CIP C120 UNDERWRITING ESSENTIALS STUDY
GUIDE 2026 TESTED QUESTIONS AND
PRACTICE SOLUTION GRADED A+
◉ How to decide if a risk is insurable?
Answer: 1. Is there a chance for loss?
2. Is there a chance for profit?
◉ Types of insurable risks?
Answer: PURE RISKS - no chance for profit
1. Personal risks: death, disability, old age, unemployment
2. Property risks: direct, indirect loss
3. Liability risks: conduct, operation, ownership/occupancy of
property, manufacture, services
◉ Classes of insurance
Answer: 1. Personal
2. Commercial
3. Special
◉ Contra Proferentem
,Answer: - principle governing insurance policies
- recognizes that any ambiguity in a contract must be interpreted
against the person who drew the contract because they had the
opportunity to make it clear
◉ Why is it important for U/W to understand general principles and
characteristics of insurance policies?
Answer: 1. Legal Precedents
- how will courts interpret clauses?
- ex. replacement cost clause gives insurers 180 days to replace
personal property but statutory condition allows one year from the
date of loss to take legal action against the insurer if the insured is
dissatisfied with the claim settlement
1. Manuscript Wording
- intentional/inadvertent broadening, typographical errors,
contradictions and lack of continuity/consistency
◉ IBC Policy Wordings
Answer: - broadly reflect the industry consensus and practice and
matters in coverage
- Insurers adapt IBC wordings to produce their own standard policy
wordings or craft their own altogether
◉ How do policy wordings evolve?
,Answer: - Policy wordings change over time to reflect changes in
society and risks
- Ex. Liability Crisis (mid 1980s) - policy wordings change to
respond shortage of capacity due to occurrence basis claims
- Ex. Abuse exclusions - excludes claims arising from abuse,
molestation or harassment by the insured or the failure of the
insured to prevent such events
◉ Dittmann v. Aviva Insurance Company of Canada
Answer: - Ontario court decision that could eventually change policy
wording for the definition of "accident"
- Dittmann applied for statutory accident benefits for burns suffered
by spilling coffee on herself in the McDonald's drive thru
- Aviva denied coverage because plaintiff was not in an auto accident
as she was not in motion
- Court of Appeal Ontario judge agreed that use of a vehicle with the
engine running and in gear to access the drive-thru along with the
seat belt restraint were direct causes and dominant features of the
injuries
◉ Two things manuscript wordings must consider
Answer: 1. Legal considerations (regulation in property and auto)
2. Insurer's underwriting philosophy
, ◉ Five elements of a contract (common law)
Answer: 1. Capacity
2. Legality of object
3. Agreement
4. Intent (genuine)
5. Money
◉ Four requisites to a binding contract in Quebec
Answer: 1. Consent
2. Capacity
3. Cause
4. Object
◉ Three unique features of insurance contracts
Answer: 1. Insurable interest - in the object of insurance in order to
prevent profiting from other's loss
2. Indemnity - insured should not profit from own loss
3. Utmost good faith - Insured knows risk best
◉ Five main policy sections
Answer: POLICY = PISCS
GUIDE 2026 TESTED QUESTIONS AND
PRACTICE SOLUTION GRADED A+
◉ How to decide if a risk is insurable?
Answer: 1. Is there a chance for loss?
2. Is there a chance for profit?
◉ Types of insurable risks?
Answer: PURE RISKS - no chance for profit
1. Personal risks: death, disability, old age, unemployment
2. Property risks: direct, indirect loss
3. Liability risks: conduct, operation, ownership/occupancy of
property, manufacture, services
◉ Classes of insurance
Answer: 1. Personal
2. Commercial
3. Special
◉ Contra Proferentem
,Answer: - principle governing insurance policies
- recognizes that any ambiguity in a contract must be interpreted
against the person who drew the contract because they had the
opportunity to make it clear
◉ Why is it important for U/W to understand general principles and
characteristics of insurance policies?
Answer: 1. Legal Precedents
- how will courts interpret clauses?
- ex. replacement cost clause gives insurers 180 days to replace
personal property but statutory condition allows one year from the
date of loss to take legal action against the insurer if the insured is
dissatisfied with the claim settlement
1. Manuscript Wording
- intentional/inadvertent broadening, typographical errors,
contradictions and lack of continuity/consistency
◉ IBC Policy Wordings
Answer: - broadly reflect the industry consensus and practice and
matters in coverage
- Insurers adapt IBC wordings to produce their own standard policy
wordings or craft their own altogether
◉ How do policy wordings evolve?
,Answer: - Policy wordings change over time to reflect changes in
society and risks
- Ex. Liability Crisis (mid 1980s) - policy wordings change to
respond shortage of capacity due to occurrence basis claims
- Ex. Abuse exclusions - excludes claims arising from abuse,
molestation or harassment by the insured or the failure of the
insured to prevent such events
◉ Dittmann v. Aviva Insurance Company of Canada
Answer: - Ontario court decision that could eventually change policy
wording for the definition of "accident"
- Dittmann applied for statutory accident benefits for burns suffered
by spilling coffee on herself in the McDonald's drive thru
- Aviva denied coverage because plaintiff was not in an auto accident
as she was not in motion
- Court of Appeal Ontario judge agreed that use of a vehicle with the
engine running and in gear to access the drive-thru along with the
seat belt restraint were direct causes and dominant features of the
injuries
◉ Two things manuscript wordings must consider
Answer: 1. Legal considerations (regulation in property and auto)
2. Insurer's underwriting philosophy
, ◉ Five elements of a contract (common law)
Answer: 1. Capacity
2. Legality of object
3. Agreement
4. Intent (genuine)
5. Money
◉ Four requisites to a binding contract in Quebec
Answer: 1. Consent
2. Capacity
3. Cause
4. Object
◉ Three unique features of insurance contracts
Answer: 1. Insurable interest - in the object of insurance in order to
prevent profiting from other's loss
2. Indemnity - insured should not profit from own loss
3. Utmost good faith - Insured knows risk best
◉ Five main policy sections
Answer: POLICY = PISCS
