Fundamentals to Insurance Exam,
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Chapter 1 - Intro
List the 5 functions of insurance: - ANSWER✅✅1) Spread of risk
2) Basis of credit system
3) Eliminate worry and develop entrepreneurship
4) Loss reduction and prevention (road safety, alarms, etc.)
5) Employment opportunity
Definition of insurance (3 parts) - ANSWER✅✅1) insurance provides a means of
shifting ones financial responsibility from a loss to another party
ii) payment will be made only in the event of the happening of a certain risk or peril
iii) the amount of the payment is restricted to the amount required to indemnify the
insured
5 points of insurance - ANSWER✅✅1) Shift financial responsibility for a loss
2) payment made only in the event of a loss
3) Payment restricted to amount to indemnify (no more, no less)
,4) Cover loss to which object of insurance may be exposed (accidental and future)
5) Indemnify in form of money or other thing of value (rebuild/repair)
3 types of property and casualty insurance - ANSWER✅✅Auto, property (home and
business), and liability (injury or damage to a third party)
What are the 2 major types of insurers and provide an example for each -
ANSWER✅✅Private (stock profit or mutual policy holder), or government (ICBC,
employment insurance)
What is the difference between mutual companies and stock companies? -
ANSWER✅✅Stock - main purpose is to derive a profit, ownerships in the hand of
the company's shareholder. Money to operate comes from private funds and public
sales of stock
Mutual - main purpose is to provide insurance at the lowest cost possible,
corporation owned by policy holders, money made goes to policyholders
What is known as the major function of insurance? - ANSWER✅✅Spread of the
losses of the few among the many
Where is the definition of insurance usually found - ANSWER✅✅The Insurance Act
Define peril - ANSWER✅✅Cause of loss
Define risk - ANSWER✅✅Chance of loss to which the object of insurance is exposed
At what point in time is indemnity calculated? - ANSWER✅✅Moments before the
loss
What two factors regarding losses must be present for them to be insured? -
ANSWER✅✅Future and accidental
Who retains the option to repair or replace damaged property rather than pay cash
settlements? - ANSWER✅✅Insurer
Main purpose of stock companies? - ANSWER✅✅Profit maximization
Identify the two main distribution methods used by insurers for their products -
ANSWER✅✅Direct writers (work for one insurance company) and independent
brokers (work for multiple insurance companies - can offer multiple options for
insurance, not limited)
Major function of insurance is to: - ANSWER✅✅Share losses of the few among the
many
Does insurance allow payment to be in another form than money? -
ANSWER✅✅Yes, replacement or repair
,Chapter 2 - Insurance Contracts -
There are 4 ways changes can be made to a policy. What are the 4 ways? -
ANSWER✅✅1) Rider (adding additional coverage)
2) Floater (provides coverage for items not on the insured premise)
3) Endorsement (acknowledges changes in the actual contract)
4) Separate policy (additional coverage, but no change in the original contract - new
policy altogether)
4 ways to deal with risk - ANSWER✅✅1) Avoidance (don't buy the car in the first
place)
2) Controlling (car alarms)
3) Retention (increase in deductible or putting money aside)
4) Transfer (buying insurance)
3 categories of risk insurance - ANSWER✅✅Personal (health, anything directly
affecting you), property (house, care), and liability (3rd party)
Define contract - ANSWER✅✅An agreement between two or more parties,
enforceable at law
What are the 2 kinds of risk? Which one is not insurable? - ANSWER✅✅Pure risk
(no chance for profit gain, insurable), and speculative (chance for profit or loss, for
example gambling or starting a new business, not insurable)
Identify four options people have when dealing with risk - ANSWER✅✅Avoidance,
risk control, retention, transfer
What type of risk control reduces loss frequency? - ANSWER✅✅Loss prevention
Which method of dealing with losses and risk is most practical? -
ANSWER✅✅Insurance
What type of risk is insurable? - ANSWER✅✅Pure risk
Identify 5 elements that must be present in all contracts - ANSWER✅✅Agreement
(offer and unconditional acceptance), consideration (exchange of something of
value), legality of object (not illegal), legal capacity of the parties (not children, not
mentally incompetent), genuine intention (no inducement, needs to be intended)
What is consideration? - ANSWER✅✅Exchange of something of value
3 unique elements of insurance contracts - ANSWER✅✅Insurable interest (insured
person derives a financial or other kind of benefit), indemnity (no more no less),
utmost good faith (honest, trust each other)
, What are binders? - ANSWER✅✅Temporary insurance placed by brokers on behalf
of clients, written or oral commitment by the broker to provide a contract of
insurance on the subject matter under discussion
How are endorsements different than riders? - ANSWER✅✅Endorsements are
extra sheets or slips of paper that change the terms of an existing contract. Riders
add additional coverage to those already in place - to have a rider you must endorse
the contract
Who would not have insurable interest?
