Fundamentals of Insurance Practice Exam B - Manitoba

Insurance plays an important role in managing financial risk. The main purpose of Insurance is to:

a) Enable the consumer to obtain loan or mortgage.

b) Provide employment and investment capital.

c) Allow spread of risk.

d) Reduce losses through loss prevention and loss reduction.

c) Allow spread of risk.

When the insurer terminates an insurance policy, ALL the following conditions apply, EXCEPT one. Pick the exception:

a) The insured is entitled to 15 days' written notice of termination sent by registered mail of 5 days' written notice personally delivered.

b) The refund due to the insured shall be calculated on a short rate basis.

c) Unless otherwise stated, the refund shall accompany the notice of termination.

d)The refund shall be in the form of money, postal or express company money order or cheque payable at par

b) The refund due to the insured shall be calculated on a short rate basis.

The major function of insurance is to:

a) Reduce the cost of losses.

b) Share the losses of the few among many.

c) Safeguard the interest of the mortgagees

d) Serve as the basis of the existing credit system.

b) Share the losses of the few among many.

Under the policy of "fire" insurance, the insurer would be obligated to pay the following loss only:

a) Fire damage caused to appliance following a sudden power surge.

b) Fire damage to insured buildings occurring during a rebellion.

c) Damage to insured property due to radioactive contamination.

d) Loss of property caused by a process involving the application of heat.

a) Fire damage caused to appliance following a sudden power surge.

Generally, all of the following, except one, are seen to be "incompetent" or lacking the legal capacity to contract. Pick the exception:

a) A corporation.

b) A child.

c) A trade name.

d) A senile person.

a) A corporation.

If a burning log rolls out of your client's fireplace grate across the hearth and onto the rug in front, the loss to the rug is the result of a(n):

a) Direct fire.

b) Indirect fire

c) Friendly fire

d) Hostile fire

d) Hostile fire

Statutory Condition Five: Termination sets out the provisions for cancellation of a contract of insurance that must be compiled by the insured and the insurer. All the following provisions regarding termination by the insurer are true, except one. Select the exception:

a) When written notice of the termination is sent by registered mail, the insurer must give the insured 15 days' notice starting the day after the letter is received by the insured's post office.

b) When written notice of termination is sent hand-delivered, the insurer must give the insured 15 days' notice starting on the date the letter was registered by the insurer's post office.

c) When written notice of termination is sent hand delivered, the insurer must give the insured 5 days' notice.

d) When the insured is entitled to a premium refund, the amount of the refund is calculated on pro- rate (per diem) basis.

b) When written notice of termination is sent hand-delivered, the insurer must give the insured 15 days' notice starting on the date the letter was registered by the insurer's post office.

The Insurance Act provides that a Waiver of Term or Condition of an insurance contract is:

a) Permitted to be made by the insurance broker if it is in favour of the insured.

b) Not binding, unless it is in writing and under the signature of a person authorized by the insurer.

c) Valid only when signed by both the insurer and the insured.

d) Binding when even provided orally.

b) Not binding, unless it is in writing and under the signature of a person authorized by the insurer.

One of the elements that determines whether a contract is legally enforceable or not is the "legal capacity of the parties". In all of the following contracts, except one, are the parties considered to have "Legal Capacity". Select the one that does not meet this element.

a) An insurance contract issued in the name of Marry Poppin d.b.a. Little People Day Care Centre.

b) A lease agreement naming the tenant as the "No Risk Denied Insurance Corporation".

c) A building contract showing the General Contractor as Bricks and Mortar Inc.

d) An invoice for merchandise shipped to the order of Mandy's Souvenir and Gift Shop.

d) An invoice for merchandise shipped to the order of Mandy's Souvenir and Gift Shop.

Risk selection is based on the Underwriter's assessment of the hazards pertaining to the risk that has been submitted for insurance. An underwriter must determine whether or not there is a potential Moral Hazard. The following does not apply as a condition indicating the presence of a Moral Hazard:

a) The moral character of the applicant for insurance.

b) The financial condition of the applicant for insurance.

c) The physical condition of the premises which may cause a loss to occur.

d) The indifference to loss of the applicant for insurance.

c) The physical condition of the premises which may cause a loss to occur.

A warranty is a:

a) Promise by the broker to remit premiums to the insurer in accordance with the terms stated in the Agency Agreement.

b) Guarantee of insureds that certain facts are truly as they are represented to be and that they will remain so.

c) Piece of paper similar to an Endorsement which makes changes to the policy.

d) Promise by the insurer to make payment of all claims submitted to it within a 21-day period.

b) Guarantee of insureds that certain facts are truly as they are represented to be and that they will remain so.

All Homeowners Policies contain the section "Extensions of Coverage". All of the following losses are covered under this section, except one. Pick the exception:

a) Damage to personal property during transportation to the insured's new principal residence located in Sydney, Nova Scotia, which is to be occupied by the insured within the next 10 days.

b) The cost of repairing the "tear out" damage to the insured's driveway that was necessarily caused to replace the ruptured water main.

c) The cost to replace the insured's freezer food that was spoiled because of a power failure caused by lightning.

d) Loss of the insured's indoor trees and plants due to exposure to extreme temperatures after a severe storm damaged part of the roof.

b) The cost of repairing the "tear out" damage to the insured's driveway that was necessarily caused to replace the ruptured water main.

