Fundamentals 1: BC

Question 1

One of the clauses contained in Commercial Property insurance policies is the Co-Insurance Clause. The purpose for including this clause in the policy is to

Answer 1

Limit the claims payment after a partial loss when the insurer finds that the insured has deliberately underinsured the values

Question 2

An underwriter is required to perform numerous task, however, the primary function of an Underwriter is to

Answer 2

Select those risks that are most likely to be profitable to the insurer

Question 3

Insurance Brokers are often asked to issue a “binder” as confirmation of the existence of valid insurance. A broker’s authority to commit the insurer to a contract:

Answer 3

Is stated in the “Agency Agreement” between the insurer and the brokerage and applies to specific types of risks and limits

Question 4

The Homeowners Basic Form (IBC1151) provides coverage for Glass Breakage. Under the peril all of the following losses, except one, are insured. Select the loss for which coverage is excluded under this form.

Answer 4

“Breakage of the glass table top which slipped out of the helpers’ hands during the move to the insured’s new residence”

Question 5

What is the Special Limit of insurance for stolen jewelry

Answer 5

$2,000

Question 6

Your client is the owner of a condominium and is currently covered under the condominium unit owners package (IBC 1165), which includes Loss Assessment coverage. She does not believe that this coverage is important. You advise her that the loss assessment coverage would respond to all the following claims, except one. Pick the exception.

Answer 6

The portion of the cost to replace personal property damaged by fire because of an inadequate limit under her own policy

Question 7

Select the term that matches the following statement:

A wrongful act or infringement of a right legally recognized as grounds for a lawsuit, especially if it causes injury or harm.

Answer 7

Tort

Question 8

The professional liability exposure of insurance brokers is ONLY insured under a policy of:

Answer 8

Errors and omission insurance

Question 9

The insurance meaning given to “risk” refers to the:

Answer 9

Chance of financial loss to which the object of insurance may be exposed

Question 10

If the insured breaches a policy condition the Standard Mortgage Clause guarantees the mortgagee will be paid;

Answer 10

Their interest

Question 11

Under the Homeowners’ Basic Form (IBC 1151) the following loss is not insured:

Answer 11

Damage caused by vandalism to a dwelling building in the course of construction

Question 12

In regards to Crime Insurance, the following are policies that would provide an array of coverages. Pick the exception.

Answer 12

Hold-up

Question 13

Property excluded and Perils excluded are the two types of exclusions found on Property Policies. The following is a list of common exclusions. Pick the exceptions.

Answer 13

Sporting equipment

Question 14

Both, insurance companies and brokers are considered fiduciaries. Under the Insurance Act, the fiduciary responsibility of a broker requires that

Answer 14

Unearned commissions are held in the trust to be available should the policy be terminated before the expiry

Question 15

A doctor’s visit or hospitalization while traveling outside the provinces of Canada would be catastrophic if there is no insurance to cover medical expenses. As a broker, you would strongly advise our clients to purchase travel insurance, which is designed to pay all of the following expenses, except one. Pick the exception:

Answer 15

The cost for a pre-arranged medical procedure at a health clinic abroad

Question 16

What is not a provision of building replacement cost;

Answer 16

Replacement shall be made on property damaged only by the peril of fire

Question 17

The Builders’ Risk-Board Form can be used to insure all of the following items, except one. Pick the exception:

Answer 17

Contractor’s tools and equipment

Question 18

In the event of an occurrence, claim or action, the insured under a liability policy must do all the following, except one. Pick the exception:

Answer 18

Make such voluntary payments on behalf of the insurer as are required interim to satisfy the plaintiff

Question 19

All Homeowners Policies contain the section “Extensions of Coverage”. All the following losses are covered under this section, except one. Pick the exception:

Answer 19

The cost to repair the “tear out” damage to the insured’s driveway that was necessarily caused to replace the ruptured water main

Question 20

In Canada the General Insurance Industry is strictly regulated by federal and provincial statutes. The provincial government performs all of the following functions, except one. Pick the exception.

Answer 20

Establishing premium levels for insurance contracts

Question 21

Regardless of which coverage is selected the underwriting is the same for all Homeowners Forms. The amount of insurance applicable to coverage B - Detached Private Structures is

Answer 21

10% of Coverage A - Dwelling Building, which is in addition to the amount of insurance stated for Coverage A

Question 22

Which of the following properly described Off-Premises Coverage

Answer 22

Provides coverage for personal property temporarily away from the insured premises insured anywhere in the world

Question 23

The financial solvency of insurers is a crucial matter. Solvency refers to

Answer 23

The ability of an insurer to pay for all insured losses

Question 24

Your client lost jewelry during a recent burglary and reported the loss of a matching gold necklace with pendant and earrings. However, the insured found one of the earrings under her bed, but she claimed the full set value. How will the insurer settle this loss?

