Fundamentals Of Insurance Latest Upload Practice Exam 2025

Fundamentals Of Insurance Latest Upload Practice Exam 2025 The major function of insurance is: a. To reduce the cost of the losses b. To share the losses of the few among the many c. The safeguard the interest of mortgages d. To serve as a basis of existing credit system - Correct Ans-b. To share the losses of the few among the many A peril if best defined as: a. The chance of a loss b. The occurrence of a loss c. The cause of a loss d. The result of a loss - Correct Ans-c. The cause of a loss Indemnify means: a. Returning the premium of the insured b. Restoring the insured's to the same financial position as they were in immediately prior to the loss c. Paying the insured's the face amount of the policy d. Restoring the insured's to the same financial position as they were - Correct Ans-b. Restoring the insured's to the same financial position as they were immediately prior to the loss Property insurance contracts are designed to pay for loss or damage arising out of the happening of a specific event. Only the following statement regarding the events insured by property insurance contract is correct: a. The event must be a future event and it must be accidental b. The event may happen with the co-operation of the insured c. The event may happen with the intent of the insured d. The event may occur accidentally or be caused deliberately by the insured - Correct Ans-a. The event must be must be a future event and it must be accidental The following is the most practical way in which to deal with risk: a. Avoidance of Risk b. Retention of Risk c. Controlling of Risk Water Water d. Transfer of Risk - Correct Ans-d. Transfer of Risk In a contract of insurance, consideration means: a. The exchange of something of value parties b. The amount the insurance can collect in event of a claim c. The object of insurance d. The reviewing of the details of the risk to be insured by an underwriter - Correct Ans a. The exchange of something of value between parties Which of the following would be correct legal name of the insured in a contact of insurance: a. The corner store b. John's Corner Store c. J.D.'s Corner Store d. The Corner Store Ltd - Correct Ans-d. The Corner Store Ltd All contracts require that five elements be present if the contract is to be enforceable by law. An insurance contract is enforceable only if it contains the following three additional interest: a. Insurable Interest, Utmost Good Faith b. Insurable Interest, Consideration, Indemnity c. Insurable Interest, Indemnity, Utmost Good Faith d. Insurable Interest, Indemnity, Genuine Intention - Correct Ans-c. Insurable Interest, Indemnity, Utmost Good Faith If your clients do not advise the insurer of previous losses when required to do so, they have violated an essential principle of insurance contracts. This principle is: a. Legality of Object b. Utmost good faith c. Insurable Interest d. Indemnity - Correct Ans-b. Utmost good faith To bind a risk means: a. That the broker has committed an insurer to provide a contract of insurance on the subject matter under discussion b. Finding a company willing to give a quote on a risk c. Getting underwriting information from a client d. Automatically renewing an existing policy - Correct Ans-a. That the broker has committed an insurer to provide a contract of insurance on the subject matter under discussion Water Water The property and casualty insurance compensation corporation (PACICC) was formed for this purpose: a. To have all insurers share in the payment of claims arising out of a single catastrophe b. To spread the costs of suspected fraudulent claims amongst all insurers c. To provide consumers with insurance protection in the event of an insurer insolvency d. To monitor the solvency of federally licensed insurers - Correct Ans-c. To provide consumers with insurance protection in the event of an insurer insolvency Insurance brokers have a fiduciary responsibility to their clients. The following statement best summarizes the extent of the broker's fiduciary responsibility: a. The commission for the policy is considered to be fully earned b. The total commission earned is returned to the insured c. The unearned portion of the commission is returned to the insured d. The commission, less 50%, is required to be returned to the insured - Correct Ans-c. The unearned portion of the commission is returned to the insured Under the terms of the Insurance Act, property which is necessarily removed to prevent further damage is covered at the new location: a. For seven days or until the policy expires b. For seven days, but only if a removal permit is attached to the policy c. For a reasonable time d. Until the original location is repaired - Correct Ans-a. For seven days or until the policy expires Subrogation refers to: a. The amount the insurance company receives from a person who is legally responsible for loss b. The right of the insurance company to recover payments made under the policy from another person who is legally responsible for the loss c. The right of the insurance to take over the salvage after the claim has been made d. The right of the insured's to collect the amount of their loss from either the insurer or the person responsible - Correct Ans-b. The right of the insurance company to recover payments made under the policy from another person who is legally responsible for the loss Every policy of "Fire" insurance: a. Usually covers fire, smoke, and specific types of explosions b. Is required by law to cover fire, windstorm, and lightening c. Covers fire, explosion, and windstorm Water Water d. Is required by law to cover at least fire, lightening, and specified types of explosions - Correct Ans-d. Is required by law to cover at least fire, lightening and specified types of explosions Your clients recently burnt a large pot roast when a fire broke out in their kitchen oven. This loss to the roast is considered to be a result of: a. Direct fire b. Indirect fire c. Hostile fire d. Friendly fire - Correct Ans-d. Friendly fire Statutory conditions found in all policies of "fire" insurance: a. Outline the duties and responsibilities of the insured and the insurer b. Specify the coverages provided c. State the rights of third parties d. Are not expressly required by law - Correct Ans-a. Outline the duties and responsibilities of the insured and the insurer When an insured knowingly fails to reveal all material information when applying for insurance and their is a subsequent loss under the policy, the insurer: a. Must pay the insured's claim b. Must continue the policy until expiry, but may choose not to renew it c. May void the policy only if it is able to show that the misrepresentation was directly linked to the loss d. May sue the insured for misrepresentation - Correct Ans-c. May void the policy only if it is able to show that the misrepresentation was directly linked to the loss In the following case, the insurer must give consent to transfer an existing insurance contract: a. When the insured's sell their home and the new owners want to continue the existing policy b. When there has been a change in title to the insured's property after the death of the insured c. When there has been an authorization assignment under the bankruptcy act d. When the insured becomes insane and title to the insured property is given to another by order of the court - Correct Ans-a. When the insured's sell their home and the new owners want to continue the existing policy The statutory conditions provide that the insured must promptly notify the insurer of any material change. A material change is one which: Water Water a. Results in damage to goods caused by their undergoing a process involving the application of heat b. Due to a bylaw change, provides for use of materials inferior to those that existed at the time the insurance policy was purchased c. Results in damage to buildings/contents caused by alterations or additions d. Introduces a new feature which increases the chance of loss - Correct Ans-d. Introduces a new feature which increases the chance of loss Your clients insurance policy was recently cancelled for non-payment of premium, six days after the notice of termination was mailed by the insurer, your client has a loss: a. The loss would not be covered because not premium has been paid b. The mailing of the notice automatically cancels the policy after five days c. The loss is covered because 15 days notice must be given by registered mail d. The loss would be covered but only in proportion to the time the policy was in effect - Correct Ans-c. The loss is covered because 15 days notice must be given by registered mail Your client recently had a burglary, in the documents filed with the insurance company, she made a claim for a $12,000 TV set she never had. This is an example of: a. Breach of Warranty b. Fraud c. Misrepresentation d. Material Change - Correct Ans-b. Fraud Your clients building is insured against fire, with loss payable to Dogwood trust company as a mortgagee. The property is destroyed by fire, but, before he can file proof of loss, your client dies without a will and with no one to look after his affairs. A proof of loss may ne filed by: a. No one b. The insurance Company c. The superintendent of insurance d. The dogwood trust company - Correct Ans-d. The dogwood trust company Your client has made application for appraisal. The intent of the appraisal process is to settle the dispute between your client and the insured regarding: a. The amount of the settlement being offered b. The denial of insurance coverage under the policy c. The right of the insured to purchase the salvage after an insured loss d. The premium change for coverages being provided by the insurer - Correct Ans-a. The amount of the settlement being offered Under a policy of "fire" insurance, the insurer must make payments for a loss within: Water Water a. 60 days after completion of the proof of loss b. 90 days after completion of the proof of loss c. 60 days after completion of the proof of loss, unless the contract provides a shorter period d. One year from the dates the loss occurred - Correct Ans-c. 60 days after the completion of the proof of loss, unless the contract provides a shorter period When the insurer opts to repair, rebuild, or replace damaged property rather than make payment in the form of a cash settlement it must: a. First provide the insured with the option of accepting or rejecting the proposed basis of settlement b. Provide the insured with written notice of the intention to do so within 30 days after receipt of proof of loss c. Seek the consent of the insured's mortgagee d. Advise the insured's broker or agent of its decision - Correct Ans-b. Provide the insured with written notice of the intention to do so within 30 days after receipt of proof of loss This is the most common of errors and omissions claims, accounting for nearly 50% of all claims a. Policy change errors b. Processing delays c. Cancellation of renewal errors d. Inadequate coverage - Correct Ans-d. Inadequate coverage A physical hazard is: a. A type of peril b. The same as a moral hazard c. A condition relating to the premises which may cause a peril to occur d. The possibility of a loss due to the character of the insured - Correct Ans-c. A condition relating to the premises which may cause a peril to occur There is no one standard