FOI - Practice Exam BC Questions and
Answers
1. Insurance plays an important role in managing financial risk.
The main purpose of
Insurance is to
a. Enable the consumer to obtain a loan or ,a' mortgage
b. Provide employment and investment capital
c. Allow the spread of risk
d. Reduce losses through loss prevention and loss reduction
Answer c. Allow the spread of risk
2. The definition of insurance in the Insurance Act includes all of the
following important points, except one. Pick the exception
a. Payment is made only when a certain peril has damaged the
object of insurance
b. Payment is limited to the actual amount of the loss - no more and
no less
c. There is no payment for losses that are deliberately caused by an
insured
d. The indemnity must always be in the form of a sum of money; no
other method is permitted by law
Answer d. The indemnity must always be in the form of a sum of money; no other method
,is permitted by law
3. The majority of insurance companies use independent brokers to
sell their insurance policies to the public. Which of the following
statements does NOT apply to this system of distribution?
a. Independent brokers are employees of the insurance companies they
represent
b. · Independent brokers receive commissions from their
insurers for the business they produce
c. Independent brokers can represent more than one insurance
company
d. Independent brokers own all of their client files
Answer a. Independent brokers are employees of the insurance companies they
represent
4. When dealing with financial risk a person has several options
available. In your opinion, which of the following is the best
option for most people?
a. Avoidance of risk
b. Retention of the risk
c. Controlling the risk
d. Transfer of the risk
Answer d. Transfer of the risk
,5. Risk as the "chance of financial loss" can be classified as either
speculative or pure. Which of the following best describes the
meaning of pure risk?
a. There is no chance of financial loss
b. There is a chance of financial gain
c. Financial loss and financial gain are both present
d. There is only the chance of financial loss with no chance of profiting
from it
Answer d. There is only the chance of financial loss with no chance of profiting from it
6. A contract is legally enforceable only when all legal elements
are present. Only an insurance contract contains the following
element
a. Genuine intention
b. Legality of the object
c. Consideration
d. Indemnity
Answer d. Indemnity
7. "Consideration" is required of all parties to a contract.
Consideration means
a. Thinking about purchasing insurance
b. An agreement by the insurer to treat the insured fair
, c. An exchange of something of value between the parties
d. A commitment by the broker to represent an insurance company
Answer c. An exchange of something of value between the parties
8. Legal capacity of the parties is an important element to a
contract. Only the following party has the legal capacity to enter
into a contract of insurance.
a. Sweet Cravings Bakery
b. Tools 4 U Enterprises
c. Mario Montana Sportswear Ltd.
d. Jack Daniels a.k.a. Jacks Liquors
Answer c. Mario Montana Sportswear Ltd.
9. Insurance brokers are often asked to provide a binder to the
insured. A Binder is
a. An insurance policy issued by the broker
b. A cover for an insurance manual
c. When a broker has ,committed an insurer to a contract of insurance
on a risk
d. Never legal when it was given orally
Answer c. When a broker has, committed an insurer to a contract of insurance on a risk
10. All changes to an existing insurance policy must be in writing.
Answers
1. Insurance plays an important role in managing financial risk.
The main purpose of
Insurance is to
a. Enable the consumer to obtain a loan or ,a' mortgage
b. Provide employment and investment capital
c. Allow the spread of risk
d. Reduce losses through loss prevention and loss reduction
Answer c. Allow the spread of risk
2. The definition of insurance in the Insurance Act includes all of the
following important points, except one. Pick the exception
a. Payment is made only when a certain peril has damaged the
object of insurance
b. Payment is limited to the actual amount of the loss - no more and
no less
c. There is no payment for losses that are deliberately caused by an
insured
d. The indemnity must always be in the form of a sum of money; no
other method is permitted by law
Answer d. The indemnity must always be in the form of a sum of money; no other method
,is permitted by law
3. The majority of insurance companies use independent brokers to
sell their insurance policies to the public. Which of the following
statements does NOT apply to this system of distribution?
a. Independent brokers are employees of the insurance companies they
represent
b. · Independent brokers receive commissions from their
insurers for the business they produce
c. Independent brokers can represent more than one insurance
company
d. Independent brokers own all of their client files
Answer a. Independent brokers are employees of the insurance companies they
represent
4. When dealing with financial risk a person has several options
available. In your opinion, which of the following is the best
option for most people?
a. Avoidance of risk
b. Retention of the risk
c. Controlling the risk
d. Transfer of the risk
Answer d. Transfer of the risk
,5. Risk as the "chance of financial loss" can be classified as either
speculative or pure. Which of the following best describes the
meaning of pure risk?
a. There is no chance of financial loss
b. There is a chance of financial gain
c. Financial loss and financial gain are both present
d. There is only the chance of financial loss with no chance of profiting
from it
Answer d. There is only the chance of financial loss with no chance of profiting from it
6. A contract is legally enforceable only when all legal elements
are present. Only an insurance contract contains the following
element
a. Genuine intention
b. Legality of the object
c. Consideration
d. Indemnity
Answer d. Indemnity
7. "Consideration" is required of all parties to a contract.
Consideration means
a. Thinking about purchasing insurance
b. An agreement by the insurer to treat the insured fair
, c. An exchange of something of value between the parties
d. A commitment by the broker to represent an insurance company
Answer c. An exchange of something of value between the parties
8. Legal capacity of the parties is an important element to a
contract. Only the following party has the legal capacity to enter
into a contract of insurance.
a. Sweet Cravings Bakery
b. Tools 4 U Enterprises
c. Mario Montana Sportswear Ltd.
d. Jack Daniels a.k.a. Jacks Liquors
Answer c. Mario Montana Sportswear Ltd.
9. Insurance brokers are often asked to provide a binder to the
insured. A Binder is
a. An insurance policy issued by the broker
b. A cover for an insurance manual
c. When a broker has ,committed an insurer to a contract of insurance
on a risk
d. Never legal when it was given orally
Answer c. When a broker has, committed an insurer to a contract of insurance on a risk
10. All changes to an existing insurance policy must be in writing.
