Fundamentals of Insurance Exams Questions
and Answers | Detailed Review with Correct
Solutions | Grade A+
The definition of insurance in the Insurance Act includes all of the following
important points, except one. Pick the exception:
a. Payment is made only when a certain peril has damaged the object of insurance
b. Payment is limited to the actual amount of the loss — no more and no less
c. There is no payment for losses that are deliberately caused by an insured
d. The indemnity must always be in the form of a sum of money; no other method
is permitted by law -✓✓a. The indemnity must always be in the form of a sum of
money; no other method is permitted by law
The majority of insurance companies use independent brokers to sell their
insurance policies to the public. Which of the following statements does NOT
apply to this system of distribution?
a. Independent brokers are employees of the insurance companies they represent
b. Independent brokers receive commissions from their insurers for the business
they produce
c. Independent brokers can represent more than one insurance company
d. Independent brokers own all of their client files -✓✓a. Independent brokers are
employees of the insurance companies they represent
When dealing with financial risk a person has several options available. In your
opinion, which of the following is the best option for most people?
a. Avoidance of risk
b. Retention of the risk
c. Controlling the risk
d. Transfer of the risk -✓✓a. Transfer of the risk
Risk as the "chance of financial loss" can be classified as either speculative or
pure. Which of the following best describes the meaning of pure risk?
a. There is no chance of financial loss
b. There is a chance of financial gain
c. Financial loss and financial gain are both present
d. There is only the chance of financial loss with no chance of profiting from it -
✓✓a. There is only the chance of financial loss with no chance of profiting from it
, A contract is legally enforceable only when all legal elements are present. Only an
insurance contract contains the following element:
a. Genuine intention
b. Legality of the object
c. Consideration
d. Indemnity -✓✓a. Indemnity
"Consideration" is required of all parties to a contract. Consideration means:
a. Thinking about purchasing insurance
b. An agreement by the insurer to treat the insured fairly
c. An exchange of something of value between the parties
d. A commitment by the broker to represent an insurance company -✓✓a. An
exchange of something of value between the parties
Legal capacity of the parties is an important element to a contract. Only the
following party has the legal capacity to enter into a contract of insurance.
a. Sweet Cravings Bakery
b. Tools 4 U Enterprises
c. Mario Montana Sportswear Ltd.
d. Jack Daniels a.k.a. Jacks Liquors -✓✓a. Mario Montana Sportswear Ltd.
Insurance brokers are often asked to provide a binder to the insured. A Binder is
a. An insurance policy issued by the broker
b. A cover for an insurance manual
c. When a broker has committed an insurer to a contract of insurance on a risk
d. Never legal when it was given orally -✓✓a. When a broker has committed an
insurer to a contract of insurance on a risk
All changes to an existing insurance policy must be in writing. Which document
does the insurer issue when both the insurer and insured have agreed to a change in
the terms of the policy.
a. A rider
b. An endorsement
c. A binder
d. A floater -✓✓a. An endorsement
In Canada the General Insurance Industry is strictly regulated by federal and
provincial statutes. The Provincial Government performs all of the following
and Answers | Detailed Review with Correct
Solutions | Grade A+
The definition of insurance in the Insurance Act includes all of the following
important points, except one. Pick the exception:
a. Payment is made only when a certain peril has damaged the object of insurance
b. Payment is limited to the actual amount of the loss — no more and no less
c. There is no payment for losses that are deliberately caused by an insured
d. The indemnity must always be in the form of a sum of money; no other method
is permitted by law -✓✓a. The indemnity must always be in the form of a sum of
money; no other method is permitted by law
The majority of insurance companies use independent brokers to sell their
insurance policies to the public. Which of the following statements does NOT
apply to this system of distribution?
a. Independent brokers are employees of the insurance companies they represent
b. Independent brokers receive commissions from their insurers for the business
they produce
c. Independent brokers can represent more than one insurance company
d. Independent brokers own all of their client files -✓✓a. Independent brokers are
employees of the insurance companies they represent
When dealing with financial risk a person has several options available. In your
opinion, which of the following is the best option for most people?
a. Avoidance of risk
b. Retention of the risk
c. Controlling the risk
d. Transfer of the risk -✓✓a. Transfer of the risk
Risk as the "chance of financial loss" can be classified as either speculative or
pure. Which of the following best describes the meaning of pure risk?
a. There is no chance of financial loss
b. There is a chance of financial gain
c. Financial loss and financial gain are both present
d. There is only the chance of financial loss with no chance of profiting from it -
✓✓a. There is only the chance of financial loss with no chance of profiting from it
, A contract is legally enforceable only when all legal elements are present. Only an
insurance contract contains the following element:
a. Genuine intention
b. Legality of the object
c. Consideration
d. Indemnity -✓✓a. Indemnity
"Consideration" is required of all parties to a contract. Consideration means:
a. Thinking about purchasing insurance
b. An agreement by the insurer to treat the insured fairly
c. An exchange of something of value between the parties
d. A commitment by the broker to represent an insurance company -✓✓a. An
exchange of something of value between the parties
Legal capacity of the parties is an important element to a contract. Only the
following party has the legal capacity to enter into a contract of insurance.
a. Sweet Cravings Bakery
b. Tools 4 U Enterprises
c. Mario Montana Sportswear Ltd.
d. Jack Daniels a.k.a. Jacks Liquors -✓✓a. Mario Montana Sportswear Ltd.
Insurance brokers are often asked to provide a binder to the insured. A Binder is
a. An insurance policy issued by the broker
b. A cover for an insurance manual
c. When a broker has committed an insurer to a contract of insurance on a risk
d. Never legal when it was given orally -✓✓a. When a broker has committed an
insurer to a contract of insurance on a risk
All changes to an existing insurance policy must be in writing. Which document
does the insurer issue when both the insurer and insured have agreed to a change in
the terms of the policy.
a. A rider
b. An endorsement
c. A binder
d. A floater -✓✓a. An endorsement
In Canada the General Insurance Industry is strictly regulated by federal and
provincial statutes. The Provincial Government performs all of the following