Business partner
Heir or beneficiary
Bailee
Mortgagee - ANSWER✅✅Heir or beneficiary
Property with a high degree of mobility associated with it is generally insured under
a: - ANSWER✅✅Floater
Chapter 3 - The Role of Government in Insurance - ANSWER✅✅
What is solvency, how is it different than insolvency? - ANSWER✅✅Solvency is
when insurers are capable of fulfilling their financial obligations. If they are unable to
meet these obligations, they are insolvent
What 3 things does the basic fire policy cover? - ANSWER✅✅Fire (hostile), lightning,
and explosion due to natural gas, coal and manufactured gas
Define fiduciary - ANSWER✅✅One who handles other people's money insurers and
brokers are both fiduciaries
3 conditions (rules) of removal coverage change - 3 conditions when someone needs
to move their insured property - ANSWER✅✅1) Removed to protect from future or
further loss
2) Amount of coverage is whatever is left over
3) Up to 7 days of coverage maximum (or expiry of policy, whichever is first)
What are the 6 contents of insurance policies legislated? (first page of policy -
declaration) - ANSWER✅✅1) Parties to the contract
2) Policy period (policy takes effect art 12:01Am local time at the address of the
name insured)
3) Loss payable (mortgagee)
4) Type of coverage and amount
5) Rate and premium
6) Subject matter (what is being insured)
What is the fiduciary responsibility of insurers? When is the full premium earned? -
ANSWER✅✅To clients. Premium not fully earned until expiry of policy
Brand New Exam Questions with
100% Correct Verified Answers, All
Graded A+,Latest Expert Premium
Update(2025-2026)|100% Guaranteed
Success.
Chapter 1 - Intro
List the 5 functions of insurance: - ANSWER✅✅1) Spread of risk
2) Basis of credit system
3) Eliminate worry and develop entrepreneurship
4) Loss reduction and prevention (road safety, alarms, etc.)
5) Employment opportunity
Definition of insurance (3 parts) - ANSWER✅✅1) insurance provides a means of
shifting ones financial responsibility from a loss to another party
ii) payment will be made only in the event of the happening of a certain risk or peril
iii) the amount of the payment is restricted to the amount required to indemnify the
insured
5 points of insurance - ANSWER✅✅1) Shift financial responsibility for a loss
2) payment made only in the event of a loss
3) Payment restricted to amount to indemnify (no more, no less)
,4) Cover loss to which object of insurance may be exposed (accidental and future)
5) Indemnify in form of money or other thing of value (rebuild/repair)
3 types of property and casualty insurance - ANSWER✅✅Auto, property (home and
business), and liability (injury or damage to a third party)
What are the 2 major types of insurers and provide an example for each -
ANSWER✅✅Private (stock profit or mutual policy holder), or government (ICBC,
employment insurance)
What is the difference between mutual companies and stock companies? -
ANSWER✅✅Stock - main purpose is to derive a profit, ownerships in the hand of
the company's shareholder. Money to operate comes from private funds and public
sales of stock
Mutual - main purpose is to provide insurance at the lowest cost possible,
corporation owned by policy holders, money made goes to policyholders
What is known as the major function of insurance? - ANSWER✅✅Spread of the
losses of the few among the many
Where is the definition of insurance usually found - ANSWER✅✅The Insurance Act
Define peril - ANSWER✅✅Cause of loss
Define risk - ANSWER✅✅Chance of loss to which the object of insurance is exposed
At what point in time is indemnity calculated? - ANSWER✅✅Moments before the
loss
What two factors regarding losses must be present for them to be insured? -
ANSWER✅✅Future and accidental
Who retains the option to repair or replace damaged property rather than pay cash
settlements? - ANSWER✅✅Insurer
Main purpose of stock companies? - ANSWER✅✅Profit maximization
Identify the two main distribution methods used by insurers for their products -
ANSWER✅✅Direct writers (work for one insurance company) and independent
brokers (work for multiple insurance companies - can offer multiple options for
insurance, not limited)
Major function of insurance is to: - ANSWER✅✅Share losses of the few among the
many
Does insurance allow payment to be in another form than money? -
ANSWER✅✅Yes, replacement or repair
,Chapter 2 - Insurance Contracts -
There are 4 ways changes can be made to a policy. What are the 4 ways? -
ANSWER✅✅1) Rider (adding additional coverage)
2) Floater (provides coverage for items not on the insured premise)
3) Endorsement (acknowledges changes in the actual contract)
4) Separate policy (additional coverage, but no change in the original contract - new
policy altogether)
4 ways to deal with risk - ANSWER✅✅1) Avoidance (don't buy the car in the first
place)
2) Controlling (car alarms)
3) Retention (increase in deductible or putting money aside)
4) Transfer (buying insurance)
3 categories of risk insurance - ANSWER✅✅Personal (health, anything directly
affecting you), property (house, care), and liability (3rd party)
Define contract - ANSWER✅✅An agreement between two or more parties,
enforceable at law
What are the 2 kinds of risk? Which one is not insurable? - ANSWER✅✅Pure risk
(no chance for profit gain, insurable), and speculative (chance for profit or loss, for
example gambling or starting a new business, not insurable)
Identify four options people have when dealing with risk - ANSWER✅✅Avoidance,
risk control, retention, transfer
What type of risk control reduces loss frequency? - ANSWER✅✅Loss prevention
Which method of dealing with losses and risk is most practical? -
ANSWER✅✅Insurance
What type of risk is insurable? - ANSWER✅✅Pure risk
Identify 5 elements that must be present in all contracts - ANSWER✅✅Agreement
(offer and unconditional acceptance), consideration (exchange of something of
value), legality of object (not illegal), legal capacity of the parties (not children, not
mentally incompetent), genuine intention (no inducement, needs to be intended)
What is consideration? - ANSWER✅✅Exchange of something of value
3 unique elements of insurance contracts - ANSWER✅✅Insurable interest (insured
person derives a financial or other kind of benefit), indemnity (no more no less),
utmost good faith (honest, trust each other)
, What are binders? - ANSWER✅✅Temporary insurance placed by brokers on behalf
of clients, written or oral commitment by the broker to provide a contract of
insurance on the subject matter under discussion
How are endorsements different than riders? - ANSWER✅✅Endorsements are
extra sheets or slips of paper that change the terms of an existing contract. Riders
add additional coverage to those already in place - to have a rider you must endorse
the contract
Who would not have insurable interest?
Business partner
Heir or beneficiary
Bailee
Mortgagee - ANSWER✅✅Heir or beneficiary
Property with a high degree of mobility associated with it is generally insured under
a: - ANSWER✅✅Floater
Chapter 3 - The Role of Government in Insurance - ANSWER✅✅
What is solvency, how is it different than insolvency? - ANSWER✅✅Solvency is
when insurers are capable of fulfilling their financial obligations. If they are unable to
meet these obligations, they are insolvent
What 3 things does the basic fire policy cover? - ANSWER✅✅Fire (hostile), lightning,
and explosion due to natural gas, coal and manufactured gas
Define fiduciary - ANSWER✅✅One who handles other people's money insurers and
brokers are both fiduciaries
3 conditions (rules) of removal coverage change - 3 conditions when someone needs
to move their insured property - ANSWER✅✅1) Removed to protect from future or
further loss
2) Amount of coverage is whatever is left over
3) Up to 7 days of coverage maximum (or expiry of policy, whichever is first)
What are the 6 contents of insurance policies legislated? (first page of policy -
declaration) - ANSWER✅✅1) Parties to the contract
2) Policy period (policy takes effect art 12:01Am local time at the address of the
name insured)
3) Loss payable (mortgagee)
4) Type of coverage and amount
5) Rate and premium
6) Subject matter (what is being insured)
What is the fiduciary responsibility of insurers? When is the full premium earned? -
ANSWER✅✅To clients. Premium not fully earned until expiry of policy
