2025 Fundamentals of Insurance (BC)
Exam and Already Solved Solutions
2026 Updated.
Insurance plays an important role in managing financial risk. The main purpose of Insurance is
to:
A. Enable the consumer to obtain loan or mortgage.
B. Provide employment and investment capital.
C. Allow spread of risk.
D. Reduce losses through loss prevention and loss reduction. - Answer C. Allow spread of risk.
When the insurer terminates an insurance policy, ALL of the following conditions apply, EXCEPT
one. Pick the exception:
A. The insured is entitled to 15 days' written notice of termination sent by registered mail of 5
days' written notice personally delivered.
B. The refund due to the insured shall be calculated on a short rate basis.
C. Unless otherwise stated, the refund shall accompany the notice of termination.
D. The refund shall be in the form of money, postal or express company money order or cheque
payable at par. - Answer B. The refund due to the insured shall be calculated on a short rate
basis.
The major function of insurance is to:
A. Reduce the cost of losses.
B. Share the losses of the few among many.
C. Safeguard the interest of the mortgagees
D. Serve as the basis of the existing credit system. - Answer B. Share the losses of the few
among many.
Under the policy of "fire" insurance, the insurer would be obligated to pay the following loss
only:
,D. Loss of property caused by a process involving the application of heat. - Answer B. Fire
damage to insured buildings occurring during a rebellion.
Generally, all of the following, except one, are seen to be "incompetent" or lacking the legal
capacity to contract. Pick the exception:
A. A corporation.
B. A child.
C. A trade name.
D. A senile person. - Answer A. A corporation.
If a burning log rolls out of your clients fireplace grate across the hearth and onto the rug in
front, the loss to the rug is considered to be the result of a(n):
A. Direct fire.
B. Indirect fire
C. Friendly fire
D. Hostile fire - Answer D. Hostile fire
Statutory Condition Five: Termination, sets out the provisions for cancellation of a contract of
insurance that must be compiled with by the insured and the insurer. All of the following
provisions regarding termination by the insurer are true, except one. Select the exception:
A. When written notice of the termination is sent by registered mail, the insurer must give the
insured 15 days' notice starting the day after the letter is received by the insured's post office.
B. When written notice of termination is sent hand-delivered, the insurer must give the insured
15 days' notice starting on the date the letter was registered by the insurer's post office.
C. When written notice of termination is sent hand delivered, the insurer must give the insured
5 days' notice.
D. When the insured is entitled to a premium refund, the amount of the refund is calculated on
pro- rate (per diem) basis. - Answer B. When written notice of termination is sent hand-
delivered, the insurer must give the insured 15 days' notice starting on the date the letter was
registered by the insurer's post office.
The Insurance Act provides that a Waiver of Term or Condition of an insurance contract is:
,C. Valid only when signed by both the insurer and the insured.
D. Bonding when even provided orally. - Answer B. Not binding, unless it is in writing and
under the signature of a person authorized by the insurer.
One of the elements that determines whether a contact is legally enforceable or not is the
"legal capacity of the parties". In all of the following contracts, except one, are the parties
considered to have "legal capacity". Select the one that does not meet this element.
A. An insurance contract issued in the name of Marry Poppin d.b.a. Little People Day Care
Centre.
B. A lease agreement naming the tenant as the "No Risk Denied Insurance Corporation".
C. A building contract showing the General Contractor as Bricks and Mortar Inc.
D. An invoice for merchandise shipped to the order of Mandy's Souvenir and Gift Shop. - Answer
D. An invoice for merchandise shipped to the order of Mandy's Souvenir and Gift Shop.
Risk selection is based on the Underwriter's assessment of the hazards pertaining to the risk
that has been submitted for insurance. An underwriter must determine whether or not there is
a potential Moral Hazard. The following does not apply as a condition indicating the presence of
a Moral Hazard:
A. The moral character of the applicant for insurance.
B. The financial condition of the applicant for insurance.
C. The physical condition of the premises which may cause a loss to occur.
D. The indifference to loss of the applicant for insurance. - Answer C. The physical condition of
the premises which may cause a loss to occur.
A warranty is a:
A. Promise by the broker to remit premiums to the insurer in accordance with the terms stated
in the Agency Agreement.
B. Guarantee of insureds that certain facts are truly as they are represented to be and that they
will remain so.