Answer 24

Your client will receive a settlement for the value claimed less the value of one earring

Question 25

Loss of property, money and securities due to burglary, robbery or theft is a major concern for many business owners. For this reason, your client has purchased Safe Burglary Insurance. All of the following statements regarding this coverage are correct, excerpt one. Select the statement that is incorrect.

Answer 25

This coverage will respond to a loss of property from a safe regardless of the cause, so long as the insured is able to prove the value lost.

Question 26

The law requires that insurance brokers exercise “reasonable skill, care and diligence” in carrying out their duties. Failure to do so can result in an Errors and Omissions claim against the broker. The main reason for Errors and Omissions claims is due to

Answer 26

The failure to properly identify the client’s loss exposures and offering the required coverages

Question 27

What is the purpose of an Appraisal insurance?

Answer 27

Determines the value of an object

Question 28

One of the elements that determine whether a contract is legally enforceable or not is the “legal capacity of the parties”. In all of the following contracts, except one, the parties are considered to have “legal capacity”. Select the one which does not meet this element.

Answer 28

An invoice for merchandise shipped to the order of Mandy’s Souvenir and Gift Shop

Question 29

In regards to the liability for Independent Contractors, when would the occupier not be held responsible?

Answer 29

When the occupier provided blue prints of the work to be done.

Question 30

The following are examples of factors used to determine the amount to be paid. Pick the exception.

Answer 30

Purchase price of the object

Question 31

The following items are all subject to a Special limit of insurance. Pick the exception.

Answer 31

Computer hardware

Question 32

All homeowners policies define the persons who are deemed to be an insured. All of the following persons are insured, except one. Pick the exception:

Answer 32

The tenant who occupies the basement suite in the insured’s dwelling

Question 33

An insured has purchased a policy in on their commercial building and is insuring it with an 80% co-insurance limit. The building has been evaluated at $180,000. What is the minimum amount the insured should insure the building for?

Answer 33

$144,000

Question 34

When the insurer opts to repair, rebuild or replace damaged property rather than make payment in the form of cash settlement, it must:

Answer 34

Provide the insured with written notice of its intention to do so within 30 days after receipt of proof of loss

Question 35

Coverage under the Builders’ Risk - Broad Form usually ends automatically

Answer 35

When construction of the project is completed and the building is occupied

Question 36

Debris removal is available when loss or damage is caused by an insured peril. Which of the following is the limit provided for this coverage?

Answer 36

5% above the amount of insurance

Question 37

When the insurer has indemnified the insured for a loss caused by a third party, the insurer has a legal right of recovery from that party. This legal process is referred to as

Answer 37

Subrogation

Question 38

“Consideration” is required of all parties to a contract. Consideration means:

Answer 38

An exchange of something of value between the parties

Question 39

When do you have to notify the company of a change in title?

Answer 39

Change of the title due to sale

Question 40

Personal property temporarily removed is insured under the Homeowners Form…

Answer 40

Anywhere in the world

Question 41

All of the following are covered by a Basic Form Policy. Pick the exception

Answer 41

Explosion of the pipe in the basement due to water hammer

Question 42

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?

Answer 42

Transfer of the risk

Question 43

Which form of the business interruption insurance provides the best coverage?

Answer 43

Profits Form.

Question 44

Your client has made an application for “appraisal”. The intent of the appraisal process is to settle the dispute between your client and the insurer regarding the:

Answer 44

Amount of the settlement being offered

Question 45

Most liability policies provide coverage on an occurrence basis. All of the following statements, except one, correctly describe what the policy covers. Select the statement which is incorrect:

Answer 45

The amount of insurance stated on the policy is the maximum amount payable for all occurrences, which happened during the policy period

Question 46

An insurance broker is;

Answer 46

Not a party to the contract.

Question 47

A fire partially damaged the insured’s garage and destroyed some of the personal property, which was stored there. The insured called you because the insurer has advised that, except for one, all of the following damaged items are subject to a special limit. Select the item for which the insured will receive the full value.

Answer 47

A leather coat lined with fur valued at $2,500 kept in a closet in the garage for winter storage

Question 48

The loss of money due to actual destruction, disappearance or wrongful abstraction would be property insured under the following policy:

Answer 48

Money and Securities (Broad Form)

Question 49

When determining the required premium for insuring commercial property the underwriter will first establish the fire rate. For this purpose the underwriter will consider all of the following factors, except one. Select the one, which is not a factor in determining the fire rate.