The Basis of Claim Payment is the same for all Homeowners Forms. All these statements regarding the Basis of Claim Payment are true, except one. Pick the exception:

a) Dwelling Building and Detached Private Structures are covered on a Replacement Cost Basis.

b) Personal Property is insured for Replacement Cost except electronic media and books of account, which are subject to a special basis of settlement.

c) Artwork, antiques, memorabilia, and souvenirs are covered on Actual Cash Value Basis.

d) Dwelling Building and Detached Private Structures are covered on a Replacement Cost Basis, which includes any increased cost of construction to the enforcement of by -laws.

d) Dwelling Building and Detached Private Structures are covered on a Replacement Cost Basis, which includes any increased cost of construction to the enforcement of by -laws.

Under all Homeowners Forms, the coverage for certain Personal Property articles is restricted to "Special Limits of Insurance", unless the insured has purchased additional insurance. All the following objects are subject to "Special Limits," except one. Pick the exception:

a) Computer games and other software with a combined value of $3,600.

b) A mountain bike valued at $6,000.

c) A coin collection valued at $1,200.

d) A gold watch valued at $1,800.

d) A gold watch valued at $1,800.

The windstorm or hail only provided by the Homeowners' Basic Form (IBC 1151) would pay for the loss or damage to:

a) Dwelling building shingles.

b) Satellite dish.

c) Interior of building by rain which entered through an open window.

d) Insured's waterfront dwelling caused by high waves which resulted directly from a severe windstorm.

b) Satellite dish.

The following loss is insured under the Homeowners' Basic Form (IBC 1151):

a) Water Hammer

b) Rupture of a heating, plumbing or air conditioning system.

c) Smoke from a fireplace.

d) Death of a family pet by vehicle impact.

b) Rupture of a heating, plumbing or air conditioning system.

The loss of money due to actual destruction, disappearance or wrongful abstraction would be property insured under the following policy:

a) Burglary Policy

b) Robbery Policy

c) Interior Messenger and Paymaster Robbery (Hold-Up) Policy.

d) Money and Securities (Broad Form)

d) Money and Securities (Broad Form)

The installation Floater is designed for contractors that specialize in the installation of machinery and equipment. The following property is not covered under this floater:

a) Property in warehouse on the insured's premises. b) Property while in transit to the job site.

c) Property awaiting installation at the job site.

d) Property while being installed at the job site.

a) Property in warehouse on the insured's premises.

The additional rate or premium charged by the insurer to pay for additional perils insured under a commercial property insurance policy is called:

a) A surcharge

b) A loading

c) The base rate.

d) A premium charge back.

b) A loading

You would advise your business clients to purchase "Temporary Locations" coverage when their stock and/or equipment would likely be:

a) Temporarily stored at their home.

b) At the premises of another business for repairs or storage.

c) In transit

d) At a warehouse where the insured has rented

b) At the premises of another business for repairs or storage.

One of the tasks performed by a commercial underwriter is to establish the rate to be charged for covering the peril of fire. The "f ire rate" is determined by several different factors. All the following factors, except one, influence the rate charged by the insurer. Pick the exception:

a) The level of public f ire protection, i.e.: distance to fire hydrants and fire hall.

b) The location of the risk, including distance to another commercial building and occupancies.

c) The number of years the applicant for insurance has been in business.

d) The claims history of the applicant over the past 3-5 years.

c) The number of years the applicant for insurance has been in business.

Which of the following statements is correct in connection with an 80% co-insurance clause?

a) The amount payable is restricted to less than 80% of the actual cash value of the property.

b) The insured can collect only 80% of any loss.

c) If the amount of insurance is less than 80% of the value of the property, payment may be less than the actual loss.

d) The amount of insurance carried must, by law, be not less than 80% of the value of the property

c) If the amount of insurance is less than 80% of the value of the property, payment may be less than the actual loss.

Insureds generally will receive a rate credit when property protection systems are installed on the premises. As a condition of coverage, the insured must notify the insurer immediately when certain conditions exist. Which of the following statements is not true in respect of this policy condition:

a) The insureds shall notify the insurer of any interruptions to such system(s) of which they are aware.

b) The insureds shall advise the insurer of the existence of any municipal by -law or ordinance related to such system(s)

c) The insureds shall advise the insurer when any contract providing monitoring or maintenance services has been cancelled.

d) The insureds shall advise the insurer when they have been provided with notification of the suspension of police services in response to any such system(s)

b) The insureds shall advise the insurer of the existence of any municipal by -law or ordinance related to such system(s)

According to the Canadian Legal System, the Insurance Act is:

a) A part of the criminal code.

b) A precedent established by common law.

c) A part of the Civil Code.

d) A statute law

d) A statute law

An insured' s liability for sickness, disease or death caused to third parties is insured by liability policies under the coverages provided for:

a) Personal Liability

b) Bodily Injury

c) Medical Payments

d) Supplementary Payments.

b) Bodily Injury

The Commercial General Liability (CGL) Policy insured the liability exposures common to most businesses. Your client is an electrical contractor, who replaced the wiring in a customer's building. Two days after the work was finished, a fire broke out, and the fire chief determined that it was caused by a faulty connection. Which liability coverage in the CGL Policy would respond to this claim?

a) Premises and Operations Liability

b) Products Liability

c) Completed Operations Liability

d) Personal Injury Liability

c) Completed Operations Liability

The Homeowners' Comprehensive Form (IBC 1155) insures the following loss or damage only:

a) Loss of sporting equipment during its use.

b) Damage caused by birds.

c) Breakdown of dishwasher motor.

d) Damage due to smoke from fireplace

d) Damage due to smoke from fireplace

Under the Homeowner's Basic Form (IBC 1151) the following loss is not insured:

a) Roof damage caused by falling object which strikes the dwelling building.

b) Damage caused to the dwelling building by an automobile driven by a neighbor.

c) Wind damage to building siding.

d) Damage caused by vandalism to a dwelling building in the course of construction.

d) Damage caused by vandalism to a dwelling building in the course of construction.

