Fundamentals Of Insurance BC – Questions With
Appropriate Solutions
Define how stock companies work compared to mutual companies.
Correct Answer - 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? Correct
Answer - Mandatory auto insurance, such as ICBC
Identify the two methods of distributing insurance and how they
differentiate. Correct Answer - Direct Writing System
-represent products provided by one company exclusively
Independent brokerage
-represent more than one insurance company
Define Peril Correct Answer - Peril is the cause of loss.
Define Risk Correct Answer - The chance of financial loss to
which the object of insurance may be exposed.
Define the 3 categories of risk: Correct Answer - Personal
Property
Liability
Identify the 4 options for dealing with risk? Which is the most/least
practical? Correct Answer - 1.Controlling of Risk
2.Avoidance of Risk
3. Retention of Risk
4.Transfer of Risk
,Avoidance is the least practical as you cannot avoid bad things.
Transfer is the most practical as you transfer the bulk of risk onto
someone else... aka insurance.
What are the two types of risk? Which is insurable? Correct
Answer - 1) Pure Risk
2) Speculative risk
Only Pure risk is insurable as there is no chance for financial gain.
Define an insurance contract: Correct Answer - An agreement
between two or more parties which is enforceable by law
What are the three elements exclusively required in an insurance
contract? Correct Answer - 1) Insurable interest
2) Utmost good faith
3) Indemnity
Define endorsements or riders on insurance policies: Correct
Answer - Acknowledges a change in the terms of the contract.
Define Floaters: Correct Answer - Used to provide coverage for
property having a high degree of mobility. Musicians harp, plumbers
tools.
Insurance is fiduciary in nature, define fiduciary: Correct Answer
- Means to hold financial trust with a person or organization.
Define the role of the federal government: Correct Answer -
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: Correct Answer -
licensing insurers, establishing premium levels, supervising terms
and conditions of provincial contracts.
Define Solvency: Correct Answer - When insurers are meeting
financial obligations they are considered solvent.
What are the fiduciary responsibilities of insurance companies and
insurance brokers? Correct Answer - 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? Correct Answer - 12:01 am
(midnight) at the address of the named insured
What is the removal clause? Correct Answer - 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? Correct Answer - When
the insured can prove that property was removed in order to
protect it from a peril covered by the policy. Necessarily moved.
For how long can an insured item be kept at an unnamed location
before the coverage is removed? Correct Answer - 7 days or
upon the expiry of the policy, whichever is sooner.
Define Subrogation: Correct Answer - When the insurer has
indemnified the insured against a third party, the insurer has the
legal right to seek recovery from the party.
Appropriate Solutions
Define how stock companies work compared to mutual companies.
Correct Answer - 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? Correct
Answer - Mandatory auto insurance, such as ICBC
Identify the two methods of distributing insurance and how they
differentiate. Correct Answer - Direct Writing System
-represent products provided by one company exclusively
Independent brokerage
-represent more than one insurance company
Define Peril Correct Answer - Peril is the cause of loss.
Define Risk Correct Answer - The chance of financial loss to
which the object of insurance may be exposed.
Define the 3 categories of risk: Correct Answer - Personal
Property
Liability
Identify the 4 options for dealing with risk? Which is the most/least
practical? Correct Answer - 1.Controlling of Risk
2.Avoidance of Risk
3. Retention of Risk
4.Transfer of Risk
,Avoidance is the least practical as you cannot avoid bad things.
Transfer is the most practical as you transfer the bulk of risk onto
someone else... aka insurance.
What are the two types of risk? Which is insurable? Correct
Answer - 1) Pure Risk
2) Speculative risk
Only Pure risk is insurable as there is no chance for financial gain.
Define an insurance contract: Correct Answer - An agreement
between two or more parties which is enforceable by law
What are the three elements exclusively required in an insurance
contract? Correct Answer - 1) Insurable interest
2) Utmost good faith
3) Indemnity
Define endorsements or riders on insurance policies: Correct
Answer - Acknowledges a change in the terms of the contract.
Define Floaters: Correct Answer - Used to provide coverage for
property having a high degree of mobility. Musicians harp, plumbers
tools.
Insurance is fiduciary in nature, define fiduciary: Correct Answer
- Means to hold financial trust with a person or organization.
Define the role of the federal government: Correct Answer -
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: Correct Answer -
licensing insurers, establishing premium levels, supervising terms
and conditions of provincial contracts.
Define Solvency: Correct Answer - When insurers are meeting
financial obligations they are considered solvent.
What are the fiduciary responsibilities of insurance companies and
insurance brokers? Correct Answer - 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? Correct Answer - 12:01 am
(midnight) at the address of the named insured
What is the removal clause? Correct Answer - 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? Correct Answer - When
the insured can prove that property was removed in order to
protect it from a peril covered by the policy. Necessarily moved.
For how long can an insured item be kept at an unnamed location
before the coverage is removed? Correct Answer - 7 days or
upon the expiry of the policy, whichever is sooner.
Define Subrogation: Correct Answer - When the insurer has
indemnified the insured against a third party, the insurer has the
legal right to seek recovery from the party.