Answer 49

The number of employees in the insured’s business

Question 50

Property policies exclude certain types of property. All of the following properties are generally excluded, except one. Select the exception:

Answer 50

A building that to the insured’s knowledge has been vacant for more than 15 days

Question 51

The limit of insurance on building would include;

Answer 51

The value of perimeter fencing

Question 52

Law states that every insurance policy for Fire must cover

Answer 52

Lightning, fire and certain types of explosions

Question 53

When will Homeowners Liability cover the following money making ventures?

Answer 53

Rental of 3 parking lot spaces to neighbors.

Question 54

Personal property temporarily removed is insured under the Homeowners Form…

Answer 54

Anywhere in the world

Question 55

If the insured breaches a policy condition the Standard Mortgage Clause guarantees the mortgagee will be paid;

Answer 55

Their interest

Question 56

When an insurer terminates a policy all of the following conditions must be followed, except one, for the termination to be valid.

Answer 56

The refund must be calculated on a short rate basis.

Question 57

The Removal Clause requires the insurer to extend coverage to another location where the insured property is kept, even if this location is not stated on the policy. Only one of the following situations would qualify for this coverage

Answer 57

The insured moved personal property to a storage facility to protect it from loss because of an encroaching forest fire

Question 58

When does liability insurance cover you?

Answer 58

As a private citizen anywhere in the world.

Question 59

A lawsuit alleging damage to a neighboring property during excavation work was filed against the property owner and the contractor. All the following statements regarding the legal liability for injury or property damage arising out of the work performed by a contractor are true, except one. Pick the exception:

Answer 59

The owner will always be held liable for injury or property damage resulting from the work performed by the contractor

Question 60

All Homeowners policies include the section of “Extensions of Coverage”. Which of the following statements pertaining to this coverage section is incorrect?

Answer 60

The insurer will cover lock replacement when the insured’s keys have been lost or stolen

Question 61

All of the following statements apply to the Statutory Conditions, except one. Pick the exception.

Answer 61

Even if the insured had a reasonable chance to protect property from loss but failed to do any such thing, this usually does not effect the claim settlement

Question 62

Your client is the owner of a condominium and is currently covered under the condominium unit owners package (IBC 1165), which includes Loss Assessment coverage. She does not believe that this coverage is important. You advise her that the loss assessment coverage would respond to all the following claims, except one. Pick the exception.

Answer 62

The portion of the cost to replace personal property damaged by fire because of an inadequate limit under her own policy

Question 63

All Homeowners and Habitational Package policies include liability insurance. Coverage E would respond in all of the following instances, except one. Pick the exception:

Answer 63

Property damage to a third party resulting from the personal actions of a named insured who permanently resides away from the insured premises

Question 64

When an applicant for supplementary travel insurance has a pre-existing condition, coverage is:

Answer 64

May be available if the condition has been under control for a period of time, three or six months depending on the condition

Question 65

The Homeowners Basic Form (BC1151) insures loss or damage caused by Windstorm or Hail. Only one of the following losses would be covered under this peril; select the loss for which the coverage is provided.

Answer 65

Damage to the exterior and interior during a severe windstorm which had ripped off a section of the roof on the insured’s house.

Question 66

Coverage provided for an insured’s records under most policies of commercial property insurance is limited to:

Answer 66

Blank value only

Question 67

when do you have to notify the company of a change in title?

Answer 67

Change of the title due to sale

Question 68

Your clients were forced to temporarily move out of the home after a tree, which was uprooted during a serious windstorm, hit the house causing structural damage. Coverage D - Additional Living Expenses under the Homeowners policy pays additional living expenses due to an insured loss. Which of the following expenses will not be paid under this coverage?

Answer 68

Mortgage payments to the insured’s bank until the insured’s bank until the insured is able to return home

Question 69

Your client lost jewelry during a recent burglary and reported the loss of a matching gold necklace with pendant and earrings. However, the insured found one of the earrings under her bed, but she claimed the full set value. How will the insurer settle this loss?

Answer 69

Your client will receive a settlement for the value claimed less the value of one earring

Question 70

The additional rate or premium charged by the insurer to pay for additional perils insured under a commercial property insurance policy is called:

Answer 70

A loading

Question 71

In the event of a claim there are also a number of Statutory Conditions that affect both the insurer and the insured. One of the following statements regarding these conditions is incorrect. Select the statement that is incorrect.

Answer 71

In the claim the insured included an article she did not even own, therefore, the insurer will only pay for the articles for which the insured can prove ownership

Question 72

The Commercial General Liability Policy insures the liability exposures common to most businesses. Your client is an electrical contractor, who replaced the wiring in a customer’s building. Two days after the work was finished, a fire broke out, and the fire chief determined that it was caused by a faulty connection. Which liability coverage in the CGL would respond to this claim?

