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C14 AUTO PRACTICE QUESTIONS EXAM
ACCURATE AND VERIFIED FOR
GUARANTEED PASS | GUARANTEED PASS|
LATEST UPDATE|2025- 2026
1. Which of the following is an example of salvage charges that would be covered as an additional benefit under loss or damage coverage? a. Expenses involved in recovering property to prevent loss from an insured peril. b. Expenses that arise when the automobile is being transported by water and cargo must be jettisoned. c. Expenses that arise from fire department charges for attending the scene of a loss. d. Expenses for customs duties levied when the automobile suffers a loss in the United States. Correct Answer: a. Expenses involved in recovering property to prevent loss from an insured peril. Rationale: Salvage charges refer to costs incurred in recovering insured property to prevent further damage or loss from an insured peril. 2. When do insureds agree to permit the insurer to inspect the car following a loss? a. After receiving 24 hours' notice b. After receiving 48 hours' notice c. At any time d. At any reasonable time Correct Answer: d. At any reasonable time Rationale: Policyholders agree to allow insurers to inspect a damaged vehicle at any reasonable time, ensuring fair access while respecting the insured's availability. 3. When might ICBC have the right to settle claims for leased vehicles? a. When the insured has paid the insurance premium as a lump-sum payment b. When the insured fails to file a statutory declaration as required c. When the insured files a written statement or proof of loss d. When the insured renews her driver's licence fewer than 90 days before the expiry date
Correct Answer: b. When the insured fails to file a statutory declaration as required Rationale: If the insured fails to file required documents like a statutory declaration, ICBC may settle claims directly with the vehicle's owner and lessee.
4. What is a phantom vehicle? a. A vehicle that does not exist or is already wrecked b. A vehicle that has been purchased but not yet delivered to the buyer c. A vehicle that is insured but has a suspension of coverage endorsement attached d. A vehicle that is owned by a garage Correct Answer: a. A vehicle that does not exist or is already wrecked Rationale: Phantom vehicles refer to non-existent or already destroyed vehicles often involved in fraudulent claims. 5. When insurance money is payable for repairable damage to a vehicle, to which party would ICBC make the payment? a. The registered owner or the garage that repairs the vehicle b. The registered owner of the vehicle only c. The registered owner of the vehicle or the driver of the vehicle at the time of the loss d. The garage that repairs the vehicle or the driver of the vehicle at the time of the loss Correct Answer: a. The registered owner or the garage that repairs the vehicle Rationale: ICBC can pay either the vehicle's registered owner or the repair shop directly for repairable damages. 6. Which of the following best describes the coverage under the 'All Perils' subsection of loss or damage coverages? a. Only comprehensive losses including theft and vandalism b. Only collision or upset c. Combines collision and comprehensive plus theft by household members or employees d. Only fire, theft, and vandalism Correct Answer: c. Combines collision and comprehensive plus theft by household members or employees Rationale: All Perils is the broadest form of physical damage coverage, combining Collision and Comprehensive, and extends to cover specific thefts excluded under Comprehensive.
c. Life insurance beneficiary information d. Estimated annual driving distance Correct Answer: c. Life insurance beneficiary information Rationale: Automobile insurance applications focus on vehicle and driver details, not life insurance-related information.
11. How does head office underwriting differ from individual underwriting? a. Head office sets rates while individual underwriters only sell policies b. Head office defines rules and systems; individual underwriting applies them to specific risks c. Head office handles claims while individuals handle renewals d. Individual underwriters only collect premiums Correct Answer: b. Head office defines rules and systems; individual underwriting applies them to specific risks Rationale: Head office establishes underwriting guidelines and manuals; individual underwriters use these to assess and rate specific policies. 12. Which of the following factors most directly impacts ICBC underwriting? a. Competition from private insurers b. Investment returns c. Its mandate to provide coverage to all drivers d. Advertising costs Correct Answer: c. Its mandate to provide coverage to all drivers Rationale: ICBC is a public insurer required to offer basic coverage to all eligible drivers, affecting how it underwrites and manages risk. Which of the following items are covered by loss or damage coverages? a. Damage to contents of trailers b. Electronic equipment attached to the vehicle c. Modifications that the insured uses for racing the vehicle in illegal street races d. Damage to detached media and equipment for use with sound system - ANSWER B.) Coverage is excluded or limited to avoid carelessness on the insured's part, if he or she were insured, and clarifies that anything not permanently attached to the vehicle is not covered.
