Midterm 2

Question 1

Which of the following can be best defined as the ability for the insurer to assume the insured’s legal rights?

A) Indemnity
B) Subrogation
C) Hold Harmless Agreement
D) Contractual Risk Transfer

Answer 1

B

Question 2

The indemnity agreement outlines…

A) How insureds will be made whole

B) The value of items lost

C) How insurance will be paid

D) The amounts kept by the insurer upon policy cancellation

Answer 2

A. “Made whole” is just fancy talk for compensated

Question 3

David, your client, just bought a brand new TV with his friend for $1000. He paid for 60% of the TV and his friend paid for 40%. After speaking with you at length about his insurance coverage, he opts to purchase Actual Cash Value coverage with a limit of insurance of $800 for the TV. A few days later, his TV is completely destroyed in a cooking accident. According to the indemnity agreement, how much would David receive from the insurer?

Answer 3

480.

The indemnity agreement states that he would receive the lesser of 3 numbers:
- The limit of insurance ($800),
- The actual cash value ($1000), and
- His insurable interest (60%).
Because he owns 60% of the TV, he is entitled to 60% of the payout received for the damage. He gets 60% x $800 = ($480).
The lesser of the 3 numbers is $480

Question 4

According to the Insurance Act, the most basic coverage is fire. In addition, it also stipulates that other coverage must be provided as well. Which of the following is not a coverage required by the Insurance Act?

A) Direct lightning damage
B) Lightning damage to electrical devices
C) Explosion of natural gas
D) Explosion of manufactured gas

Answer 4

B. That’d be in the Homeowners Basic Form.

Question 5

Which of the following type of property has a special limit of $2500 when damaged by any peril?

A) Securities
B) Personal property of students away at school
C) Garden tractors
D) Spare car parts

Answer 5

B

Question 6

Are motorcycles included in bike or automobile insurance?

Answer 6

Automobile since they have a motor like motorboats & cars

Question 7

Homeowners Basic form provides coverage for many perils. Which of the following is not an insured peril

A) Explosion
B) Impact by vehicle
C) Riot
D) Losses due to application of heat

Answer 7

D.

A riot is usually defined as a violent disturbance by a crowd, often involving vandalism, looting, arson, and other forms of property damage.
So just like anything violent caused by a crowd

Question 8

Under Homeowners Basic form, all of the following causes/types of water damage are excluded except…

A) Sudden & accidental escape of water from appliance

B) Sewer, sump or septic tank

C) Water damage caused by freezing inside the dwelling while the insured was away on a 2 week vacation in the winter

D) While building is vacant or under construction

Answer 8

A.
As a general rule, coverage for most things are excluded if it’s to a building that is vacant or under construction (i.e. glass breakage, theft, etc.). Freezing inside the dwelling during the heating season is excluded if the insured is away for more than 3 days (≥ 4 days) unless the water is shut off and someone responsible checks daily.

Question 9

True or False:
Under Homeowners Broad form, personal property is covered like in Comprehensive forms while the building and structures are covered like in the Basic form.

Answer 9

False. Personal property is covered for named perils (like basic) but buildings are covered for all risks (like comprehensive)

Question 10

Under Comprehensive form, anything not specifically excluded is covered. Which of the following would be covered?

A) Glass damage caused by the settling/expansion of the building

B) A carpet that gets frayed and starts to discolor over time

C) A golf club accidentally bent while the insured was practicing his swing in his backyard

D) Property damaged by birds/vermin

Answer 10

A. Glass damage is covered but damage to the building itself isn’t. Damage to the building itself caused by moving, settling, expansion, bulging, etc. are considered natural or maintenance issues.

Question 11

Under Comprehensive form, anything not specifically excluded is covered. Which of the following would be covered?

A) Natural heating and cooling of the building during the winter causes the basement walls to crack

B) The insured is cleaning furniture using a chemical cleaner. The harsh chemicals in it causes the wood to discolor.

C) Damage to the home when the insured accidentally crashes his car into it while trying to park in the garage

D) Water damage caused by water hammer
This answer is incorrect. The correct answer is

Answer 11

C. Settling/expansion damage isn’t covered. Property while being worked on, if damaged by the work, isn’t covered. And even the comprehensive form has the same water damage exclusions as the basic form.

Y’know I’d expect C to be wrong cuz it’s your fault but whatevs

Question 12

True or False:
Tenants insurance provides coverage for personal property and tenant improvements but not for building damage.

Answer 12

True. The renter has no insurable interest in the building so of course, they would not be able to purchase insurance on that building. (makes way more sense when u see the reasoning behind it ngl…)

Question 13

Condo Owners insurance covers personal property, additional living expenses, liability, lost rental income and some unique coverages. Which of the following is not an example of such a coverage?

A) Unit improvements & betterments
B) Loss assessment
C) Strata building coverage
D) Unit additional protection

Answer 13

C. Insuring the building is the responsibility of the strata/condo corporation. Not their problem

Question 14

Why is Unit Additional Protection needed?

