ALBERTA INSURANCE BROKER EXAM|
QUESTIONS AND CORRECT ANSWERS
(VERIFIED ANSWERS) PLUS RATIONALES
2026 Q&A | INSTANT DOWNLOAD PDF
Question 1
A client intentionally withholds material information when applying for
insurance coverage. Which principle is violated?
A. Indemnity
B. Subrogation
C. Utmost good faith
D. Contribution
Correct Answer: C. Utmost good faith
Rationale: Utmost good faith requires full disclosure of all material facts
by both parties. Failure to disclose can render the policy void.
Question 2
An insured suffers a loss and receives compensation exceeding the actual
loss amount. Which principle is breached?
A. Indemnity
B. Insurable interest
C. Proximate cause
D. Subrogation
Correct Answer: A. Indemnity
Rationale: The principle of indemnity ensures that the insured is restored
to their pre-loss financial position, not allowed to profit from a loss.
Question 3
A policyholder transfers their risk to an insurer in exchange for premiums.
This arrangement is known as:
,A. Risk avoidance
B. Risk retention
C. Risk transfer
D. Risk mitigation
Correct Answer: C. Risk transfer
Rationale: Insurance is a formal mechanism of risk transfer, shifting
financial loss from the insured to the insurer.
Question 4
Which term refers to the financial interest an individual must have in the
insured subject?
A. Indemnity
B. Insurable interest
C. Subrogation
D. Contribution
Correct Answer: B. Insurable interest
Rationale: Insurable interest ensures that the policyholder would suffer a
financial loss if the insured event occurs.
Question 5
A fire spreads from one building to another, causing damage. Which
principle determines the cause of loss?
A. Contribution
B. Proximate cause
C. Indemnity
D. Subrogation
Correct Answer: B. Proximate cause
Rationale: Proximate cause identifies the primary cause of a loss when
multiple causes are involved.
,Question 6
An insurer seeks recovery from a third party responsible for a loss after
compensating the insured. This is:
A. Contribution
B. Subrogation
C. Indemnity
D. Reinsurance
Correct Answer: B. Subrogation
Rationale: Subrogation allows the insurer to recover losses from
responsible third parties.
Question 7
Which policy component specifies the risks covered and excluded?
A. Declarations
B. Insuring agreement
C. Conditions
D. Endorsements
Correct Answer: B. Insuring agreement
Rationale: The insuring agreement outlines the scope of coverage
provided by the policy.
Question 8
A policy endorsement modifies the original contract. What is its primary
purpose?
A. Cancel the policy
B. Adjust coverage terms
C. Increase premiums automatically
D. Replace underwriting
Correct Answer: B. Adjust coverage terms
, Rationale: Endorsements are used to add, remove, or modify policy
coverage.
Question 9
Which type of insurance covers physical damage to property?
A. Liability insurance
B. Property insurance
C. Life insurance
D. Health insurance
Correct Answer: B. Property insurance
Rationale: Property insurance protects against damage or loss of
physical assets.
Question 10
A deductible in an insurance policy primarily serves to:
A. Increase insurer liability
B. Reduce premium costs
C. Eliminate risk
D. Guarantee claims
Correct Answer: B. Reduce premium costs
Rationale: Higher deductibles lower premiums by shifting some loss
responsibility to the insured.
Question 11
Which risk is insurable?
A. Speculative risk
B. Pure risk
C. Gambling risk
D. Market risk
QUESTIONS AND CORRECT ANSWERS
(VERIFIED ANSWERS) PLUS RATIONALES
2026 Q&A | INSTANT DOWNLOAD PDF
Question 1
A client intentionally withholds material information when applying for
insurance coverage. Which principle is violated?
A. Indemnity
B. Subrogation
C. Utmost good faith
D. Contribution
Correct Answer: C. Utmost good faith
Rationale: Utmost good faith requires full disclosure of all material facts
by both parties. Failure to disclose can render the policy void.
Question 2
An insured suffers a loss and receives compensation exceeding the actual
loss amount. Which principle is breached?
A. Indemnity
B. Insurable interest
C. Proximate cause
D. Subrogation
Correct Answer: A. Indemnity
Rationale: The principle of indemnity ensures that the insured is restored
to their pre-loss financial position, not allowed to profit from a loss.
Question 3
A policyholder transfers their risk to an insurer in exchange for premiums.
This arrangement is known as:
,A. Risk avoidance
B. Risk retention
C. Risk transfer
D. Risk mitigation
Correct Answer: C. Risk transfer
Rationale: Insurance is a formal mechanism of risk transfer, shifting
financial loss from the insured to the insurer.
Question 4
Which term refers to the financial interest an individual must have in the
insured subject?
A. Indemnity
B. Insurable interest
C. Subrogation
D. Contribution
Correct Answer: B. Insurable interest
Rationale: Insurable interest ensures that the policyholder would suffer a
financial loss if the insured event occurs.
Question 5
A fire spreads from one building to another, causing damage. Which
principle determines the cause of loss?
A. Contribution
B. Proximate cause
C. Indemnity
D. Subrogation
Correct Answer: B. Proximate cause
Rationale: Proximate cause identifies the primary cause of a loss when
multiple causes are involved.
,Question 6
An insurer seeks recovery from a third party responsible for a loss after
compensating the insured. This is:
A. Contribution
B. Subrogation
C. Indemnity
D. Reinsurance
Correct Answer: B. Subrogation
Rationale: Subrogation allows the insurer to recover losses from
responsible third parties.
Question 7
Which policy component specifies the risks covered and excluded?
A. Declarations
B. Insuring agreement
C. Conditions
D. Endorsements
Correct Answer: B. Insuring agreement
Rationale: The insuring agreement outlines the scope of coverage
provided by the policy.
Question 8
A policy endorsement modifies the original contract. What is its primary
purpose?
A. Cancel the policy
B. Adjust coverage terms
C. Increase premiums automatically
D. Replace underwriting
Correct Answer: B. Adjust coverage terms
, Rationale: Endorsements are used to add, remove, or modify policy
coverage.
Question 9
Which type of insurance covers physical damage to property?
A. Liability insurance
B. Property insurance
C. Life insurance
D. Health insurance
Correct Answer: B. Property insurance
Rationale: Property insurance protects against damage or loss of
physical assets.
Question 10
A deductible in an insurance policy primarily serves to:
A. Increase insurer liability
B. Reduce premium costs
C. Eliminate risk
D. Guarantee claims
Correct Answer: B. Reduce premium costs
Rationale: Higher deductibles lower premiums by shifting some loss
responsibility to the insured.
Question 11
Which risk is insurable?
A. Speculative risk
B. Pure risk
C. Gambling risk
D. Market risk
