Fundamentals of Insurance - Self
Exam Questions & Answers 2025-2026
Edition.
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
,-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
, 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
Exam Questions & Answers 2025-2026
Edition.
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
,-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
, 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
