Fundamentals Of Insurance
Fundamentals Of Insurance Exam
Questions and Answers 2025 Graded A+
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. -Correct 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. -Correct 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. -Correct 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:
A. Fire damage caused to appliance following a sudden power surge.
B. Fire damage to insured buildings occurring during a rebellion.
C. Damage to insured property due to radioactive contamination.
D. Loss of property caused by a process involving the application of heat. -Correct
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.
Fundamentals Of Insurance
,Fundamentals Of Insurance
B. A child.
C. A trade name.
D. A senile person. -Correct 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 -Correct 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. -Correct 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:
A. Permitted to be made by the insurance broker as long as it is in favour of the insured.
B. Not binding, unless it is in writing and under the signature of a person authorized by
the insurer.
C. Valid only when signed by both the insurer and the insured.
D. Bonding when even provided orally. -Correct 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.
Fundamentals Of Insurance
, Fundamentals Of Insurance
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.
-Correct 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. -Correct 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. -Correct Answer ✔B. Guarantee of insureds that certain facts are truly as they
are represented to be and that they will remain so.
All Homeowners Policies contain the section "Extensions of Coverage". All of the
following losses are covered under this section, except one. Pick the exception:
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. -Correct 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.
Fundamentals Of Insurance
Fundamentals Of Insurance Exam
Questions and Answers 2025 Graded A+
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. -Correct 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. -Correct 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. -Correct 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:
A. Fire damage caused to appliance following a sudden power surge.
B. Fire damage to insured buildings occurring during a rebellion.
C. Damage to insured property due to radioactive contamination.
D. Loss of property caused by a process involving the application of heat. -Correct
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.
Fundamentals Of Insurance
,Fundamentals Of Insurance
B. A child.
C. A trade name.
D. A senile person. -Correct 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 -Correct 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. -Correct 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:
A. Permitted to be made by the insurance broker as long as it is in favour of the insured.
B. Not binding, unless it is in writing and under the signature of a person authorized by
the insurer.
C. Valid only when signed by both the insurer and the insured.
D. Bonding when even provided orally. -Correct 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.
Fundamentals Of Insurance
, Fundamentals Of Insurance
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.
-Correct 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. -Correct 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. -Correct Answer ✔B. Guarantee of insureds that certain facts are truly as they
are represented to be and that they will remain so.
All Homeowners Policies contain the section "Extensions of Coverage". All of the
following losses are covered under this section, except one. Pick the exception:
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. -Correct 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.
Fundamentals Of Insurance
