Questions

Question 1

Which distribution system features agents who typically are salaried employees of one insurer and who do not own their client list?

Answer 1

A. Exclusive agency

Question 2

In Ontario, a newly licensed Level 1 insurance broker is authorized to:

Answer 2

A. Sell insurance only under the supervision of a Level 2 broker, handling certain types of insurance

Question 3

The court case Fine’s Flowers Ltd. v. General Accident (1977) is significant to brokers because it:

Question 4

The principle of uberrimae fidei (utmost good faith) in insurance means:

Answer 4

A. All parties to the contract must act honestly and disclose all material facts.

Question 5

A broker following the ethical standard ‘not be swayed by remunerative gain’ should:

Answer 5

A. Prioritize the client’s best interests over any higher commission that one policy might pay.

Question 6

If a broker binds coverage beyond the limit of their binding authority with an insurer, they risk:

Answer 6

A. The insurer refusing to honor the coverage, leaving the broker financially responsible.

Question 7

One common cause of Errors & Omissions claims against insurance brokers is:

Answer 7

A. Failing to explain exclusions or policy limitations to a client.

Question 8

Premiums collected by a broker on behalf of insurers should be:

Answer 8

A. Held in a trust account separate from the broker’s operating funds until remitted.

Question 9

Focusing marketing efforts on a specific group of customers whose needs match the products your insurers offer is known as:

Answer 9

A. Market segmentation (targeting a niche market).

Question 10

A major benefit of gaining new clients through referrals is that:

Answer 10

A. Referred prospects often come with a higher level of trust and convert to clients more easily.

Question 11

Selling an additional line of insurance (like an auto policy to a home insurance client) is an example of:

Answer 11

C. Cross-selling

Question 12

When a broker suggests a higher level of coverage (for example, increasing from basic to comprehensive coverage on a home policy) to better protect the client, this approach is called:

Answer 12

B. Up-selling.

Question 13

While cold calling potential clients, brokers must be mindful to:

Answer 13

A. Adhere to privacy laws (PIPEDA) and ‘do-not-call’ regulations when collecting and using personal information.

Question 14

A Broker of Record (BOR) letter serves to:

Answer 14

A. Authorize a new broker to represent the client and obtain policy information from the current insurer.

Question 15

Qualifying a prospect means:

Answer 15

A. Determining if the potential client fits the broker’s target market and the insurers’ underwriting appetite.

Question 16

Tracking the expiry dates of clients’ policies is important because:

Answer 16

A. It allows the broker to contact clients at renewal to offer continued or additional coverage, improving retention and cross-sales.

Question 17

Online insurance quote aggregator websites:

Answer 17

A. Allow consumers to compare multiple insurers’ quotes easily, often providing leads to brokers for follow-up.

Question 18

Which of the following is NOT typically found on a standard insurance application form?

Answer 18

A. The applicant’s credit card number for automatic premium billing

Question 19

Due to privacy laws, when collecting personal information during an insurance application, a broker must:

Answer 19

A. Obtain the applicant’s consent for collecting, using, or sharing sensitive information like credit or background checks.

Question 20

Which of these sources is NOT usually available to a broker investigating a personal insurance applicant’s background?

Answer 20

A. Provincial vital statistics records (birth, marriage, death certificates)

Question 21

A material fact in an insurance context is:

Answer 21

A. Information that would influence an insurer’s decision to accept or price the risk.

Question 22

The ‘penalty clause’ on an Ontario auto insurance application warns that:

Answer 22

A. Providing false or misleading information on the application can void coverage or result in charges for insurance fraud.

Question 23

Who is required to sign a completed insurance application to make it valid?

Answer 23

A. The applicant (insured) and the licensed broker/agent who solicited the application.

Question 24

Insurable interest in a property insurance policy must exist:

Answer 24

A. At the time of loss; otherwise, the claim may not be paid.

Question 25

If an applicant lies about prior claims on an insurance application:

Answer 25

A. The broker and insurer may void the policy for misrepresentation, as all material facts must be truthfully disclosed.

Question 26

Binding authority in a brokerage contract means:

Answer 26

A. The broker can commit the insurer to provide coverage up to certain limits without prior insurer approval.

Question 27

Which of the following is NOT one of the typical sections of an insurance policy?

Answer 27

A. The application (which is not part of the final insurance contract)

Question 28

Under Quebec law, when a new insurance policy is issued by a broker:

Answer 28

A. It must be accompanied by a cover letter advising the client to review the policy and outlining steps to take if changes or corrections are needed.

Question 29

A short rate cancellation occurs when:

Answer 29

A. An insured cancels their policy mid-term and the insurer refunds the remaining premium minus a penalty charge.

Question 30

If a policy has a minimum retained premium of $500, it means:

Answer 30

A. If the policy is canceled, the insurer will keep at least $500 of the premium, even if the cancellation happens shortly after inception.

Question 31

After binding a new policy over the phone, a broker should issue a binder (cover note) to the client, which:

Answer 31

A. Provides written confirmation of the coverage, key terms, and effective date until the formal policy is issued.

Question 32

A client asks to increase the liability limit on their commercial policy mid-term. To make this change effective, the broker will:

Answer 32

A. Request the insurer issue an endorsement to modify the policy with the new terms.

Question 33

The insuring agreement of a policy is best described as:

Answer 33

A. The section that specifies what is covered (the insurer’s promise to indemnify the insured against described perils).

Question 34

Mirroring in communication refers to:

Answer 34

A. A broker subtly matching the client’s body language or tone to build rapport.

Question 35

Which of the following is a sign of poor customer service by a broker?

Answer 35

A. Using excessive insurance jargon that the client doesn’t understand.

Question 36

An office abeyance system or tickler file is used to:

Answer 36

A. Track pending tasks and follow-up reminders so that no important item is overlooked.

Question 37

A client calls, upset that their claim was denied. The best initial approach for the broker is to:

Answer 37

A. Listen to the client’s concerns with empathy, apologize for their frustration, and assure them you will investigate and help clarify the outcome.

Question 38

If a broker doesn’t know the answer to a client’s question, the broker should:

Answer 38

A. Admit they are unsure but promise to find out and promptly follow up with the correct information.

Question 39

Privacy laws like PIPEDA require that brokers:

Answer 39

A. Protect clients’ personal information and use it only for purposes the client has consented.

Question 40

Good time management for an insurance broker involves:

Answer 40

A. Prioritizing tasks by urgency and importance and using tools (calendars, reminders) to meet deadlines such as renewals and follow-ups.

Question 41

Thorough documentation of client interactions is important because:

Question 42

In assessing property risks using COPE, which of the following is NOT one of the COPE factors?

Question 43

What is the consequence of violating a policy condition?

Answer 43

The insured may lose some or all rights to coverage for that claim due to the breach of condition. ## Footnote This is known as forfeiture.

Question 44

What is the limitation period in insurance?

Answer 44

The period after a loss during which an insured can file a lawsuit against the insurer, often two years in many jurisdictions. ## Footnote This is also referred to as the prescription period.

Question 45

What is subrogation in insurance?

Answer 45

When an insurer pays out a claim to its insured and then seeks to recover that amount from a third party who was responsible for the loss. ## Footnote This allows the insurer to reclaim costs from the party at fault.

Question 46

What principle applies when two different insurance policies cover the same loss?

Answer 46

Contribution, meaning each insurer will pay only its proportional share of the loss. ## Footnote This helps prevent the insured from being overcompensated.

Question 47

In a housing co-operative (co-op), what do residents own?

Answer 47

Residents don’t own their individual unit; they own shares in the entire property. ## Footnote They typically need a tenant’s insurance package for their own belongings and improvements.

Question 48

What factors do underwriters check during a home insurance inspection?

Answer 48

The home’s construction, condition of key systems (roof, wiring, plumbing), and its proximity to fire services. ## Footnote These factors affect the risk assessment for insurance coverage.

Question 49

Which situation likely requires a commercial policy or special endorsement?