A) It’s not needed because the strata policy will cover any damage to the building

B) It offers protection when the strata’s insurance isn’t adequate or otherwise falls short but they are unable to assess other owners to cover the shortfall

C) It offers coverage for when the strata needs to assess owners to make up for shortfalls in the strata’s own insurance

D) It offers coverage for when the strata needs to assess owners to pay for building upgrades (i.e. a security upgrade after a series of insured break-ins and vandalism damage)

Answer 14

B

Question 15

The strata is unable to assess building owners for damage if…

A) The strata policy was inadequate

B) The owners are not at fault for the damage

C) Damage is limited to just one unit

D) The damage was caused by the negligence of one of the unit owners

Answer 15

C

Question 16

When it comes to Rented Dwelling insurance, which of the following statements is not true?

A) It excludes coverage for vandalism & theft

B) Coverage for buildings is provided on a replacement cost basis

C) Coverage for personal property is covered on an actual cash value basis

D) Most insurers will not offer this coverage unless the insured also has their principal residence with the same insurer

Answer 16

B

Question 17

Under Mobile Home insurance coverage, all of the following are covered except…

A) Reasonable expenses to transport the mobile home if necessary to protect it

B) Damage during the move

C) Appliances

D) Skirtings & tie-down equipment

Answer 17

B. The mobile home insurance includes furniture, fixtures (like appliances), & equipment for the move in “dwelling”

Question 18

If your client has a very expensive rifle used for hunting, what endorsement would you use?

A) Personal articles endorsement
B) Fine arts endorsement
C) High value articles endorsement
D) Firearms endorsement

Answer 18

See you’d THINK it’s D but it’s actually B. I got this one it’s more just so I don’t forget in the future

Question 19

Under the All Risks Personal Articles Endorsement, which of the following losses would not be covered in full?

A) A golf club is damaged during a around of golf

B) A collectible coin worth $500 is damaged

C) Camera equipment is stolen by your tenant’s son

D) Your client’s grand piano suffered a large scratch in its wood finish after a tree branch falls though the insured’s roof and onto the piano

Answer 19

B. I KNEW IT WAS $250 NOT $500 AND I STILL GOT IT WRONG !!!!!!!

Question 20

Under the All Risks Personal Articles Endorsement, which of the following losses would not be covered in full?

A) A grand piano is damaged while being tuned

B) Earthquake damages the insured’s silverware collection

C) The insured purchases another camera valued at $10,000 is damaged by a sewer back-up incident

D) The insured’s expensive fur coats are stolen by her tenant

Answer 20

Knew it was C and I still chose A.

Question 21

True or False:
If the insured chooses optional valued coverage for personal articles, she must get the items appraised regularly

Answer 21

Bro I gotta start picking on impulse cuz I knew it was false since that’s only for especially high value items and I STILL CHOSE TRUE. FOR SOME REASON.

Question 22

Regarding Personal Articles insurance, what two things (idk how to word it) would require an up-to-date valuation before the insurer will offer coverage?

Answer 22

Jewellery & furs over a certain dollar amount (usually $2000) need an appraisal report done recently prior to coverage

Question 23

Regarding Personal Articles insurance, which of the following situations would a broker usually be able to bind insurance?

A) The insured wants to insure a Rolex watch valued at $11,000

B) The insured wants to insure a few different high value hand bags collectively valued at $50,000

C) They want to insure a fur coat they inherited from their grandmother valued at $5000

D) The insured has over $100,000 high value items they want to insure

Answer 23

C. Jewellery & furs under $10,000 are usually bindable

Question 24

When it comes to the Fine Arts endorsement, which of the following losses would not be covered?

A) A tapestry hanging above the fireplace is damaged by smoke

B) A painting stolen from a vehicle that was left unlocked by the insured

C) A marbe sculpture is damaged by an earthquake

D) A bronze is damaged in a landslide

Answer 24

See I expected it to be B because if the doors unlocked then that’s on you, but no it’s actually D. Guess landslide damage isn’t included

Question 25

True or false: Under the Fine Arts Endorsement, you have no coverage for fine art being transported.

Answer 25

False

Question 26

True or false: Under the Fine Arts Endorsement, you have no coverage while the property is being displayed at a gallery.

