Fundamentals of Insurance - Self Exam Q & A Solved 100%

Main purpose of Insurance - Answer Allow the spread of risk Definition of Insurance - Answer -Payment's made only when a certain peril has damaged the insured object -Payment's limited to actual amount of loss, no more and no less -There's no payment for losses that are deliberately caused by an insured. Five important points to the definition of insurance: - Answer -Spread of Risk -Basis of Credit System -Eliminates Worry/Encourages Entrepreneurship -Loss Prevention and Loss Reduction -Source of Employment and Investment Capital Five important points as they relate to the definition of insurance: - Answer -Provides a means of shifting one's financial responsibility for loss to another party -Payment made only in the event of the happening of a certain risk or peril -Payment restricted to amount required to indemnify insured -Covers losses to which the object of insurance 'may' be exposed -Indemnity can be in the form of money or other thing of value Three types of insurance included within the broad area of 'Property and Casualty Insurance': - Answer -Auto Insurance -Property Insurance -Liability Insurance Two major types of insurers: Private Insurers - Answer Stock Companies -operate via private funds or public sale of stock -main goal to generate profit for shareholders (owners) Mutual Companies -owned by its policy holders -main goal to provide insurance to its policy holders at as low a cost as possible -profits returned to policy via dividends or rate adjustments Two major types of insurers: Government Insurers - Answer -Medical insurance -employment insurance -workers' compensation -mandatory auto insurance (Sask, BC, MB and QC) Three methods used by insurers to sell their products: Direct Writing System - Answer -Salary or commission from employer (insurer) -Insurer owns all business -Insurer performs administrative functions Three methods used by insurers to sell their products: Independent Brokerage System - Answer -Earn commissions from insurers -Brokerage owns all business -Provides client services for policy holders Three methods used by insurers to sell their products: Agency System - Answer -Paid commissions/bonuses by insurers -Agents own their business Most common insurance distribution method in Canada: - Answer -Independent Brokerage System Three major categories of insurance needs: - Answer -Personal -Property -Liability Risk Four options an insured may use in dealing with risk: - Answer -Avoidance -Controlling -Retention -Transfer of Risk Five elements required to be present in all contracts: - Answer -Agreement -Consideration -Legality of Object -Legal Capacity of the Parties to Contract -Genuine Intention Three additional elements unique to insurance contracts and must be present if an insurance contract is to be enforceable at law: - Answer -Insurable Interest -Utmost Good Faith -Indemnity Three types of insurance forms used by insurers to make changes to an existing policy: Endorsements/Riders - Answer -acknowledge a change in the terms of the contracts Three types of insurance forms used by insurers to make changes to an existing policy: Floaters - Answer -provide coverage for property having a high degree of mobility Three types of insurance forms used by insurers to make changes to an existing policy: Separate Policies - Answer -Provide additional coverages needed by insureds PCICC role when an insurer becomes insolvent: - Answer -Pays all valid claims -Charges companies an assessment to cover the total amount of claims Fiduciary obligations of insurers - Answer -Premiums paid aren't fully earned until expiry of policy -Unearned premiums considered to be held in trust to refund the insureds in event the policy's cancelled prior to expiry date Fiduciary obligations of brokers: - Answer -Commissions aren't fully earned until expiry of policy -Considered to be held in trust to refund to insureds in event the policy's cancelled prior to expiry date The provisions of the 'Removal Clause' contained in policies of fire insurance: - Answer -Property necessarily removed insured at unnamed locations -Amount available for loss to property while at unnamed location will be reduced by amount paid for loss at named location -Obligation on insurer to extend coverages at unnamed location is for limited time only Three coverages required to be provided on all policies of fire insurance: - Answer -Fire -Lightning -Explosion of Natural Gas, Coal or Manufactured Gas Primary role of underwriters: - Answer -To select those risks likely to be most profitable for the insurer Three sources of information used by the underwriters when making a decision regarding suitability of a risk: - Answer -The application -The broker -Loss experience data and inspection reports Two reasons why insurance policies contain exclusions: - Answer -Items represent a greater than normal potential for loss -Rust, corrosion and wear and tear The way claims are settled when there is loss to one item of a pair or set: - Answer -Item not lost continues to have value -Amount will be deducted from amount of claim payment The way claims are settled when there is a loss to one part of property which consists of several parts: - Answer -The value of the lost or damaged part, including cost of installation Three criteria considered by the adjuster in determining the amount of the loss: - Answer -The acv (actual cash value) of the property at the time of loss or damage -Interest of the insured in the property -Amount of insurance specified on the 'Declarations Page' om respect of the property lost or damaged Four factors used to determine amount of depreciation when insured property is lost or damaged: - Answer -Condition of the item(s) -Obsolesence -Resale value -Normal life expectancy Three provisions relating to replacement cost coverage: - Answer -Replacement shall be effected by the insured with due diligence and dispatch -Replacement shall be on the same site or an adjacent site -Settlement on a replacement cost basis shall be made only when replacement has actually been effected Basis of settlement when these provisions aren't met: - Answer -ACV Two important provisions to be followed by the insurer when making settlement on a replacement cost basis: - Answer -Property was useable for its original purpose at the time of loss -Property was repaired or replaced promptly Basis of settlement under a 'valued' policy: - Answer -The value agreed to by the insured and insurer -Coverage on a valued basis A mortgagee can be: - Answer -Anyone having an insurable interest in the property insured (bank, trust company, credit union) Two guarantees provided to mortgagees by the Standard Mortgage Clause: - Answer -Guarantee of payment when insured breaches any policy conditions -Guarantee that insurer will not reduce coverages to the prejudice of the mortgagee, nor terminate the policy without providing it with the same notice required by law to be given to the insured. Term or condition of condition waived by a broker: - Answer -Under the signature of a person authorized for that purpose by ensurer -whomever the insurer wants it to be, normally an officer of the insurance company Four persons included in the definition of 'you' or 'your' and who would be 'insureds' under the policy: - Answer -Persons named on the policy -Spouse/partner of the named insured -Relatives of either spouse/partner who live with the insureds -Any person under 21 in the care of the Named Insured -Full time students dependent on the insureds Three ways (certain evidence) in which 'spouses' or 'common law partners' might qualify for coverage on a policy with only one : - Answer -Proof of marriage to the insured -Proof of residence with the insured in a conjugal relationship continuously for three years -Proof of being the natural/adoptive parent of a child living with the Named Insured for one year. Coverage sections and the coverages provided by each in Homeowners Form: Section I - Property Coverages - Answer A - Dwelling Building B - Detached Private Structures C - Personal Property D - Additional Living Expenses Coverage sections and the coverages provided by each in Homeowners Form: Section II - Answer E - Personal Liability F - Voluntary Medical Payments G - Voluntary Payment for Damage to Property H - Voluntary Compensation for Residence Employees Items insured under Coverage A - Dwelling Building: - Answer -The dwelling and attached structures -Permanently installed outdoor equipment on the premises -Outdoor swimming pool and attached equipment on the premises -Constructions materials/supplies located on/beside premises -Building fixture/fittings temporarily removed -Outdoor trees, shrubs, plants *Exclusions: wind, hail, theft during construction