Fundamentals of Insurance BC questions and answers graded A+

Fundamentals of Insurance BC questions and answers graded A+ What is the major function of insurance? - ANSWERS to allow the spread of risk What are the five important functions of insurance? - ANSWERS 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) - ANSWERS Auto insurance property insurance liability insurance (Also known as general insurance) Identify the two major types of insurers - ANSWERS 1) private insurers 2)government insurers define how stock companies work compared to mutual companies - ANSWERS 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 - ANSWERS Mandatory auto insurance, such as ICBC identify the two methods of distributing insurance and how the differentiate - ANSWERS Direct Writing System -represent products provided by one company exclusively Independent brokerage -represent more than one insurance company Chapter 2 - ANSWERS Define the 3 categories of risk - ANSWERS Personal Property Liability Identify the 4 options for dealing with risk - ANSWERS 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? - ANSWERS 1) Pure Risk 2) speculative risk Only Pure risk is insurable as there is no chance for financial gain Define an insurance contract - ANSWERS an agreement between two or more parties which is enforceable by law What are the five elements required to be present in all contracts - ANSWERS 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 laws 5) genuine intention between parties What are the three elements exclusively required in an insurance contract - ANSWERS 1) Insurable interest 2) Utmost good faith 3) Indemnity Define endorsements or riders on insurance policies - ANSWERS acknowledges a change in the terms of the contract Define Floaters - ANSWERS Used to provide coverage for property having a high degree of mobility Insurance is fiduciary in nature, define fiduciary - ANSWERS Means to hold financial trust with a person or organization define the role of the federal government - ANSWERS Provides licensing only to companies who can meet strict financial standards, these companies are monitored constantly to ensure financial stability define the role of the provincial government - ANSWERS licensing insurers, establishing premium levels, supervising terms and conditions of provincial contracts Define solvency - ANSWERS when insurers are meeting financial obligations they are considered solvent What are the fiduciary responsibilities of insurance companies and insurance brokers - ANSWERS Unearned premiums are held in trust to refund insureds in the event the policy is cancelled prior to expiring The insurance act determines when a contract takes affect. what time does coverage commence at? - ANSWERS 12:01 am (midnight) at the address of the named insured what is the removal clause - ANSWERS requires the insurer to extend coverage to another location where the insured's property is kept, even if the location is not named in the policy When does the removal clause apply? - ANSWERS when the insured can prove that property was removed in order to protect it from a peril covered by the policy For how long can kept at an unnamed location before the coverage is removed? - ANSWERS 7 days or upon the expiry of the policy Define subrogation - ANSWERS when the insurer has indemnified the insured against a third party, the insurer has the legal right to seek recovery from the party. The insurance act requires that every policy insuring loss by fire must also provide what coverages? - ANSWERS 1) lightening 2) explosion of natural gas, coal or manufactured gas Define two sources of fire which