C. Piece of paper similar to an Endorsement which maked changes to the policy.
D. Promise by the insurer to make payment of all claims submitted to it within a 21 day period. -
Answer B. Guarantee of insureds that certain facts are truly as they are represented to be and
, A. Damage to personal property during transportation to the insured's new principal residence
located in Sydney, Nova Scotia, which is to be occupied by the insured within the next 10 days.
B. The cost of repair the "tear out" damage to the insured's driveway that was necessarily
caused to replace the ruptured water main.
C. The cost to replace the insured's freezer food that was spoiled as a result of a power failure
caused by lightening.
D. Loss of the insured's indoor trees and plants due to exposure to extreme temperatures after
a severe storm damaged part of the roof. - Answer B. The cost of repair the "tear out" damage
to the insured's driveway that was necessarily caused to replace the ruptured water main.
The Basis of Claim Payment is the same for all Homeowners Forms. All of these statements
regarding the Basis of Claim Payment are true, except one. Pick the EXCEPTION:
A. Dwelling Building and Detached Private Structures are covered on a Replacement Cost Basis.
B. Personal Property is insured for Replacement Cost except electronic media and books of
account, which are subject to a special basis of settlement.
C. Artwork, antiques, memorabilia, and souvenirs are covered on Actual Cash Value Basis.
D. Dwelling Building and Detached Private Structures are covered on a Replacement Cost Basis,
which includes any increased cost of construction to the enforcement of by-laws. - Answer D.
Dwelling Building and Detached Private Structures are covered on a Replacement Cost Basis,
which includes any increased cost of construction to the enforcement of by-laws.
Under all Homeowners Forms, the coverage for certain Personal Property articles is restricted to
"Special Limits Of Insurance", unless the insured has purchased additional insurance. All of the
following objects are subject to "Special Limits," except one. Pick the EXCEPTION:
A. Computer games and other software with a combined value of $3,600.
B. A mountain bike valued at $6,000.
C. A coin collection valued at $1,200.
D. A gold watch valued at $1,800. - Answer D. A gold watch valued at $1,800.
The windstorm or hail only provided by the Homeowners' Basic Form (IBC 1151) would pay for
the loss or damage to:
Exam and Already Solved Solutions
2026 Updated.
Insurance plays an important role in managing financial risk. The main purpose of Insurance is
to:
A. Enable the consumer to obtain loan or mortgage.
B. Provide employment and investment capital.
C. Allow spread of risk.
D. Reduce losses through loss prevention and loss reduction. - Answer C. Allow spread of risk.
When the insurer terminates an insurance policy, ALL of the following conditions apply, EXCEPT
one. Pick the exception:
A. The insured is entitled to 15 days' written notice of termination sent by registered mail of 5
days' written notice personally delivered.
B. The refund due to the insured shall be calculated on a short rate basis.
C. Unless otherwise stated, the refund shall accompany the notice of termination.
D. The refund shall be in the form of money, postal or express company money order or cheque
payable at par. - Answer B. The refund due to the insured shall be calculated on a short rate
basis.
The major function of insurance is to:
A. Reduce the cost of losses.
B. Share the losses of the few among many.
C. Safeguard the interest of the mortgagees
D. Serve as the basis of the existing credit system. - Answer B. Share the losses of the few
among many.
Under the policy of "fire" insurance, the insurer would be obligated to pay the following loss
only:
,D. Loss of property caused by a process involving the application of heat. - Answer B. Fire
damage to insured buildings occurring during a rebellion.
Generally, all of the following, except one, are seen to be "incompetent" or lacking the legal
capacity to contract. Pick the exception:
A. A corporation.
B. A child.
C. A trade name.
D. A senile person. - Answer A. A corporation.
If a burning log rolls out of your clients fireplace grate across the hearth and onto the rug in
front, the loss to the rug is considered to be the result of a(n):
A. Direct fire.
B. Indirect fire
C. Friendly fire
D. Hostile fire - Answer D. Hostile fire
Statutory Condition Five: Termination, sets out the provisions for cancellation of a contract of
insurance that must be compiled with by the insured and the insurer. All of the following
provisions regarding termination by the insurer are true, except one. Select the exception:
A. When written notice of the termination is sent by registered mail, the insurer must give the
insured 15 days' notice starting the day after the letter is received by the insured's post office.