Answer 26

False. There is an exclusion for fairs & expos, but not galleries or art showings (yeah imma forget this one)

Question 27

Under the Watercraft Boat & Motor Floater, your liability insurance rates are based on… A) Year, make & model of boat B) Length of the boat C) Construction of the boat D) Motor horsepower

Answer 27

It's D but isn't it crazy how nothing in A matters

Question 28

When would you recommend a Personal Computer endorsement to a client? A) When they have expensive hardware that exceed the special limits on their homeowner policy B) When they have expensive software that exceed the special limits on their homeowner policy C) When they have hardware that they use occasionally for business purposes D) When they have software on their computer that they regularly use for business purposes

Answer 28

It's B. I'm including this one because I want to remember it's based on SOFTware not HARDware

Question 29

Which of the following entities would be responsible for ensuring that someone fulfills an obligation? Choose only ONE best answer. A) Surety B) Principal C) Obligee D) Surety & Fidelity Court

Answer 29

A

Question 30

True or false: Statutory bonds are intended to protect the public

Answer 30

True

Question 31

Considering the characteristics of a surety bond or surety relationship, all of the following are true except one. A) Just like insurance, some losses are expected so the bond premium paid to the surety is pooled together and used to pay out any losses to obligees from principals who default. B) The bond limit (sometimes called penalty) is the amount paid by the surety to ensure the fulfillment of the obligation C) Once a surety relationship is in place, the principal cannot abandon the obligation D) Unlike insurance, the surety can subrogate against the principal to recover all monies

Answer 31

A. Unlike insurance policies, no losses are expected and so no "premium" (in the traditional sense) is charged

Question 32

What are the obligee, principal, and surety in a bond? Give an example of each

Answer 32

Obligee = the one guaranteed to get something out of it, like the insured Principal = the one that has to give the obligee something, like the insurer Surety = the one making sure the principal actually gives the obligee something, like the government

Question 33

In general, there are 2 classes of bonds, fidelity bonds and surety bonds. Which of the following is not an example of a fidelity bond? A) Administrator & Executor Bond B) Guardianship Bond C) License and permit bond D) Bankruptcy Trustee Bond

Answer 33

Surprisingly C

Question 34

When it comes to fidelity bonds, the fiduciary is the… A) Surety B) Obligee C) Principal D) Guarantor

Answer 34

C

Question 35

When it comes to qualifying for Surety bonds, underwriting is pretty strict. The ability of a contractor to complete the contract is called… A) Character B) Capacity C) Capital D) Capability

Answer 35

See you'd expect D cuz are they capable, but no it's B

Question 36

When the surety underwriter is considering a contractor's Capital, they would look at all of the following except one. A) Net Worth B) Working Capital C) Accounting Systems D) Other Liabilities

Answer 36

Surprisingly C. That'd fall under Capacity

Question 37

When it comes to performance bonds, all of the following statements are true except one. A) The performance bond limit is usually 50-100% of the contract price B) The performance bond guarantees that the principal will complete the job properly and on time, that there are no faulty work/materials in the project and that they will fulfill their financial obligations C) If the principal defaults, the surety must use a new contractor to complete the project (provided the Obligee approves this new contractor) D) The Surety will monitor the Principal to reduce the probability of a default

Answer 37

C. The Surety may also use the same contractor, if the failure was outside of the Principal's control

Question 38

The Labour & Materials bond is reponsible for… A) Guaranteeing that all materials used in the project are appropriate B) Guaranteeing that the labour used in the project are appropriately skilled C) Both A & B D) Guaranteeing that suppliers of labour and materials will be paid

Answer 38

D, which is wild

Question 39

Bob insureds their condo under a Condo Unit Owners policy Comprehensive Form with a $2500 deductible. The building suffers a loss due to Overland Water which is insufficiently covered by the strata/condo corporation's insurance and so they need to assess each owner $10000 to cover the shortfall. 10% of the unit owners are uninsured for loss assessments. How much of the assessment will your client's policy pay? A) $0 B) $10,000 C) $7500 D) $9000

Answer 39

A. If the loss was caused by a peril that was also covered by the underlying condo policy, the loss assessment portion would pay $10,000 minus the $2500 deductible = $7500. However, because they do not have any extensions under their condo policy, and overland water is a typically excluded peril, the condo policy's loss assessment section would pay nothing as the loss was caused by a peril excluded under the condo policy. For clarity, whether the other owner's have loss assessment coverage is irrelevant to what your client's policy would pay.

Question 40

The Canadian Insurance Claims Managers Association is responsible for all of the following except one... A) Ensuring a good relationship between claims adjusters, investigators, and other parties involved B) Ensuring the proper settlement of claims C) Promoting remedies to disputes through the Canadian court systems D) Promoting and ensuring the welfair of claims-related matters

Answer 40

C

Question 41

True or False: Under Homeowners Basic form, a falling tree branch damaging the dinner table would only be insured if it damaged the roof or other building structures in the process.

Answer 41

True. Falling object coverage only applies to damage to buildings/structures. Coverage for personal property (i.e. dining table) is only covered if its coincidental building damage. Ex: if a tree branch smashed through the roof and landed on your table.

Question 42

The ultimate goal of CSIO is to: A) Increase broker efficiency B) Develop technology between brokers and insurers C) Allow brokers and insurers to communicate effectively through technology (ie. quoting online) D) Create and administer the eDocs system to securely transmit data between brokers and insurers

Answer 42

A. All of the other stuff is aimed at increasing broker efficiency