Fundamentals of Insurance (BC) - Self-Examination Chapter Questions &
Answers | 100% Verified solutions |Questions with Correct Answers 2026
latest update!!
What is the major function of insurance? - (ANSWER)To allow the spread of risk.
Define "Spread of Risk" - (ANSWER)"The losses of the few are shared among the many"
What are the 4 other functions of insurance? - (ANSWER)1. Basis of Credit System
2. Eliminates worry - Encourages Entrepreneurship
3. Loss Prevention and Loss Reduction
4. Source of Employment and Investment Capital
What are the 3 types of property and casuality (general) insurance? - (ANSWER)1. Automobile
2. Property
3. Liability
What are the 2 types of insurer organizations? (including the 2 subtypes) - (ANSWER)1. Private Insurers
- Stock Companies
- Mutual Companies
2. Government Insurers
How do stock companies work? - (ANSWER)The money to operate a stock company may come from
private funds or via a public sale of stock. Ownership rests in the hand's of the company's shareholders
whose main purpose is to derive profit from their investment.
How do mutual companies work? - (ANSWER)A mutual company is a corporation owned by its policy
holders. The creation of profit is not a primary incentive. Instead, the main goal is to provide
,Fundamentals of Insurance (BC) - Self-Examination Chapter Questions &
Answers | 100% Verified solutions |Questions with Correct Answers 2026
latest update!!
policyholders with insurance at as low a cost as possible. When the company makes money it's refunded
to the policy holders via dividends or rate adjustments.
Which insurance are government insurers most involved in? - (ANSWER)Federal and provincial
governments are involved in medical insurance, employment insurance and workers' compensation.
In BC, Saskatchewan, Manitoba and Quebec the government provides compulsory auto insurance.
What are 2 ways insurers use to sell their products? - (ANSWER)1. Direct Writing System
2. Independent Brokerage System
How does the Direct Writing System work? - (ANSWER)- In the direct writing system, the producers are
employees of the insurer and are limited to selling only products of the insurer.
- Remuneration may be via salary or commission basis or a combination
- Insurer owns all business and performs administrative functions
- Examples of direct writers include: Belair, RBC Insurance, and Desjardin
How does the Independent Brokerage System work? - (ANSWER)- Brokerage owners are NOT employees
of insurers and in most cases choose to represent more than 1 insurance company as well as the facility
association.
- The brokerage owns the business it produces and is responsible for providing policyholders with
several client services.
- The brokerage is paid a commission by the insurer on all the business it writes which is then used to
pay salaries, rent, postage and other operating expenses.
How does the agency system work? - (ANSWER)- Agents are distinct from brokers and direct writers as
they are small business owners.
,Fundamentals of Insurance (BC) - Self-Examination Chapter Questions &
Answers | 100% Verified solutions |Questions with Correct Answers 2026
latest update!!
- Like direct writers, they represent 1 insurer and the Facility Association.
- Agents are paid commission and bonuses for the business they sell and the agents themselves have
ownership in their book of business.
- Examples of agent companies are Desjardin and Cooperators General Insurance Company.
Define Risk. - (ANSWER)Risk is "the chance of financial loss to which the object of insurance may be
exposed"
Define Peril. - (ANSWER)Peril is simply defined as "the cause of loss"
- Examples can include and are not limited to: fire, wind, hail, etc.
Of the 2 distribution methods, which is most common? - (ANSWER)The majority of insurance business in
Canada is transacted by private insurers.
What are 3 major categories of insurance needs? - (ANSWER)1. Personal Risk
2. Property Risk
3. Liability Risk
What are the 4 options an insured may use when dealing with risk? - (ANSWER)1. Avoidance of Risk
2. Controlling of Risk
3. Retention of Risk
4. Transfer of Risk
Which method of dealing with risk the LEAST practical? - (ANSWER)Avoidance of risk
, Fundamentals of Insurance (BC) - Self-Examination Chapter Questions &
Answers | 100% Verified solutions |Questions with Correct Answers 2026
latest update!!
What are the 2 types of risk? And which of them is insurable? - (ANSWER)1. Speculative risk
2. Pure risk
- Only pure risk is insurable.
Describe Pure Risk. - (ANSWER)Pure risk involves the chance of financial loss with no chance of financial
gain. When there is no opportunity for a person to profit from a loss, the risk is pure. Only pure risk is
insurable.
Describe Speculative Risk. - (ANSWER)Speculative risk involves the possibility of financial loss or gain.
What are the 5 elements required to be present in all contracts? - (ANSWER)1. Agreement
2. Consideration
3. Legality of Object
4. Legal Capacity of the Parties to Contract
5. Genuine Intention
What are 3 elements of a contract, that are unique to insurance contracts which must be present if an
insurance contract is to be enforceable at law. - (ANSWER)1. Insurance Interest
2. Utmost Good Faith
3. Indemnity
Define "bind" - (ANSWER)In insurance, to "bind" means that the broker has committed the insurer to
provide a contract of insurance on the subject matter under discussion.
