Fundamentals of Insurance BC exam all possible questions and answers with complete solution

What is the major function of insurance? - to allow the spread of risk What are the five important functions of insurance? - 1) insurance is the shifting of financial responsibility for a loss 2) payment will be made only in the event of an insured risk 3) the amount of payment is restricted to the amount required to indemnify the insured 4) insurance covers losses the object may be exposed to 5) the indemnity can be in the form of money or repair/replacement What are the three main types of insurance included in broad insurance (property and casualty) - Auto insurance property insurance liability insurance (Also known as general insurance) Identify the two major types of insurers - 1) private insurers 2)government insurers define how stock companies work compared to mutual companies - Stock companies exist to turn a profit Mutual companies exist to provide lower insurance rates for its policy holders What type of insurance involves government insurers - Mandatory auto insurance, such as ICBC identify the two methods of distributing insurance and how the differentiate - Direct Writing System-represent products provided by one company exclusively Independent brokerage -represent more than one insurance company Chapter 2 - Define the 3 categories of risk - Personal Property Liability Identify the 4 options for dealing with risk - 1) avoidance of risk 2) controlling of risk 3) retention of risk 4) transfer of risk What are the two types of risk? Which is insurable? - 1) Pure Risk 2) speculative risk Only Pure risk is insurable as there is no chance for financial gain Define an insurance contract - an agreement between two or more parties which is enforceable by law What are the five elements required to be present in all contracts - 1) agreement; an offer made, and accepted 2) consideration; exchange of value between parties 3) legal capacity to contract 4) legality of object; cannot breach laws5) genuine intention between parties What are the three elements exclusively required in an insurance contract - 1) Insurable interest 2) Utmost good faith 3) Indemnity Define endorsements or riders on insurance policies - acknowledges a change in the terms of the contract Define Floaters - Used to provide coverage for property having a high degree of mobility Insurance is fiduciary in nature, define fiduciary - Means to hold financial trust with a person or organization define the role of the federal government - Provides licensing only to companies who can meet strict financial standards, these companies are monitored constantly to ensure financial stability