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2025 - 2026 FUNDAMENTALS OF INSURANCE-
PRACTICE EXAM /QUESTIONS AND ANSWERS/A+
GRADE
A building valued at $120,000 is insured for $30,000 and there is an 80% co- insurance clause on the policy. The building was totally destroyed by fire last weekend. The insured would receive a settlement of: a. 7, b. 12, c. 30, d. 37,5000 - ANS:->>> c. 30, The reinstatement clause contained in most policies of commercial property insurance provided that: a. The insureds shall have as much insurance on the property after an insured loss as they had immediately prior to it b. Coverage which is suspended due to a breach of policy conditions is automatically reinstated when that breach is corrected c. Coverage which has been terminated by the insurer may be re-instated at the request of the insured upon application to the insurer in writing d. Property lost or damaged shall be re-instated with equivalent property of like kind and quality
- ANS:->>> a. The insureds shall have as much insurance on the property after an insured loss as they had immediately prior to it The locked vehicle warranty requires that: a. The vehicle be equipped with a theft deterrent system b. The vehicle locked between the house of 9:00 p.m. and 6:00 a.m. and when not in motion c. The vehicle containing the property insured be properly licensed and registered by the highway traffic board d. Visible signs of forcible entry must be present before the insurer will agree to pay any claim for theft
- ANS:->>> d. Visible signs of forcible entry must be present before the insurer will agree to pay any claim for theft Loss resulting from the taking of property by a person breaking into the premises is defined as: a. Theft b. Robber y c. Burglary
except one. Pick the exception: a. All materials and supplies entering into the completed project b. Value of landscaping c. Temporary building on project site d. Contractors tools and equipment
- ANS:->>> d. Contractors tools and equipment The basic principle behind business interruption insurance is: a. To restore the building to the condition it was in before the loss b. To find a place for the employees to work during the period that the business is out of operation c. Restore the income that would have been earned had the loss not occurred d. To maintain a higher level of operation during the period of repair than exsisted prior to the loss - ANS:->>> c. Restore the income that would have been earned had the loss not occurred Payment is made for as long as the business results are affected by the interruption, subject to specified limits. This statement is a characteristic of:
a. Earnings formb. Profits form c. Extra Expense Insurance d. Broad Form
- ANS:->>> b. Profits form Liability policies are concerned with matters of civil liability. Civil Law: a. Deals with wrongs against society b. Uses fines, penalties, probation or imprisonment as a means of enforcing its many rules c. Focuses on compensating the victim for the financial loss or damage suffered d. Deals primarily with settling disputes on contractual matters - ANS:->>> c. Focuses on compensating the victim of the financial loss or damage suffered All of the following "elements" must be present if your clients legal liability for a tort is tobe established, except one. Pick the exception: a. The plaintiff was owed a legal duty b. The duty owed to the plaintiff was breached by the defendant
d. Licenses
- ANS:->>> a. Children Generally, Employers cannot be sued for bodily injuries sustained by their employees in the course of their employment. This is because: a. Employers cannot be expected to provide for continuous supervision of their employees b. Employees are responsible to obtain their own coverage under a separate accident and sickness policy c. Workers compensation plans provide employees with "no fault" insurance benefits and remove their right to sue their employers for injuries received on the job d. employees are fully insured through contributions made to the federal employment insurance plan
- ANS:->>> c. Workers compensation plans provide employees with "no fault" insurance benefits and remove their right to sue their employers for injuries received on the job Your client is considered hiring a contractor to preform renovations to a building. She would share in any liability for injury or damage caused by such contractor in all of the following instances, except one. Pick the exception.
a. When the work being contracted in inherently dangerous b. When she supplied "blue prints" and leaves the contractor to his own resources toarrive at the desired result c. When she supplies effective machinery or equipment from which injury or damage arises d. When she provides an on-site direction and on-going supervision of work
- ANS:->>> b. When she supplied "blue prints" and leaves the contractor to his own resources to arrive at the desired result Parents will be requires to respond financially for injury or damage caused by their children in all of the following instances, except one. Pick the exception: a. When child shoots farmers cow while hunting with father b. When child swerves to avoid a pot-hole in the road and runs over a toddler with her bicycle c. When child damages neighbour's fence will assist her farther in landscaping their yard d. When child employed part-time in the family business closes the door on customers hand - ANS:->>> b. When child swerves to avoid a pot-hole in the road and runs over a toddler with her bicycle
harmful conditions The only expense that insured is entitled to incur on behalf of the insurer in respect topotential claim under a liability policy that is related to: a. First aid b. Legal Fees c. Interest payments from the date the judgement is rendered d. Amount of the judgement
- ANS:->>> a. First Aid Supplementary payments include all of the following costs, except one. Pick the exception: a. Cost of establishing the insureds defense b. Court costs c. Transportation d. Meals and accommodations - ANS:->>> d. Meals and accommodations The liability coverage provided by homeowners form insure all of the following premises owned or used by the insured, except on. Pick the exception:
a. Vacant farm land b. Family cemetery plot c. Vacant land purchased as a future dwelling site d. Land where independent contractor is building a single family dwelling for the insured
- ANS:->>> a. Vacant Farm Land The personal liability coverage provided on homeowners form are designed to: a. Insure the legal liability of private citizens for their actions b. Insurer the legal liability of insured arising out of their business pursuits c. Insure the legal liability of insured arising out of the operation of all owned and non- owned automobiles d. Insure all exposures for which an insured might be legally liable - ANS:-
c. Insure the legal liability of insured arising out of the operation of all owned and non- owned automobiles The voluntary payment for damage to property coverage provided under section 2 - liability coverage of the homeowners forms covers property damage intentionally caused by insureds:
The liability coverage provided by homeowners forms covers the insured's legal liability for a loss or damage to the premises of others which the insured is using or renting from all of the following, except one. Pick the exception: a. Water escape b. Smoke c. Vehicle Impact d. Explosion - ANS:->>> c. Vehicle Impact Liability coverage provided by the Homeowners form for motorized vehicles and watercraft is subject to special limitations. There is no coverage for bodily injury or property damage caused by an insured who operates the following automobiles or watercraft: a. a 14' watercraft owned by the insured and which is equipped with a 15 h/p outboard motor b. a watercraft which is equipped with a 220 h/p inboard-outboard motor and which purchased two weeks ago c. a 20 h/p riding lawnmower used exclusively on the insured's premises d. A motorized golf card owned by the insured while being used on the insured premises or adjacent walkway - ANS:->>> d. A motorized golf card owned by the
insured while being used on the insured premises or adjacent walkway Liability coverage provided by homeowners form covers the insured's liability arising out of a certain business activities. Liability for bodily injury or property damage arising out of all the following business activities are automatically insured, except one. Pick the exception: a. Occasional rental of premises b. Rental of up to three car spaces or stalls in garages or stables c. Temporary business pursuits of an insured under the age of 21 years d. Operation of a hairdressing, beautician or barber shop on the premises - ANS:->>> d. Operation of a hairdressing, beautician or barber shop on the premises Business have some unique liability exposure which needs to be properly insured. Your client sells hair care supplies for men and a mail order basis. Which one of the following liability coverage would be most important for such a business? a. Premises liability b. Operations liability c. Products liability
a. To obtain an initial license, an applicant must pass an approved examination b. Once obtained, the initial licence automatically entitles the license to transactinsurance business in all provinces c. A license is usually issued for a limited time period d. A license may be terminated when the licensee contravenes any provisions of the insurance act - ANS:->>> b. Once obtained, the initial licence automatically entitles the license to transact insurance business in all provinces Licenses must be both candid and honest when providing clients with insurance evidence. To this end, licenses must avoid engaging in the practice of "tired selling". The following is an example of tired selling: a. Re-marketing of the insured's coverage on expiry without their consent b. Adding a warranty or condition to the insured's policy without informing them c. Charging a fee on an individual policy of insurance in excess of the premium charged by the insurer d. Making the insurance of an insurance policy conditional on the purchase of another insurance policy - ANS:->>> d. Making the insurance of an insurance policy conditional on the purchase of another insurance policy When licensees take improper advantage of a clients inexperience, lack of education, youth or lack of sophistication, they are in breach of this ethical
standard: a. Competence b. Quality of service c. Integrity d. Confidentiality - ANS:->>> c. Integrity All of the following details are required to be shown on an application for automobile insurance, except one. Pick the exception: a. Number of people residing in the insured's household b. Particulars of the insured's automobile c. License, insurance and loss history d. Territory in which the described automobile will chiefly be used - ANS:->>> a. Number of people residing in the insured's household Under an application for automobile insurance: a. All drivers who will be using the described automobile must sign the application b. Only the applicant need sign the application c. No signature is required on the application d. The applicant's signature is required only when insuring leased automobiles -
the following are excluded uses under the policy, except one. Pick the exception: a. The carrying of passengers for compensation for hire b. The carrying of explosive and radioactive material c. The carrying of clients or customers prospective clients or customers d. The lease or rental of the insured automobile - ANS:->>> c. The carrying of clients or customers prospective clients or customers There are a number of general provisions, definitions and exclusions that apply to the entire automobile insurance policy. The coverage provided by the automobile policy to losses occurring in all of the following territories except one, pick the exception: a. Northwest Territoriesb. USA c. Mexico d. Hawaii - ANS:->>> c. Mexico When an insured replaces an automobile designated in the policy or adds another automobile to others which are all insured by the same insurer, coverage is automatically provided for such newly acquired automobile for a maximum of:
a. 7 days b. 14 days c. 21 days d. 30 days - ANS:->>> b. 14 days Automobile insurance policies are subject to statutory conditions. One such condition requires that when there has been loss or damage to the insured automobile, the most immediate requirement upon insured is: a. To notify the repair garage b. To notify the insurer within 30 days c. To protect the automobile from further loss d. To make a full written report to their insurer - ANS:->>> c. To protect the automobile from further loss Physical damage coverage for automobiles rented in the same of an individual can be added to the insureds automobile insurance policy by the SEF No. 27 Legal Liability for damage to non-owned automobiles endorsement. All of the following coverage provisions apply to this endorsement, except one. Pick the exception: a. Coverage is for the same perils as are insured under the insureds