The following claim would be insured by the Homeowners' Basic Form (IBC 1151) under the peril of theft:

a) Theft of insured's registered black Labrador dog.

b) Damage to door and lock by persons attempting to break into the insured's dwelling.

c) Theft to personal property from a seasonal dwelling owned by the insured and which had not been occupied by the insured for almost two months.

d) Theft of building materials from site of insured's new dwelling prior to its completion.

b) Damage to door and lock by persons attempting to break into the insured's dwelling.

Under the Homeowners' Basic Form (IBC 1151) only the following loss is covered:

a) Water Hammer.

b) Damage to a garage door caused by a vehicle driven by the insured.

c) Smoke damage due to the faulty operation of the basement furnace.

d) Sewer back-up.

c) Smoke damage due to the faulty operation of the basement furnace.

The emergency removal coverage provided by the Mobile Home Insurance Form insures all the following, except one. Pick the exception.

a) Cost to disconnect water services.

b) Cost to disconnect power services.

c) Towing or transporting costs.

d) Cost of repair damage caused during moving

d) Cost of repair damage caused during moving

One of the perils insured under the Homeowners' Basic Form (IBC 1151) is theft including damage caused by attempted theft. Although the coverage for theft is very broad, there are limitations that apply to this peril. All the following losses are excluded, except one. Pick the exception:

a) Theft of the insured's camera during a sightseeing trip while vacationing in Europe.

b) Theft of a diamond ring the insured had left in the laundry room and to which the tenant had access.

c) Theft of a generator and other power tools from the insured's summer cottage during a time when the cottage was unattended by the insured.

d) Loss of collector's music albums, which the insured had given to an acquaintance to copy onto CD's, but which were never returned.

a) Theft of the insured's camera during a sightseeing trip while vacationing in Europe.

When one person, (the plaintiff), sues the other person, the defendant, for damages, before awarding damages, the courts require the plaintiff to prove all the following elements, except one. Pick the exception:

a) the defendant had a moral duty to defend the plaintiff' s well-being

b) the defendant owed the plaintiff a legal duty of care

c) the defendant breached the legal duty of care

d) damages were suffered as the proximate result of the defendant's action

a) the defendant had a moral duty to defend the plaintiff' s well-being

Your client operates a medical clinic near your office. She was recently sued by a customer who broke her back when the rail leading to a second-floor office gave away, causing her to fall a distance of 5 meters to the floor below. This is an example of:

a) a premises liability claim,

b) a professional liability claim.

c) A products liability claim

d) a completed operations liability claim

a) a premises liability claim,

Businesses have some unique liability exposures which need to be properly insured. Your client sells toasters on a mail order basis. Which one of the following liability coverages would be most important for such a business?

a) premises liability

b) operations liability

c) products liability

d) completed operations

c) products liability

In general, liabilities policies are designed to respond (if a claim is made against an insured for bodily injury or property damage caused to a third party. All of the following would be considered "bodily injury" claims under liability insurance, except one. Pick the exception.

a) a friend's child was bitten by the insured's dog and required stitches to close the wound

b) a letter carrier died because of a fall on icy steps on the insured's premises

c) a neighbor is suffering from emotional trauma having witnesses the insured shooting a bear that has wandered into the insured's yard.

d) a customer contracted food poisoning after eating improperly cooked meat in the insured's restaurant.

c) a neighbor is suffering from emotional trauma having witnesses the insured shooting a bear that has wandered into the insured's yard.

All the following statement respecting voluntary medical payment coverage, which is provided on all homeowner's forms, are true except one. Pick the exception.

a) are limited as to amount

b) is not a requirement that the insured be legally liable for the injury before payment will be made

c) are payable for up to 5 years from the date of the accident

d) are deigned to pay surgical, medical, hospital and other expenses.

c) are payable for up to 5 years from the date of the accident

A lawsuit alleging damage to a neighboring property during excavation work was filed against the property owner and the contractor. All of the following statements regarding the legal liability for injury or property damage arising out of the work performed by a contractor are true, except one. Pick the Exception:

a) the owner will not be held legally liable if the owner hired a contractor having the necessary expertise in performing the work

b) the owner will not be legally liable if the work is considered reasonable

c) the owner and contractor will share the liability if the work was dangerous

d) the owner will always be held liable for injury or property damage resulting from the work performed by the contractor

d) the owner will always be held liable for injury or property damage resulting from the work performed by the contractor

Civil law, also called private law, is the body of law that addresses disputes between individuals and other legal entities. Civil law is divided into two branches, contract law and tort law. Civil law defines a tort as:

a) a failure to meet obligations under a contract

b) a private wrong or injury other than a breach of contract.

c) a criminal wrong that must be punished.

d) a failure to exercise that degree of care, which an ordinary person with reasonable prudence would under the same circumstances.

b) a private wrong or injury other than a breach of contract.

Most liability policies provide coverage on an occurrence basis. All of the following statements, except one, correctly describes what the policy covers. Select the statement which is incorrect.

a) the amount of insurance stated on the policy is the maximum amount payable for all occurrences, which happened during the policy period.

b) the policy covers bodily injury or property damage resulting from an accident.

c) the policy covers bodily injury or property damage caused by an exposure to a harmful condition over a long period of time.

d) the amount of insurance stated on the policy is available for each occurrence during the policy period.

a) the amount of insurance stated on the policy is the maximum amount payable for all occurrences, which happened during the policy period.

All homeowners' forms insure the personal liability of the insured arising out of:

a) the insured's private actions anywhere in the world and business-related actions in north America only

b) the insured's action as private citizen anywhere in the world

c) the insured's private and business actions anywhere in the world

d) the insured's private actions in Canada and USA

b) the insured's action as private citizen anywhere in the world

All Homeowners and Habitational package policies include liability insurance. Coverage E would respond to all the following instances, except one.

a) bodily injury or property damage caused by the insured arising out a personal non-business activity.

b) bodily injury suffered by a resident employee as a direct result of the insured's negligence.

c) fire damage to a cottage rented by the insured when a burning log rolled out of a fireplace.

d) property damage to a third-party resulting from the personal actions of a named insured who does not reside at the insured premises.

b) bodily injury suffered by a resident employee as a direct result of the insured's negligence.

Your client is considering hiring a contractor to perform renovations to a building. She would share in any liability for injury or damage caused by such contractor in all the following instances, except one.

a) when the work being contracted is inherently dangerous

b) when she supplies "blueprints" and leaves the contractor to his own resources to arrive at the desired results.

c) when she supplies defective machinery or equipment form which injury or damage arises.

d) when she provides on-site direction and on-going supervision of work

b) when she supplies "blueprints" and leaves the contractor to his own resources to arrive at the desired results.

The personal injury liability coverage, in the commercial general liability would respond to all the following torts, except one.

a) negligence

b) false arrest

c) libel or slander

d) wrongful entry or eviction

a) negligence

The personal liability coverages, provided on homeowner's forms are designed to insure:

a) the legal liability for private citizens for their actions.

b) the legal liability for insureds arising out of their business pursuits.

c) the legal liability of insureds arising out of the operation of all owned and non-owned automobiles.

d) all exposures for which an insured might be legally liable

a) the legal liability for private citizens for their actions.

Homeowner's forms cover the insured's legal liability for loss or damage to rented or leased premises from all of the following losses, except one.

a) fire

b) explosion

c) smoke from a fireplace

d) water damage

c) smoke from a fireplace

The professional liability exposure of insurance brokers is only insured under a policy of:

a) personal liability insurance

b) commercial general liability insurance

c) Malpractice insurance.

d) errors and omissions insurance

d) errors and omissions insurance

In the event of an occurrence, claim or action, the insured under a liability policy must do of the following, except one.

a) provide the insurer with prompt notification of any accident or occurrence which may lead to a claim.

b) immediately forward to the insurer copies of any legal paper received.

c) make such voluntary payments on behalf of the insurer as are required interim to satisfy the plaintiff.

d) assist the insurer in in the investigation, settlement or defense of the claim or action

c) make such voluntary payments on behalf of the insurer as are required interim to satisfy the plaintiff.

While in most of the cases law considers a person "innocent until proven guilty" there are circumstances in which the courts deem the defendant " guilty until proved innocent." this approach is referred to as "strict liability and applies to all of the following actions, except one.

a) the defendant made a fire on his property to burn yard waste, and the fire spread to neighboring property where it destroyed an outbuilding.

b) the defendant set off fireworks, which seriously injured a bystander.

c) the defendant, who lives in a multi-story building, caused serious water damage to the unit below when the bathtub overflowed.

d) the defendant, who piloted an airplane, crashed into a building

c) the defendant, who lives in a multi-story building, caused serious water damage to the unit below when the bathtub overflowed.

When an applicant for supplementary travel insurance has pre-existing condition, coverage is:

a) unavailable in all situations

b) may be available in Canada only

c) may be available only if the applicant has returned to work

d) maybe available if the condition had been under control for a period, three or six months depending on the condition.

d) maybe available if the condition had been under control for a period, three or six months depending on the condition.

A doctor's visit or hospitalization while travelling outside the provinces of Canada could be catastrophic if there is no insurance to cover medical expenses. As a broker you would strongly advise our clients to purchase travel insurance, which is designed to pay all of the following expenses, except one.

a) the cost of X-ray and other diagnostics related to an accident.

b) the cost of pre-arranged medical procedure at a health clinic abroad

c) the cost of prescription drugs

d) the cost of the air ambulance to transfer the person to a hospital in their home province

b) the cost of pre-arranged medical procedure at a health clinic abroad

The insurance act requires that all people who sell insurance be licensed. All of the following statements are true except one.

a) to obtain an initial license an applicant must pass an approved examination

b) the initial license authorizes the licensee to sell all classes of insurance.

c) brokers / salespersons must be licensed in each province in which they do business

d) a license may be terminated when the licensee proves to be incompetent or untrustworthy

b) the initial license authorizes the licensee to sell all classes of insurance.

Insurance agents and brokers must comply with the licensing regulations under the insurance act in their respective province. To qualify for a license, insurance agents /brokers must:

a) undergo an examination under oath to prove that they are of good character

b) undertake and successfully pass a provincial licensing examination.

c) provide proof that they are an employee of a brokerage for at least one year

d) provide proof that they are sponsored by an insurance company.

b) undertake and successfully pass a provincial licensing examination.

The premium for a "single trip" travel policy is based on all the following factors, except one.

a) the distance between the applicant's home address and the destination

b) the number of days the applicant is travelling

c) the number of persons insured under the travel policy

d) the age and medical condition of the applicant.

a) the distance between the applicant's home address and the destination

Basic Autopac provides owners of vehicles of the private passenger type with the following limit of third-party liability coverage:

a) $50,000

b) $200,000

c) $500,000

d) $1,000,000

c) $500,000

All of the following factors will affect the premium to be charged for Autopac except one. Pick the Exception.

a) Rate class or use of the vehicle.

b) Age of the applicant.

c) Territory in which the automobile is chiefly being used.

d) Make, model and year of vehicle being insured

b) Age of the applicant.

The definition of insurance in the Insurance Act includes all of the following important points, except one. Pick the exception:

a) Payment is made only when a certain peril has damaged the object of insurance

b) Payment is limited to the actual amount of the loss - no more and no less

c) Payment for losses that are deliberately caused by an insured will only be in the form of replacement

d) The indemnity must always be in the form of a sum of money or other thing of value

c) Payment for losses that are deliberately caused by an insured will only be in the form of replacement

Most insurance companies use independent brokers to sell their insurance policies to the public. Which of the following statements does NOT apply to this system of distribution?

a) Independent brokers are employees of the insurance companies they represent

b) Independent brokers receive commissions from their insurers for the business they produce

c) Independent brokers can represent more than one insurance company

d) Independent brokers own all their client files

a) Independent brokers are employees of the insurance companies they represent

.When dealing with financial risk a person has several options available. In your opinion, which of the following is the best option for most people?

a) Avoidance of risk

b) Retention of the risk

c) Controlling the risk

d) Transfer of the risk

d) Transfer of the risk

. Risk as the "chance of financial loss" can be classified as either speculative or pure. Which of the following best describes the meaning of pure risk?

a) There is no chance of financial loss

b) There is a chance of financial gain

c) Financial loss and financial gain are both present d) There is only the chance of financial loss with no chance of profiting from it.

d) There is only the chance of financial loss with no chance of profiting from it.

Both, insurance companies and brokers are considered fiduciaries. Under the Insurance Act the fiduciary responsibility of a broker requires that:

a) The broker must regularly remit the collected premiums to the insurers

b) All policies not paid for within sixty (60) days of the effective data must be terminated

c) Unearned commissions are held in trust to be available should the policy be terminated before expiry

d) The full amount of the commission must be held in trust until the expiry of the policy

c) Unearned commissions are held in trust to be available should the policy be terminated before expiry

The Insurance Act determines when a contract of insurance takes effect. Coverage commences at:

a) 12.01 pm standard time at the address of the Named Insured

b) 12.01 am standard time at the address of the location of the risk

c) 12.01 am standard time at the address of the Insurer

d) 12.01 am standard time at the address of the Named Insured

d) 12.01 am standard time at the address of the Named Insured

The Removal Clause requires the insurer to extend coverage to another location where the insured property is kept even if this location is not stated on the policy. Only one of the following situations would quality for this coverage.

a) The Insured moved to a new residence five (5) days ago and has not yet advised the insurer of the new location.

b) The insured keeps furniture and fixtures in a rented storage locker because there is no more room at the principal residence

c) The Insured moved personal property to a storage facility to protect it from loss because of an encroaching forest fire

d) The Insured keeps some personal property at her seasonal dwelling but only during the summer months

c) The Insured moved personal property to a storage facility to protect it from loss because of an encroaching forest fire

. When the insurer has indemnified the insured for a loss caused by a third party, the insurer has a legal right of recovery from that party. This legal process is referred to as:

a) Arbitration

b) Restitution

c) Subrogation

d) Mediation

c) Subrogation

The Insurance Act provides that a policy insuring the peril of "fire" must also include coverage for:

a) Windstorm and Lightning

b) Lightning, including damage to electrical appliances and devices

c) Lightning and all types of Explosions

d) Explosion of natural, coal or manufactured gas and Lightning, excluding damage to electrical appliances and devices

d) Explosion of natural, coal or manufactured gas and Lightning, excluding damage to electrical appliances and devices

All the following statements apply to the Statutory Conditions, except one. Pick the exception:

a) After a loss has been reported the insurer has the immediate right of access and entry to the property to investigate the loss.

b) When the insurer elects to repair or rebuild the damaged property, it must give written notice to the insured within thirty (30) days after receipt of the Proof of Loss.

c) When the insured is unable to notify the insurer of a loss and provide Proof of Loss, an agent of the insured is permitted to give notice and proof.

d) Even if the insured had a reasonable chance to protect property from loss but failed to do any such thing, this usually does not affect the claim settlement.

d) Even if the insured had a reasonable chance to protect property from loss but failed to do any such thing, this usually does not affect the claim settlement.

The role of agents and brokers is to serve as an intermediary between the client and the insurer. Which of the following best reflects the duties of the broker?

a) A broker acts exclusively in the best interest of the client

b) A broker must always place insurance with the insurer that charges the lowest premium.

c) A broker must always present the client's risk truthfully and disclose all material facts to the insurer.

d) A broker does not owe any duty to the insurer he or she represents.

c) A broker must always present the client's risk truthfully and disclose all material facts to the insurer.

The law requires that insurance brokers exercise "reasonable skill, care and diligence" in carrying out their duties. Failure to do so can result in an Errors and Omissions claim against the broker. The main reason for Errors and Omissions claims is due to

a) Providing the client with coverage he doesn't need.

b) The failure to properly identify the client's loss exposures and offering the required coverages

c) The failure to cancel the policy when requested by the insured

d) A violation of the Agency Agreement

b) The failure to properly identify the client's loss exposures and offering the required coverages

An underwriter is required to perform numerous tasks, however, the primary function of an Underwriter is to

a) Select those risks that are most likely to be profitable to the insurer

b) Bind coverage on all risks the insurer accepts

c) Set the premium rates mostly for commercial risks

d) Process cancellation certificates and issue premium refund cheques

a) Select those risks that are most likely to be profitable to the insurer

Determining whether a risk meets the criteria for insurance the Underwriter must assess the hazards that could cause a peril to occur. When checking into an applicant's prior claims history or financial condition the Underwriter is concerned about the existence of

a) Other parties with an insurable interest

b) Abnormal physical hazards

c) A moral hazard

d) Smoking material on the premises

c) A moral hazard

The indemnity Agreement describes how the amount of a loss settlement is determined. One of the following values is not a factor in arriving at the amount of the settlement. Select this value:

a) Replacement cost of the lost or damaged property less depreciation

b) The financial interest of the insured in the property that was lost or damaged

c) The future investment value of the property that was lost or damaged

d) The amount of insurance purchased on the property that was lost or damaged

c) The future investment value of the property that was lost or damaged

A fire totally destroyed the building owned by your client, I.M. Broke. The Actual Cash Value of the building was $400,000. I.M. Broke still carries a mortgage of $200,000 on his property. The building was insured for $350,000. Based on the Indemnity Agreement what is the amount of the settlement that I.M. Broke is entitled to?

a) $400,000

b) $200,000

c) $350,000

d) $150,000

d) $150,000

Actual Cash Value means

a) The value of property at the time it was purchased b) The re-sale value of the property

c) Replacement cost less the amount for depreciation

d) Replacement cost less the sentimental value the insured has in the property

c) Replacement cost less the amount for depreciation

The standard Mortgage Clause contained in property policies provides

a) A guarantee to the insured that the mortgage will be paid off if the insured became sick or unemployed

b) A guarantee to the mortgagee that even if the insured breached a condition or warranty the mortgagee's interests will still be protected

c) A guarantee that, if the policy is cancelled by the insured, the insurer will issue a separate policy to the mortgages

d) A guarantee that a payment will be made to the insured, if the mortgages has breached a certain policy condition

b) A guarantee to the mortgagee that even if the insured breached a condition or warranty the mortgagee's interests will still be protected

All Homeowners policies define the persons who are deemed to be an Insured. All of the following persons are insured, except one. Pick the Exception:

a) The insured's common law spouse who has lived with the insured for five years.

b) The parents who are permanently living with the insured.

c) The insured's daughter who lives in the dorm while attending university in a neighboring province.

d) The tenant who occupies the basement suite in the insured's dwelling

d) The tenant who occupies the basement suite in the insured's dwelling

In all Homeowners the Basis of Claim Payment on dwelling building, detached private structures and personal property is generally based on Replacement Cost. However, in certain circumstance the insurer will provide settlement only on an Actual Cash Value Basis. Which of the following losses will be settled on an Actual Cash Value Basis?

a) Reconstruction at the insured location after a fire destroyed the home.

b) Replacement of the hardwood floor due to damage from a ruptured water pipe.

c) Replacement of the insured's ANTIQUE doll house which was smashed by burglars.

d) Reconstruction of the fence which was blown over by a windstorm.

c) Replacement of the insured's ANTIQUE doll house which was smashed by burglars.

All the following statements regarding Coverage F - Voluntary Medical Payments are true, except one. Select a statement, which is false:

a) There is no need to establish the insured's negligence before payment is made to cover medical expenses of an injured third party.

) Payments for medical expenses are made for up to one year from the date of accident.

c) Coverage is provided only when the third party does not have other health insurance, which would pay the medical expenses.

d) Coverage is provided for medical payment incurred by an insured while traveling outside Canada

d) Coverage is provided for medical payment incurred by an insured while traveling outside Canada

Coverage G- Voluntary Payment for Damage to Property would respond to pay in the following instance only:

a) The insured smashed the computer at work in the fit of rage, the employer is demanding to be reimbursed for the damage.

b) The insured's 10-year-old son deliberately threw a rock into the neighbor's window because he was chastised for swearing.

c) The insured's 14-year-old son spray- painted the neighbor's garage door just for fun.

d) The insured damaged his own riding lawn mower and was denied a claim under Section 1 of Homeowners Policy.

b) The insured's 10-year-old son deliberately threw a rock into the neighbor's window because he was chastised for swearing.

Your client, who owns and operates a Pizza Take-out and Delivery Service has just received notice of a bodily injury claim by a customer against his business. The customer alleges that he bit on a chicken bone in the topping of his pizza and broke a tooth, which required substantial dental work. His business liability exposures are covered under Commercial General Liability Policy. Which of the following coverages under this policy would respond to this claim?

a) Premises and Operations Liability

b) Personal Injury Liability

c) Products Liability

d) Completed Operations Liability

c) Products Liability

A business may be liable for causing a Personal Injury to a Third Party. All of the following are "Personal Injury" claims, except one. Select the one, which is not a Personal Injury Claim.

a) Claim for a broken hip caused by the collapse of a display chair the customer sat on.

b) Claim by a tenant against the landlord for wrongful entry into the tenant's apartment.

c) Claim for false arrest by a customer, who was wrongfully detained for shoplifting.

d) Claim against a business owner by a competitor for making slanderous remarks about his business practices.

a) Claim for a broken hip caused by the collapse of a display chair the customer sat on.

Professionals require a special liability policy, which covers claims arising out of the rendering or failure to render professional services. A doctor would require this liability insurance:

a) Personal Injury Liability Policy

b) Malpractice Liability Insurance

c) Errors and Omissions Liability Insurance

d) Medical Expenses Insurance

b) Malpractice Liability Insurance

Travel Insurance is highly recommended for those who travel outside the province for business purposes for a vacation. There are several factors that must be considered, when determining the premium for a single trip. All of the following factors, except one are applicable. Select the one, which is not a factor in establishing the premium.

a) The length of the trip.

b) The destination of the trip.

c) The method of transportation.

d) The age and health condition of the applicant.

c) The method of transportation.

Travel Insurance is designed to cover the medical expenses related to only one of the following conditions. Select the condition to which the insurance would respond:

a) Pregnancy, childbirth, or miscarriage within eight (8) weeks of the expected delivery date.

b) Injury sustained because of a skydiving accident. c) Hospitalization due to a drug over doze.

d) Emergency medical treatment required due to food poisoning

d) Emergency medical treatment required due to food poisoning

The Homeowners Basic Form (IBC1151) insures loss or damage caused by Windstorm or Hail. Only one of the following losses would be covered under this peril: select the loss for which coverage is provided.

a) Damage to the exterior and interior during a severe windstorm which had ripped off a section of the roof on the insured's house

b) The radio and TV antennae permanently installed on the insured's property collapsed during a storm

c) Collapse of the insured's storage shed caused by the accumulation of snow during a snowstorm with winds reaching 50 km/hr.

d) Damage to the interior of the house caused by heavy rain that entered through a window, which was left open by the insured.

a) Damage to the exterior and interior during a severe windstorm which had ripped off a section of the roof on the insured's house

The Homeowners Basic Form (IBC1151) provides coverage for Glass Breakage. Under this peril all the following losses, except one are insured. Select the loss for which coverage is excluded under this form.

a) While practicing his golf swing in the backyard a

flying golf ball shattered a large pane of glass of the enclosed sunroom

b) Accidental breakage occurred during a party when one of the guests stepped into the closed glass patio door.

c) Breakage of the glass tabletop which slipped out of the helpers' hands during the move to the insured's new residence

d) Breakage of the large picture window at the front of the insured's house caused by a rock thrown up by the wheels of a passing vehicle

c) Breakage of the glass tabletop which slipped out of the helpers' hands during the move to the insured's new residence

Although the Homeowners Comprehensive Form (IBC1155) insures based on "all risks of direct physical loss or damage" coverage is subject to conditions and exclusions. All the following losses, except one, are excluded; select the loss, which is covered by this form.

a) Damage to the roof caused by raccoons, which tried to get into the attic

b) Crack in the foundation wall due to the setting of the ground over time

c) Wear and tear of the furniture upholstery due to continuous use

d) Smoke damage to family room from the fireplace

d) Smoke damage to family room from the fireplace

Because of its broad coverage the Homeowners Comprehensive Form (IBC1155) offers many advantages to an insured. This form insures all the following losses, except one. Select the loss that is not covered.

a) Damage to the garage door when the insured accidentally backed into it

b) Damage to carpeting when the insured spilled a gallon of paint on it

c) Damage to the insured's dwelling caused by an earthquake tremor

d) Loss of the insured's watch down a storm drain because the strap suddenly broke

c) Damage to the insured's dwelling caused by an earthquake tremor

Commercial property insurance policies are designed to insure property, which has a business or commercial use. The Commercial Property Insurance Broad Form (IBC4037) is the policy that provides commercial risks with the broadest coverage. It covers loss or damage from all the following, except one. Select the one, which is not covered.

a) All sources of smoke damage, except from agricultural smudging or industrial operations

b) Vehicle impact damage to building even when operated by the insured or an employee of the insured

c) Theft of money from a cash register

d) Water damage resulting from the rupture or freezing of a water pipe

c) Theft of money from a cash register

When determining the required premium for insuring commercial property the underwriter, will first establish the fire rate. For this purpose, the underwriter will consider all the following factors, except one. Select the one, which is not a factor in determining the fire rate.

a) The use of occupancy of the building by the insured and others

b) The type of construction of the building

c) The type of public and private fire protection

d) The number of employees in the insured's business

d) The number of employees in the insured's business

All commercial property insurance policies describe the classes of property insured. Under "building" all of the following values, except one, are included. Select the value, which is not covered under "building".

a) A large neon sign displaying the company name, which the insured erected on the premises

b) Air conditioning units mounted on the roof of the building

c) Building materials on the insured's premises for use in the construction of a new warehouse down the road

d) A live palm tree surrounded by other growing plants installed in the center of the entrance of the insured's office building

c) Building materials on the insured's premises for use in the construction of a new warehouse down the road

Your client is leasing retail space in the local shopping mall. Before she is ready to open her business, she is renovating the premises and installing new floor covering, wall paneling, light fixtures, and a security system, which is wired into the electrical system of the mall building. As her broker you advise her that these values.

a) Need to be insured under the landlord's building insurance because once installed they become a permanent part of the building

b) Need to be insured as Building coverage within her own property policy

c) Need to be insured under her own property policy by including these values in the amount of insurance for equipment

d) Don't need to be insured at all, because in the event of a loss the landlord's insurance will automatically cover the cost to replace or repair the improvements she has made

c) Need to be insured under her own property policy by including these values in the amount of insurance for equipment

One of the clauses contained in Commercial property insurance policies is the Co -Insurance Clause. The purpose for including this clause in the policy is to:

a) Limit the claims payment after a partial loss when the insurer finds that the insured has deliberately underinsured the values

b) Impose a penalty for underinsuring regardless of whether a loss is a total or partial loss

c) Penalize the insured for underinsuring when the loss is less than 2% or $5,000

d) Penalize the insured for insuring values that are greater than required by this clause

a) Limit the claims payment after a partial loss when the insurer finds that the insured has deliberately underinsured the values

Owners and contractors can purchase the Builder's Risk - Broad Form to insure buildings while in the course of construction. This policy is designed to insure all the following property, except one. Select the property, which is not covered by this Form.

a) Materials and supplies owned by the insured and others used in construction and forming part of the completed project

b) All contractors' tools and equipment on the construction site

c) Trees, shrubs, and plants for landscaping when part of the contract

d) Temporary buildings, such as trailers, scaffolding and hoarding

b) All contractors' tools and equipment on the construction site

Coverage under the Builder's Risk - Broad Form Usually ends automatically

a) Upon the expiry of the policy term

b) Thirty (30) days after construction is completed

c) When construction of the project is completed, and the building is occupied

d) Thirty (30) days after the building is occupied by the owner

c) When construction of the project is completed, and the building is occupied

One of the main differences between the Earnings and the Profits Form is how long the insurer will pay for loss of income. Your client has asked you to explain up to how long payment will be made under the Earnings Form. You give her the following answer:

a) Payment under this Form starts on the date of the loss and continues until the property has been reinstated, however, not exceeding twelve (12) months

b) Payment under this Form starts on the date of the loss and continues until the profits are at the same level as before the loss.

c) Payment under this Form starts on the date of the loss and continues until the policy expires

d) Payment under this Form starts on the date of the loss and continues until the end of twelve (12) months even if the insured has reopened the business after three months

a) Payment under this Form starts on the date of the loss and continues until the property has been reinstated, however, not exceeding twelve (12) months

Some businesses must resume operations as quickly as possible after a loss, which may lead to substantial expenses. This exposure can be insured under Extra Expense Insurance. Which of the following expenses is not covered by this insurance.

a) Rental costs for a temporary location until the insured's premises have been restored

b) Bonus paid to the contractor to prepare the temporary location for occupancy

c) Mortgage payments on insured's building while it is being rebuild after a fire loss

d) Overtime salaries paid to employees for the extra help required to resume operation

c) Mortgage payments on insured's building while it is being rebuild after a fire loss

Matters of legal liability have been established in precedents set by the courts. The following statements regarding legal liability are true, except one. Select the statement, which is false.

a) An occupier who hires an independent contractor is not liable for damages arising out of the contractor's actions, as long as care was taken in selecting the contractor and the work to be done was reasonable

b) Generally, employers are responsible for the acts of their employees while in the course of their duties

c) Bailees for hire who have temporary custody of a customer's personal property for the purpose of repair, must exercise the highest duty of care

d) When two or more parties have acted negligently but cannot agree to share the liability equally, the courts will hold each party liable for the full amount of the damages

b) Generally, employers are responsible for the acts of their employees while in the course of their duties

The majority of liability policies have certain characteristics in common. All of the following characteristics, except one, apply to most liability policies. Select the one, which does not apply.

a) The insurer covers the liability of the insured for bodily injury and property damage caused to a third party

b) The liability policy covers payment for compensatory, exemplary, and punitive damages and nominal damages awarded by the courts

c) Payment is made only when the insured is found legally liable for bodily injury and property damage

d) Payment of compensatory damages is made only for unintentional torts

b) The liability policy covers payment for compensatory, exemplary, and punitive damages and nominal damages awarded by the courts

Most liability policies provide coverage on an occurrence basis. All of the following statements, except one, correctly describe what the policy covers. Select the statement, which is incorrect.

a) The amount of insurance stated on the policy is the maximum amount payable for all occurrences, which happened during the policy period

b) The policy covers bodily injury or property damage resulting from an accident

c) The policy covers bodily injury or property damage caused by an exposure to a harmful condition over a long period of time.

d) The amount of insurance stated on the policy is available for each occurrence during the policy period

a) The amount of insurance stated on the policy is the maximum amount payable for all occurrences, which happened during the policy period

Your client is concerned that a serious fire could close her business for several months resulting in a substantial loss of income. For this reason, she has decided to purchase Business Interruption insurance. All of the following, except one, are characteristics of Business Interruption insurance. Select the one characteristic, which is not applicable to this coverage.

a) Business Interruption insurance is designed to indemnify the insured for loss of income and loss of profit

b) Business Interruption insurance is triggered by a loss covered under the insured's property policy

c) Payment under Business Interruption insurance is not restricted to the expiry of the policy

d) Business Interruption insurance pays for the cost to order new equipment and supplies to restart the business as quickly as possible

d) Business Interruption insurance pays for the cost to order new equipment and supplies to restart the business as quickly as possible