Answers | 100% Verified solutions |Questions with Correct Answers 2026
latest update!!
What is the major function of insurance? - (ANSWER)To allow the spread of risk.
Define "Spread of Risk" - (ANSWER)"The losses of the few are shared among the many"
What are the 4 other functions of insurance? - (ANSWER)1. Basis of Credit System
2. Eliminates worry - Encourages Entrepreneurship
3. Loss Prevention and Loss Reduction
4. Source of Employment and Investment Capital
What are the 3 types of property and casuality (general) insurance? - (ANSWER)1. Automobile
2. Property
3. Liability
What are the 2 types of insurer organizations? (including the 2 subtypes) - (ANSWER)1. Private Insurers
- Stock Companies
- Mutual Companies
2. Government Insurers
How do stock companies work? - (ANSWER)The money to operate a stock company may come from
private funds or via a public sale of stock. Ownership rests in the hand's of the company's shareholders
whose main purpose is to derive profit from their investment.
How do mutual companies work? - (ANSWER)A mutual company is a corporation owned by its policy
holders. The creation of profit is not a primary incentive. Instead, the main goal is to provide
,Fundamentals of Insurance (BC) - Self-Examination Chapter Questions &
Answers | 100% Verified solutions |Questions with Correct Answers 2026
latest update!!
policyholders with insurance at as low a cost as possible. When the company makes money it's refunded
to the policy holders via dividends or rate adjustments.
Which insurance are government insurers most involved in? - (ANSWER)Federal and provincial
governments are involved in medical insurance, employment insurance and workers' compensation.
In BC, Saskatchewan, Manitoba and Quebec the government provides compulsory auto insurance.
What are 2 ways insurers use to sell their products? - (ANSWER)1. Direct Writing System
2. Independent Brokerage System
How does the Direct Writing System work? - (ANSWER)- In the direct writing system, the producers are
employees of the insurer and are limited to selling only products of the insurer.
- Remuneration may be via salary or commission basis or a combination
- Insurer owns all business and performs administrative functions
- Examples of direct writers include: Belair, RBC Insurance, and Desjardin
How does the Independent Brokerage System work? - (ANSWER)- Brokerage owners are NOT employees
of insurers and in most cases choose to represent more than 1 insurance company as well as the facility
association.
- The brokerage owns the business it produces and is responsible for providing policyholders with
several client services.
- The brokerage is paid a commission by the insurer on all the business it writes which is then used to
pay salaries, rent, postage and other operating expenses.
How does the agency system work? - (ANSWER)- Agents are distinct from brokers and direct writers as
they are small business owners.
,Fundamentals of Insurance (BC) - Self-Examination Chapter Questions &
Answers | 100% Verified solutions |Questions with Correct Answers 2026
latest update!!
- Like direct writers, they represent 1 insurer and the Facility Association.
- Agents are paid commission and bonuses for the business they sell and the agents themselves have
ownership in their book of business.
- Examples of agent companies are Desjardin and Cooperators General Insurance Company.
Define Risk. - (ANSWER)Risk is "the chance of financial loss to which the object of insurance may be
exposed"
Define Peril. - (ANSWER)Peril is simply defined as "the cause of loss"
- Examples can include and are not limited to: fire, wind, hail, etc.
Of the 2 distribution methods, which is most common? - (ANSWER)The majority of insurance business in
Canada is transacted by private insurers.
What are 3 major categories of insurance needs? - (ANSWER)1. Personal Risk
2. Property Risk
3. Liability Risk
What are the 4 options an insured may use when dealing with risk? - (ANSWER)1. Avoidance of Risk
2. Controlling of Risk
3. Retention of Risk
4. Transfer of Risk
Which method of dealing with risk the LEAST practical? - (ANSWER)Avoidance of risk
, Fundamentals of Insurance (BC) - Self-Examination Chapter Questions &
Answers | 100% Verified solutions |Questions with Correct Answers 2026
latest update!!
What are the 2 types of risk? And which of them is insurable? - (ANSWER)1. Speculative risk
2. Pure risk
- Only pure risk is insurable.
Describe Pure Risk. - (ANSWER)Pure risk involves the chance of financial loss with no chance of financial
gain. When there is no opportunity for a person to profit from a loss, the risk is pure. Only pure risk is
insurable.
Describe Speculative Risk. - (ANSWER)Speculative risk involves the possibility of financial loss or gain.
What are the 5 elements required to be present in all contracts? - (ANSWER)1. Agreement
2. Consideration
3. Legality of Object
4. Legal Capacity of the Parties to Contract
5. Genuine Intention
What are 3 elements of a contract, that are unique to insurance contracts which must be present if an
insurance contract is to be enforceable at law. - (ANSWER)1. Insurance Interest
2. Utmost Good Faith
3. Indemnity
Define "bind" - (ANSWER)In insurance, to "bind" means that the broker has committed the insurer to
provide a contract of insurance on the subject matter under discussion.
