property is rebuilt, repaired or replaced.

True

TRUE OR FALSE: The Extra Expense Insurance Endorsement Form insures all necessary expenses incurred by insured to resume normal business operations after a loss.

True

What form is IBC 4027?

The Extra Expense Insurance Endorsement Form

Examples of extra costs covered in The Extra Expense Insurance Endorsement Form include:

A) Rent of a temporary premises or temporary equipment

B) Paying overtime salaries

C) Rebuilding of property

D) Both A) and B)

D) Both A) and B)

The laws used to govern most societies fall under TWO categories:

A) Common Law and Statute Law

B) Criminal Law and Civil Law

C) Contract Law and Tort Law

D) None of the above

B) Criminal Law and Civil Law

The following statements are true of Criminal Law except one, pick the exception.

A) Deals with wrongs against society

B) Rarely concerned with compensating the victims of a criminal act for the wrongs they suffer

C) The goal is to seek compensation for the amount of financial loss or damage suffered by the insured party

D) Relies on a system of punishment including fines, penalties , probation and imprisonment

C) The goal is to seek compensation for the amount of financial loss or damage suffered by the insured party

__________ is based on the doctrine of precedence. The basic premise is that current court decisions should follow previous decisions whenever the circumstances underlying each are similar.

A) Criminal Law

B) Civil Law

C) Common Law

D) Contract Law

C) Common Law

__________ Is concerned with setting disputes between individuals or other legal entities in matters not involving a criminal act:

A) Criminal Law

B) Civil Law

C) Common Law

D) Contract Law

B) Civil Law

What are the TWO branches of Civil Law:

A) Common Law and Statute Law

B) Criminal Law and Common Law

C) Contract Law and Tort Law

D) None of the above

C) Contract Law and Tort Law

An Individual who commits a wrong against an innocent party is refereed to as a: *select the BEST answer*

A) Tortfeasor

B) Tort

C) Joint Tortfeasor

D) Wrongdoer

A) Tortfeasor

People have a duty to refrain from causing harm to others, this is refereed to as:

A) Duty Breached

B) Duty of Tort

C) Intentional Tort

D) Duty Owed

D) Duty Owed

______________ Involves a careless invasion of another's rights. when injury or damage results the wronged is entitled to sue for damages.

A) Negligence

B) Unintentional Tort

C) Intentional Tort

D) Careless Tort

B) Unintentional Tort

____________ Is a wrong which was committed by someone who knew the act was illegal.

A) Negligence

B) Unintentional Tort

C) Intentional Tort

D) Careless Tort

C) Intentional Tort

All of the following are examples where strict liability would apply, select the exception:

A) Hazardous activities which are inherently dangerous regardless of the care taken

B) Performance of a reasonable task in an unreasonable setting

C) Applying heat to light a fire within its usual receptacle

D) Allowing the spread of an intentionally started fire

C) Applying heat to light a fire within its usual receptacle

The monetary award provided by the courts is refereed to as:

A) Compensation

B) Damages

C) Monies

D) Funds of justice

B) Damages

A Licensee is defined as:

A) One who comes on to the premises for his own purpose but with the occupiers consent

B) A Person invited onto the land by invitation or for the owners business (customer)

C) A person who comes onto premises without permission of the occupier

D) None of the above

A) One who comes on to the premises for his own purpose but with the occupiers consent

The indirect legal responsibility one person may have for the acts of another is known as:

A) Indirect care

B) Ordinary care

C) Vicarious liability

D) Indirect liability

C) Vicarious liability

The following are examples of which parents are financially responsible for damages theirs kids cause, pick the exception:

A) Painting exterior or dwelling

B) Cutting the lawn

C) Removing snow

D) Playing at school

D) Playing at school

Insurance offers coverage for which type of damages?

A) Punitive Damages

B) Exemplary Damages

C) Compensatory Damages

D) All of the above

C) Compensatory Damages

Bodily injury is considered as:

A) Physical injury sustained and associated with external causes

B) Sickness or disease

C) injury resulting in death

D) all of the above

D) all of the above

Unintentional damage to the property of others is considered:

A) Bodily Injury

B) Property Damage

C) Damages

D) Punitive damages

B) Property Damage

You can purchase an additional agreement called "Supplementary Payments" which provides coverage for:

A) Cost of Defence

B) Court Costs

C) Additional expenses incurred when requesting assistance in investigation

D) all of the above

D) all of the above

MATCHING:

A) Coverage E - ______________________________________

B) Coverage F - ______________________________________

C) Coverage G -______________________________________

D) Coverage H -______________________________________

1. Voluntary medical payments

2. Voluntary Compensation for residence employees

3. Personal legal liability

4. Voluntary payment for damage to property

A) - 3

B) - 1

C) - 4

D) - 2

There is not coverage for a lessee or tenant of the premises under any agreement which is longer than:

A) 30 days

B) 90 days

C) 15 days

D) 60 days

B) 90 days

Personal liability coverage is designed to ensure the legal liability of the insureds in their role of a private citizen while :

A) In Canada

B) in Canada Or USA

C) Anywhere in the world

D) While in province they reside

C) Anywhere in the world

The insurer will defend claims against the insured even if they are:

A) Groundless

B) False

C) Fraudulent

D) All of the above

E) None of the above

D) All of the above

Professionals such as doctors and dentists require a special type of insurance, this insurance is:

A) Commercial General Liability Insurance

B) Errors and Omissions Insurance

C) Medical Payments Insurance

D) Malpractice Insurance

D) Malpractice Insurance

Professionals such as Lawyers, Architects and Insurance Brokers require a special type of insurance, this insurance is:

A) Commercial General Liability Insurance

B) Errors and Omissions Insurance

C) Medical Payments Insurance

D) Malpractice Insurance

B) Errors and Omissions Insurance

S.P.F. No. 4 is __________________________?

Standard Garage Automobile Policy

Most workers compensation plans provide the following benefits for work-related disabilities:

A) Health care costs / Rehabilitation programs

B) Replacement for lost earnings

C) A Death Benefit

D) All of the above

E) Both A and B

D) All of the above

The Period of self-insurance between the onset of the disability and the commencement of disability benefits is:

A) Commencement Period

B) Elimination Period

C) Benefit Period

D) Disability Period

B) Elimination Period

The Period for which benefits are payable is:

A) Commencement Period

B) Elimination Period

C) Benefit Period

D) Disability Period

C) Benefit Period

The Manitoba Public Insurance Act was passed in ______?

A) 1971

B) 1981

C) 1991

D) 2001

A) 1971

The most important difference between on road and ff road vehicle insurance is:

A) Doesn't include comprehensive coverage

B) Doesn't include Personal injury protection plan

C) All of the above

D) None of the above

B) Doesn't include Personal injury protection plan

Autopac programs are made up of a combination of TWO *Acts* , Name the two acts

1) The Highway Traffic Act

2) The Insurance Act