Fundamentals of Insurance Practice Exam
Questions with Verified Answers
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 - Answer 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 - Answer 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 - Answer 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 - Answer 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
d. Transfer of Risk - Answer 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 - Answer 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 - Answer 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 - Answer 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 - Answer 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 - Answer a. That the broker has committed an insurer to
provide a contract of insurance on the subject matter under discussion
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
Questions with Verified Answers
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 - Answer 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 - Answer 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 - Answer 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 - Answer 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
d. Transfer of Risk - Answer 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 - Answer 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 - Answer 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 - Answer 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 - Answer 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 - Answer a. That the broker has committed an insurer to
provide a contract of insurance on the subject matter under discussion
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