B. When written notice of termination is sent hand-delivered, the insurer must give the insured
15 days' notice starting on the date the letter was registered by the insurer's post office.
C. When written notice of termination is sent hand delivered, the insurer must give the insured
5 days' notice.
D. When the insured is entitled to a premium refund, the amount of the refund is calculated on
pro- rate (per diem) basis. - Answer B. When written notice of termination is sent hand-
delivered, the insurer must give the insured 15 days' notice starting on the date the letter was
registered by the insurer's post office.
The Insurance Act provides that a Waiver of Term or Condition of an insurance contract is:
,C. Valid only when signed by both the insurer and the insured.
D. Bonding when even provided orally. - Answer B. Not binding, unless it is in writing and
under the signature of a person authorized by the insurer.
One of the elements that determines whether a contact is legally enforceable or not is the
"legal capacity of the parties". In all of the following contracts, except one, are the parties
considered to have "legal capacity". Select the one that does not meet this element.
A. An insurance contract issued in the name of Marry Poppin d.b.a. Little People Day Care
Centre.
B. A lease agreement naming the tenant as the "No Risk Denied Insurance Corporation".
C. A building contract showing the General Contractor as Bricks and Mortar Inc.
D. An invoice for merchandise shipped to the order of Mandy's Souvenir and Gift Shop. - Answer
D. An invoice for merchandise shipped to the order of Mandy's Souvenir and Gift Shop.
Risk selection is based on the Underwriter's assessment of the hazards pertaining to the risk
that has been submitted for insurance. An underwriter must determine whether or not there is
a potential Moral Hazard. The following does not apply as a condition indicating the presence of
a Moral Hazard:
A. The moral character of the applicant for insurance.
B. The financial condition of the applicant for insurance.
C. The physical condition of the premises which may cause a loss to occur.
D. The indifference to loss of the applicant for insurance. - Answer C. The physical condition of
the premises which may cause a loss to occur.
A warranty is a:
A. Promise by the broker to remit premiums to the insurer in accordance with the terms stated
in the Agency Agreement.
B. Guarantee of insureds that certain facts are truly as they are represented to be and that they
will remain so.
C. Piece of paper similar to an Endorsement which maked changes to the policy.
D. Promise by the insurer to make payment of all claims submitted to it within a 21 day period. -
Answer B. Guarantee of insureds that certain facts are truly as they are represented to be and
, A. Damage to personal property during transportation to the insured's new principal residence
located in Sydney, Nova Scotia, which is to be occupied by the insured within the next 10 days.
B. The cost of repair the "tear out" damage to the insured's driveway that was necessarily
caused to replace the ruptured water main.
C. The cost to replace the insured's freezer food that was spoiled as a result of a power failure
caused by lightening.
D. Loss of the insured's indoor trees and plants due to exposure to extreme temperatures after
a severe storm damaged part of the roof. - Answer B. The cost of repair the "tear out" damage
to the insured's driveway that was necessarily caused to replace the ruptured water main.
The Basis of Claim Payment is the same for all Homeowners Forms. All of these statements
regarding the Basis of Claim Payment are true, except one. Pick the EXCEPTION:
A. Dwelling Building and Detached Private Structures are covered on a Replacement Cost Basis.
B. Personal Property is insured for Replacement Cost except electronic media and books of
account, which are subject to a special basis of settlement.
C. Artwork, antiques, memorabilia, and souvenirs are covered on Actual Cash Value Basis.
D. Dwelling Building and Detached Private Structures are covered on a Replacement Cost Basis,
which includes any increased cost of construction to the enforcement of by-laws. - Answer D.
Dwelling Building and Detached Private Structures are covered on a Replacement Cost Basis,
which includes any increased cost of construction to the enforcement of by-laws.
Under all Homeowners Forms, the coverage for certain Personal Property articles is restricted to
"Special Limits Of Insurance", unless the insured has purchased additional insurance. All of the
following objects are subject to "Special Limits," except one. Pick the EXCEPTION:
A. Computer games and other software with a combined value of $3,600.
B. A mountain bike valued at $6,000.
C. A coin collection valued at $1,200.
D. A gold watch valued at $1,800. - Answer D. A gold watch valued at $1,800.
The windstorm or hail only provided by the Homeowners' Basic Form (IBC 1151) would pay for
the loss or damage to:
