Fundamentals of Insurance - Practice Exam (updated 2022) All answers
are 100% Correct [DISTINCTION LEVEL]
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 Correct 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 Correct 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 Correct
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
Correct 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 Correct 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
Correct 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 Correct 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 Correct 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 Correct 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 Correct 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
d. To monitor the solvency of federally licensed insurers Correct Answer: c. To
provide consumers with insurance protection in the event of an insurer
insolvency
Insurance brokers have a fiduciary responsibility to their clients. The following
statement best summarizes the extent of the broker's fiduciary responsibility:
a. The commission for the policy is considered to be fully earned
b. The total commission earned is returned to the insured
c. The unearned portion of the commission is returned to the insured
d. The commission, less 50%, is required to be returned to the insured Correct
Answer: c. The unearned portion of the commission is returned to the insured
Under the terms of the Insurance Act, property which is necessarily removed to
prevent further damage is covered at the new location:
are 100% Correct [DISTINCTION LEVEL]
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 Correct 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 Correct 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 Correct
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
Correct 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 Correct 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
Correct 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 Correct 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 Correct 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 Correct 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 Correct 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
d. To monitor the solvency of federally licensed insurers Correct Answer: c. To
provide consumers with insurance protection in the event of an insurer
insolvency
Insurance brokers have a fiduciary responsibility to their clients. The following
statement best summarizes the extent of the broker's fiduciary responsibility:
a. The commission for the policy is considered to be fully earned
b. The total commission earned is returned to the insured
c. The unearned portion of the commission is returned to the insured
d. The commission, less 50%, is required to be returned to the insured Correct
Answer: c. The unearned portion of the commission is returned to the insured
Under the terms of the Insurance Act, property which is necessarily removed to
prevent further damage is covered at the new location:
