Fundamentals of Insurance - Practice Exam LATEST UPDATE
The major function of insurance is:
a. To reduce the cost of the losses
b. To share the losses of the few among the many
c. The safeguard the interest of mortgages
d. To serve as a basis of existing credit system Correct Answer: b. To share the losses of the few
among the many
A peril if best defined as:
a. The chance of a loss
b. The occurrence of a loss
c. The cause of a loss
d. The result of a loss Correct Answer: c. The cause of a loss
Indemnify means:
a. Returning the premium of the insured
b. Restoring the insured's to the same financial position as they were in immediately prior to the
loss
c. Paying the insured's the face amount of the policy
d. Restoring the insured's to the same financial position as they were Correct Answer: b.
Restoring the insured's to the same financial position as they were immediately prior to the loss
Property insurance contracts are designed to pay for loss or damage arising out of the happening
of a specific event. Only the following statement regarding the events insured by property
insurance contract is correct:
a. The event must be a future event and it must be accidental
b. The event may happen with the co-operation of the insured
c. The event may happen with the intent of the insured
d. The event may occur accidentally or be caused deliberately by the insured Correct Answer: a.
The event must be must be a future event and it must be accidental
The following is the most practical way in which to deal with risk:
a. Avoidance of Risk
b. Retention of Risk
c. Controlling of Risk
d. Transfer of Risk Correct Answer: d. Transfer of Risk
In a contract of insurance, consideration means:
a. The exchange of something of value parties
,b. The amount the insurance can collect in event of a claim
c. The object of insurance
d. The reviewing of the details of the risk to be insured by an underwriter Correct Answer: a.
The exchange of something of value between parties
Which of the following would be correct legal name of the insured in a contact of insurance:
a. The corner store
b. John's Corner Store
c. J.D.'s Corner Store
d. The Corner Store Ltd Correct Answer: d. The Corner Store Ltd
All contracts require that five elements be present if the contract is to be enforceable by law. An
insurance contract is enforceable only if it contains the following three additional interest:
a. Insurable Interest, Utmost Good Faith
b. Insurable Interest, Consideration, Indemnity
c. Insurable Interest, Indemnity, Utmost Good Faith
d. Insurable Interest, Indemnity, Genuine Intention Correct Answer: c. Insurable Interest,
Indemnity, Utmost Good Faith
If your clients do not advise the insurer of previous losses when required to do so, they have
violated an essential principle of insurance contracts. This principle is:
a. Legality of Object
b. Utmost good faith
c. Insurable Interest
d. Indemnity Correct Answer: b. Utmost good faith
To bind a risk means:
a. That the broker has committed an insurer to provide a contract of insurance on the subject
matter under discussion
b. Finding a company willing to give a quote on a risk
c. Getting underwriting information from a client
d. Automatically renewing an existing policy Correct Answer: a. That the broker has committed
an insurer to provide a contract of insurance on the subject matter under discussion
The property and casualty insurance compensation corporation (PACICC) was formed for this
purpose:
a. To have all insurers share in the payment of claims arising out of a single catastrophe
b. To spread the costs of suspected fraudulent claims amongst all insurers
c. To provide consumers with insurance protection in the event of an insurer insolvency
d. To monitor the solvency of federally licensed insurers Correct Answer: c. To provide
consumers with insurance protection in the event of an insurer insolvency
, Insurance brokers have a fiduciary responsibility to their clients. The following statement best
summarizes the extent of the broker's fiduciary responsibility:
a. The commission for the policy is considered to be fully earned
b. The total commission earned is returned to the insured
c. The unearned portion of the commission is returned to the insured
d. The commission, less 50%, is required to be returned to the insured Correct Answer: c. The
unearned portion of the commission is returned to the insured
Under the terms of the Insurance Act, property which is necessarily removed to prevent further
damage is covered at the new location:
a. For seven days or until the policy expires
b. For seven days, but only if a removal permit is attached to the policy
c. For a reasonable time
d. Until the original location is repaired Correct Answer: a. For seven days or until the policy
expires
Subrogation refers to:
a. The amount the insurance company receives from a person who is legally responsible for loss
b. The right of the insurance company to recover payments made under the policy from another
person who is legally responsible for the loss
c. The right of the insurance to take over the salvage after the claim has been made
d. The right of the insured's to collect the amount of their loss from either the insurer or the
person responsible Correct Answer: b. The right of the insurance company to recover payments
made under the policy from another person who is legally responsible for the loss
Every policy of "Fire" insurance:
a. Usually covers fire, smoke, and specific types of explosions
b. Is required by law to cover fire, windstorm, and lightening
c. Covers fire, explosion, and windstorm
d. Is required by law to cover at least fire, lightening, and specified types of explosions Correct
Answer: d. Is required by law to cover at least fire, lightening and specified types of explosions
Your clients recently burnt a large pot roast when a fire broke out in their kitchen oven. This loss
to the roast is considered to be a result of:
a. Direct fire
b. Indirect fire
c. Hostile fire
d. Friendly fire Correct Answer: d. Friendly fire
Statutory conditions found in all policies of "fire" insurance:
The major function of insurance is:
a. To reduce the cost of the losses
b. To share the losses of the few among the many
c. The safeguard the interest of mortgages
d. To serve as a basis of existing credit system Correct Answer: b. To share the losses of the few
among the many
A peril if best defined as:
a. The chance of a loss
b. The occurrence of a loss
c. The cause of a loss
d. The result of a loss Correct Answer: c. The cause of a loss
Indemnify means:
a. Returning the premium of the insured
b. Restoring the insured's to the same financial position as they were in immediately prior to the
loss
c. Paying the insured's the face amount of the policy
d. Restoring the insured's to the same financial position as they were Correct Answer: b.
Restoring the insured's to the same financial position as they were immediately prior to the loss
Property insurance contracts are designed to pay for loss or damage arising out of the happening
of a specific event. Only the following statement regarding the events insured by property
insurance contract is correct:
a. The event must be a future event and it must be accidental
b. The event may happen with the co-operation of the insured
c. The event may happen with the intent of the insured
d. The event may occur accidentally or be caused deliberately by the insured Correct Answer: a.
The event must be must be a future event and it must be accidental
The following is the most practical way in which to deal with risk:
a. Avoidance of Risk
b. Retention of Risk
c. Controlling of Risk
d. Transfer of Risk Correct Answer: d. Transfer of Risk
In a contract of insurance, consideration means:
a. The exchange of something of value parties
,b. The amount the insurance can collect in event of a claim
c. The object of insurance
d. The reviewing of the details of the risk to be insured by an underwriter Correct Answer: a.
The exchange of something of value between parties
Which of the following would be correct legal name of the insured in a contact of insurance:
a. The corner store
b. John's Corner Store
c. J.D.'s Corner Store
d. The Corner Store Ltd Correct Answer: d. The Corner Store Ltd
All contracts require that five elements be present if the contract is to be enforceable by law. An
insurance contract is enforceable only if it contains the following three additional interest:
a. Insurable Interest, Utmost Good Faith
b. Insurable Interest, Consideration, Indemnity
c. Insurable Interest, Indemnity, Utmost Good Faith
d. Insurable Interest, Indemnity, Genuine Intention Correct Answer: c. Insurable Interest,
Indemnity, Utmost Good Faith
If your clients do not advise the insurer of previous losses when required to do so, they have
violated an essential principle of insurance contracts. This principle is:
a. Legality of Object
b. Utmost good faith
c. Insurable Interest
d. Indemnity Correct Answer: b. Utmost good faith
To bind a risk means:
a. That the broker has committed an insurer to provide a contract of insurance on the subject
matter under discussion
b. Finding a company willing to give a quote on a risk
c. Getting underwriting information from a client
d. Automatically renewing an existing policy Correct Answer: a. That the broker has committed
an insurer to provide a contract of insurance on the subject matter under discussion
The property and casualty insurance compensation corporation (PACICC) was formed for this
purpose:
a. To have all insurers share in the payment of claims arising out of a single catastrophe
b. To spread the costs of suspected fraudulent claims amongst all insurers
c. To provide consumers with insurance protection in the event of an insurer insolvency
d. To monitor the solvency of federally licensed insurers Correct Answer: c. To provide
consumers with insurance protection in the event of an insurer insolvency
, Insurance brokers have a fiduciary responsibility to their clients. The following statement best
summarizes the extent of the broker's fiduciary responsibility:
a. The commission for the policy is considered to be fully earned
b. The total commission earned is returned to the insured
c. The unearned portion of the commission is returned to the insured
d. The commission, less 50%, is required to be returned to the insured Correct Answer: c. The
unearned portion of the commission is returned to the insured
Under the terms of the Insurance Act, property which is necessarily removed to prevent further
damage is covered at the new location:
a. For seven days or until the policy expires
b. For seven days, but only if a removal permit is attached to the policy
c. For a reasonable time
d. Until the original location is repaired Correct Answer: a. For seven days or until the policy
expires
Subrogation refers to:
a. The amount the insurance company receives from a person who is legally responsible for loss
b. The right of the insurance company to recover payments made under the policy from another
person who is legally responsible for the loss
c. The right of the insurance to take over the salvage after the claim has been made
d. The right of the insured's to collect the amount of their loss from either the insurer or the
person responsible Correct Answer: b. The right of the insurance company to recover payments
made under the policy from another person who is legally responsible for the loss
Every policy of "Fire" insurance:
a. Usually covers fire, smoke, and specific types of explosions
b. Is required by law to cover fire, windstorm, and lightening
c. Covers fire, explosion, and windstorm
d. Is required by law to cover at least fire, lightening, and specified types of explosions Correct
Answer: d. Is required by law to cover at least fire, lightening and specified types of explosions
Your clients recently burnt a large pot roast when a fire broke out in their kitchen oven. This loss
to the roast is considered to be a result of:
a. Direct fire
b. Indirect fire
c. Hostile fire
d. Friendly fire Correct Answer: d. Friendly fire
Statutory conditions found in all policies of "fire" insurance:
