Fundamentals to Insurance Final
Exam Questions with All Guaranteed
Pass Solutions 2025-2026 Updated.
Chapter 1 - Intro - Answer
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
,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 - Answer
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
,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
, 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
Exam Questions with All Guaranteed
Pass Solutions 2025-2026 Updated.
Chapter 1 - Intro - Answer
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
,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 - Answer
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
,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
, 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