policy. Insurance companies provide consumers with a variety of operation or choices from which they can select the policy which is best for them. When you sell broad form of comprehensive form, your should advise the client that the policy insures: a. All risks it is possible to assume, without exception b. All risks, except earthquake and radioactive contamination c. All risk, except theft from the interior of an unlocked car Water Water d. All risks of direct physical loss or damage, subject to the policy conditions and exclusions - Correct Ans-d. All risks of direct physical loss or damage, subject to the policy conditions and exclusions Property policies contain two types of exclusions - one for property excluded and one for perils excluded. All of the following property items are normally excluded by property policies, except one. Pick the exception: a. Automobiles b. Yard and maintenance equipment c. Money and securities d. Property which has been vacant for more than 30 consecutive days - Correct Ans-b. Yard and maintenance equipment Under a policy of insurance, a "deductible" is: a. payable by the insureds only if they are responsible for the loss b. Payable by the insured's only when the insurer disputes the amount of its liability for the loss c. The amount the insured is required to absorb for each loss before receiving any payment from the insurer d. The responsibility of the broker - Correct Ans-c. The amount the insured is required to absorb for each loss before receiving any payment from the insurer Every property insurance policy describes the method used to pay claims. Normally, the insurer will pay the lesser of the three amounts in the event of a claim. One factor which does not enter into this calculation is: a. The actual cash value of the property b. The original cost of the property c. The insured's interest in the property d. The policy limit - Correct Ans-b. The original cost of the property Your clients furniture store is insured under a commercial property insurance policy to which a replacement cost endorsement is attached. To qualify for settlement on a replacement cost basis. The insured must comply with all of the following obligations, except one. Pick the exception: a. Replacement shall be effective by the insured with due diligence and dispatch b. Replacement shall be on the same site on an adjacent site c. Replacement shall commence within 45 days of the insurer agreeing to pay the loss d. Payment of the loss on a replacement cost basis shall be provided only after the insured has actually repaired or replaced the property - Correct Ans-c. Replacement shall commence within 45 days of the insurer agreeing to pay the loss The chief advantage of replacement cost coverage is: Water Water a. No deductible for depreciation b. Only limited depreciation is charged to the insured c. The insured receives a settlement based on replacement cost, even if the property is not replaced d. It removes the effect of the bylaws exclusion - Correct Ans-a. No deductible for depreciation Which of the following statements is true when a standard mortgagee clause is attached to the policy? a. The insurer could be called upon to pay a loss of the mortgagee, even though the insured violated a policy or other condition b. The insurer can reduce the coverage at any time at the request of the insured, even if such changes prejudice the position of the mortgagee c. The insurer may cancel the policy at any time by providing the mortgagee with seven days notice of cancellation by registered mail d. Neither the insured nor the insurer may cancel the policy until the mortgage has been paid off - Correct Ans-a. The insurer could be called upon to pay a loss of the mortgagee, even though the insured violated a policy or other condition The personal property of all the following persons would be insured under the homeowners form, except one. Pick the exception. a. Grandmother living with the insured b. Roomers or boarders living with the insured c. Daughter over 21 years of age living with the insured d. Common-Law spouse who has lived with the insured for five years - Correct Ans-b. Roomers or boarders living with the insured The homeowners forms contain a number of "extensions of coverage". All of the following statements, respecting these coverage extensions are true, except one. Pick the exception. a. Coverage is provided for lock replacement when the keys to the insured dwelling have been lost or stolen b. Property which is necessarily removed to protect it from loss or damage is insured for 30 days or until the expiry of the policy. Whichever occurs first c. If the amount payable for loss, including expenses for debris removal, is greater than the amount of insurance, an additional 5% of that amount will be available to cover debris removal expenses d. Coverage is automatically extended for a minimum of 30 days to insure personal property while in transit to and at another location in Canada which is to be occupied by the insured's as their principal dwelling - Correct Ans-a. Coverage is provided for lock replacement when the keys to the insured dwelling have been lost or stolen Water Water The homeowners forms contain a number of extensions of coverage. One such coverage is that for freezer food. All of the following statement respecting this extension of coverage are true, except one. Pick the exception. a. Coverage is provided when there is an accidental interruption of electrical power on or off the insured's premises b. Coverage is provided for loss of freezer food due to mechanical breakdown of the food freezer c. Coverage is provided for loss to freezer food due to the accidental or intential disconnection of the power supply or