Answer 72

Completed Operations Liability

Question 73

Statutory Conditions found in all policies of “fire” insurance:

Answer 73

Outline the duties and responsibilities of the insured and the insurer

Question 74

All of the following are covered by a Basic Form Policy. Pick the exception

Answer 74

Explosion of the pipe in the basement due to water hammer

Question 75

A dentist has rented an office in a strip mall and performed renovations to the space. What insurance will he need to cover this?

Answer 75

Tenants Improvement and Betterments

Question 76

One of the elements that determine whether a contract is legally enforceable or not is the “legal capacity of the parties”. In all of the following contracts, except one, the parties are considered to have “legal capacity”. Select the one which does not meet this element.

Answer 76

An invoice for merchandise shipped to the order of Mandy’s Souvenir and Gift Shop

Question 77

According to the Canadian Legal System, the Insurance Act is:

Answer 77

A statute Law

Question 78

The Installation Floater is designed for contractors that specialize in the installation of machinery or equipment. The following property is not covered by this floater:

Answer 78

Property in warehouse on the insured’s premises

Question 79

Under all Homeowners Forms the coverage for certain personal property articles is restricted to “special limits of insurance” unless the insured has purchased additional insurance. All of the Following objects are not subject to these “special limits” when a loss is caused by the peril of fire, except one. Pick the exception:

Answer 79

Computer games and cd’s with a combined value of $3,600

Question 80

A physical hazard is:

Answer 80

A condition relating to the premises which caused a peril to occur

Question 81

Crime policies define certain terms as they relate to coverage. The broadest meaning is given to:

Answer 81

Theft

Question 82

Under a policy of “fire” insurance, the insurer must make payment for a loss within:

Answer 82

60 days after the completion of the proof of loss unless the contract provides for a shorter period

Question 83

Your client has made an application for “appraisal”. The intent of the appraisal process is to settle the dispute between your client and the insurer regarding the:

Answer 83

Amount of the settlement being offered

Question 84

Which of the following is not an example of Stock?

Answer 84

Leased photocopier

Question 85

This one of the following would result in the claim being paid under Effect of Delivery of Policy as stipulated in the Insurance Act.

Answer 85

Policy cancelled by non-payment suffers a claim 7 days after a registered letter received

Question 86

Select the term that matches the following statement:

Coverage to a limit of $200,000 provided by Autoplan Basic

Answer 86

Third party liability

Question 87

The Property Protection Systems Clause requires the insured to report any flaw, defect or interruption, coming to the knowledge of the insured of all of the following systems, except one. Pick the exception.

Answer 87

Electrical system

Question 88

In the event of an occurrence, claim or action, the insured under a liability policy must do all the following, except one. Pick the exception:

Answer 88

Make such voluntary payments on behalf of the insurer as are required interim to satisfy the plaintiff

Question 89

All of the following are examples of conditions which affect the physical hazards of a risk, except one. Pick the exception.

Answer 89

Financial condition

Question 90

Your client’s insurance policy was cancelled for non-payment of premium. 6 days after the notice of termination was mailed, your client had a loss.

Answer 90

The loss is covered because 15 days’ notice must be given by registered mail

Question 91

The Insurance Act provides that a Waiver of Terms or Conditions of an Insurance contract is:

Answer 91

Not binding, unless it is in writing and under the signature of a person authorized by the insurer

Question 92

‘Indemnity’ means:

Answer 92

Restoring the insureds to the same financial position as they were in immediately prior to the loss

Question 93

The following claim would be insured by the Homeowners’ Basic Form (IBC 1151) under the peril of theft:

Answer 93

Damage to the door and lock persons attempting to break into the insured’s dwelling

Question 94

Glass has one of the broadest coverage wordings including those listed below. Pick the exception.

Answer 94

Glass lamp falling from a shelf

Question 95

Your client is transporting goods in their own vehicles and, because he is concerned about theft of property from a vehicle, has purchased the Commercial Building, Equipment and Stock Broad Form. The insurer has imposed the “Locked Vehicle Warranty,” which requires the insured to

Answer 95

Keep the insured property in a fully enclosed metal compartment in or on the vehicle, close all windows and lock all doors when the vehicle is left unattended

Question 96

The following are examples of factors used to determine the amount to be paid. Pick the exception.

Answer 96

Purchase price of the object

Question 97

The reinstatement clause contained in most policies of commercial property insurance provides that:

Answer 97

The insureds shall have as much insurance on the property after an insured loss as they had immediately prior to it

Question 98

A building worth $360,000 is insured for $90,000 and the policy contains an 80% co-insurance clause. A fire causes $72,000 damage. The insured will recover:

Answer 98

$22,500

Question 99

All of the following are excluded by a Comprehensive Form Policy. Pick the exception.

Answer 99

Smoke damage

Question 100

Only the following person(s) have the authority to change the policy.

Answer 100

An officer of the insurance company.