Answer 49

The homeowner runs a baking business out of the home kitchen full-time, selling goods to local cafes. ## Footnote This activity increases liability risks beyond standard home insurance coverage.

Question 50

A house is considered vacant when:

Answer 50

The occupants have moved out with no intention of returning, and no new occupants are living there. ## Footnote Other scenarios, like vacation, do not qualify as vacancy.

Question 51

What is a floater (or rider) on a property policy used for?

Answer 51

To provide additional coverage for specific valuable items or property that are subject to special limits or travel with the insured. ## Footnote Examples include jewelry or fine art.

Question 52

What coverage is mandatory by law in Ontario auto insurance?

Answer 52

Third-Party Liability coverage (for injury or damage the insured causes to others). ## Footnote This is essential for legal compliance in Ontario.

Question 53

What does Direct Compensation – Property Damage (DCPD) coverage in Ontario do?

Answer 53

Pays for damage to the insured’s vehicle and its contents in an accident where another driver is at fault, without a lawsuit. ## Footnote This simplifies claims for property damage.

Question 54

Which factor is NOT typically used as a rating factor for private passenger auto insurance in Ontario?

Answer 54

The applicant’s credit score. ## Footnote Other factors include driving record, geographical territory, and vehicle details.

Question 55

What does the Broker/Agent Report section of an auto insurance application provide?

Answer 55

The broker’s observations and additional information to the insurer’s underwriter, such as notes on the risk or client. ## Footnote It helps in assessing the application.

Question 56

Which personal auto policy endorsement covers the insured while driving a car they do not own?

Answer 56

The 'Legal Liability for Damage to Non-Owned Automobile' endorsement. ## Footnote This includes rental or borrowed cars.

Question 57

What might a business add to its Commercial General Liability (CGL) policy?

Answer 57

Non-owned automobile liability – to cover the business’s liability for employees using their own cars for company business. ## Footnote This extends coverage to employee vehicles used for work.

Question 58

What is vicarious liability?

Answer 58

An employer can be held responsible for the negligent acts of an employee committed in the course of employment. ## Footnote This principle holds businesses accountable for their employees' actions.

Question 59

Which of the following is NOT an extended peril usually added to a fire policy?

Answer 59

Lightning. ## Footnote Lightning is typically covered under basic fire policies.

Question 60

Why do standard property policies generally exclude perils such as war and nuclear incidents?

Answer 60

Such disasters could impact many policyholders at once and are too catastrophic for insurers to cover. ## Footnote This helps insurers manage risk effectively.

Question 61

What is an example of a loss likely excluded as 'inherent vice'?

Answer 61

A metal tool rusts over time due to moisture in a garage. ## Footnote This represents a gradual deterioration rather than a sudden event.

Question 62

If a homeowner wants coverage for an excluded peril, what can they do?

Answer 62

They can often purchase an endorsement or separate policy to cover that peril for an additional premium. ## Footnote This provides flexibility in coverage options.

Question 63

Which of the following perils is NOT covered by a basic fire insurance policy?

Answer 63

Theft. ## Footnote Basic fire policies typically cover fire, lightning, and limited explosion but exclude theft.

Question 64

What is the role of a floater in insurance?

Answer 64

To provide additional coverage for specific valuable items or property that are subject to special limits or travel with the insured. ## Footnote It is often used for items like jewelry and fine art.

Question 65

What is the purpose of an umbrella policy?

Answer 65

Provides excess coverage above primary policies and can broaden coverage to fill some gaps, subject to its terms and a self-insured retention. ## Footnote This helps protect against large claims.

Question 66

What is a typical coverage under a standard homeowner policy’s personal liability?

Answer 66

Legal liability if the insured accidentally injures a visitor on their property. ## Footnote This protects homeowners from potential lawsuits.

Question 67

What could lead an insurer to apply a surcharge or coverage restriction on a homeowner’s policy?

Answer 67

The home has outdated knob-and-tube electrical wiring that has not been replaced. ## Footnote Such conditions increase risk and may affect insurability.