Why do many insureds choose to have direct compensation-property damage (DCPD) coverage with no deductible? a) They would like to pay lower premiums for DCPD coverage. b) They would like to pay higher premiums for DCPD coverage. c) They would like to self-insure instead of purchasing DCPD coverage. d) They would have to pay the deductible on a claim even when they were not responsible and the damage was caused by another party.
- ANSWER D.) A deductible under DCPD is optional and many insureds choose not to have one because it unfairly impacts insureds who were not responsible for a loss by making them pay a deductible on a claim for damage caused by another party. third-party liability for minimum limits; accident benefits; basic vehicle damage coverage (BVDC); underinsured motorist protection; and uninsured motorist protection. ICBC does not have the right to refuse coverage for the basic mandatory coverages. ICBC may decline optional coverage high risk drivers who are higher risks, but this is rare.
c) Basic vehicle damage coverage (BVDC) d) Enhanced accident benefits - ANSWER D.) Enhanced accident benefits provide coverage to a pedestrian injured by a vehicle in British Columbia. What is underwriting? a) Consideration of the acceptance or rejection of a risk b) Solely the pricing mechanism of insurance c) Terms of the policy if the risk is declined d) Settlement of claims under the policy - ANSWER A.) To underwrite a risk includes scrutinizing the risk, then deciding on its eligibility based on the company's rules and practices. Which of the following is a function of underwriting? a) Establishing the terms of the application b) Determining the purchase price of the automobile c) Using actuarial methodology to determine rates for insuring an automobile d) Determining the amount to be paid for a claim - ANSWER C.) Underwriters will use manuals and other sophisticated rating process to determine rates for various classes of risk. The term of the policy is dependent on the company's underwriting guidelines and process. Which of the following is accomplished using an endorsement? a) Terminating a policy mid-term b) Lapsing a policy on renewal c) Limiting insurers' exposures under the policy for certain risks d) Changing statutory conditions under the policy - ANSWER C.) Endorsements can be used to limit, increase, or remove coverage based on the need of the insured and underwriting guidelines of the Insurer. They can be an effective underwriting tool; however, usage of same must remain within the confines of the regulatory bodies.
What usual function of underwriting is considered illegal for government insurers in British Columbia, Manitoba, and Saskatchewan? a) Selling endorsement coverage b) Selling coverage extensions c) Declining basic insurance coverage d) Lowering insurance rates - ANSWER C.) Declining basic insurance coverage is illegal for government insurers in British Columbia, Manitoba, and Saskatchewan Which statement correctly describes underwriting by the Insurance Corporation of British Columbia (ICBC)? a) It can decline to offer mandatory coverage to drivers who have had their driver's licence suspended within the past three years. b) It can decline to offer mandatory coverage to vehicle owners who do not have a valid British Columbia driver's licence. c) It can decline to offer optional coverages to any drivers who have had an at-fault collision within the past 10 years. d) It will in - ANSWER D.) ICBC will insure, on demand, when eligible, all applicants for optional coverages, but can impose increased deductibles on vehicles subject to rating by rate groups. Which of the following factors influences the rate class assigned to a vehicle for the purpose of ICBC premium calculation? a) Length of time a driver has been licensed b) Home address of the registered owner c) Commercial use of the automobile d) Age of the driver - ANSWER C.) Vehicle rate classes reflect how the vehicle is used, including for pleasure use, commuting, business use, and commercial use. What is the maximum number of years of driving experience that will be recognized as part of the driving experience factor for listed drivers?
The vehicle, driver, date, type, and description of the claim, as well as amount paid, must be indicated. Because Autoplan is tied to the vehicle registration and driver's licence, past accident and claims information can be determined by reviewing data on file for a particular applicant. ICBC will only consider at-fault claims from after March 1, 2017; claims older than March 1, 2017 will not be used in the new premium calculation. Each year thereafter, ICBC will extend the scan period, so that by 2027 the full 10-year scan period will be in place. In provinces and territories without government insurance schemes, what questions must the broker or agent answer in the final section of the application? - ANSWER Report of broker/agent Has the broker or agent bound the risk? Is the business new to the broker or agent? What type of motor vehicle liability card was issued—temporary, permanent, or none? How long has the broker or agent known the applicant? How long has the broker or agent known the principal driver? Explain the criteria used in automobile rating. - ANSWER Commonly used rating factors Age, gender, and marital status - prohibited in some jurisdictions, considered discriminatory Driving experience - number of years licensed; driver training courses
Driving record - number of accidents (past six years) or traffic violations (past three years) Other regular drivers Territory and distance driven annually - amount of time and where vehicle driven Vehicle usage - purpose the vehicle is used for, including personal, business, or commercial use Vehicle description - year, make, model, and vehicle identification number (VIN) Coverage - more extensive coverage for damage resulting from more perils will result in higher premiums Law of Large Numbers - ANSWER degree of uncertainty is reduced as the number of events increases and this can assist actuaries to establish rates coverages Components of automobile insurance rates - ANSWER 1. Pure premium - the amount required to pay only the anticipated losses.
- Expense loading - the amount added to the pure premium, which includes the following: Acquisition costs - commission and cost of the insurer's sales structure Processing and servicing costs- administration Taxes - federal, provincial/territorial, and municipal Contingencies - catastrophes, extra-large losses, and reinsurance costs
Types of rate control - ANSWER Prior approval - companies file their proposed rates and must wait for approval before using them. File and use - companies file proposed rates and use them as proposed, but may face inquiries by the board. File and use following an adjudication period - companies file their proposed rates and the law allows a period of time, such as 30 or 60 days, during which the board can challenge them. Following this period, the company can use the unchallenged rates as they are then deemed to be approved. Prior setting of rates by the board with variations from ''benchmark" - the board sets the rates known as the benchmark. Insurers can use or vary them, based on a board-approved percentage. A board hearing is usually required—this may take the form of a public hearing. The board then allows, disallows, or varies the application. Which of the following factors affects the premium of an automobile insurance policy? a. Type and model of automobile b. Existence of a lien on the automobile c. Insured's friend who occasionally borrows the vehicle d. Number of persons in the household - ANSWER A.) The type and model of the automobile factors into the process of ratemaking for automobile insurance. Some automobiles are more attractive to thieves than others, but the incidence of theft is also influenced by which of the following factors? a.) Principal driver b.) Territory in which the automobile is normally operated c.) Registered owner of the automobile
d.) Number of occasional drivers - ANSWER B.) It is easier to steal a vehicle in a heavily populated area where the thief can get lost in a crowd. Vehicles in the city may also be parked for long periods, making them a target for car thieves. According to the law of large numbers, the degree of uncertainty is reduced as which of the following increases? a.) Frequency of the events b.) Cost of the type of risk c.) Size of the type of risk d.) Location where the events occur - ANSWER A.) The law of large numbers is the mathematical premise that the degree of uncertainty is reduced as the number of events increases. What do we call the forecasting of the increase or decrease of loss costs for the period for which premiums are calculated? a.) Actuary forecasting b.) Projected loss forecasting c.) Rating forecasting d.) Trending - ANSWER D.) Trending is the process of adjusting statistics for premiums and losses to current or anticipated future levels to represent changes in insurance experience from economic and demographic forces, and to use data to determine present and anticipated future levels of cost. CLEAR (Canadian Loss Experience Automobile Rating) is based on which of the following factors? a.) Likelihood of the vehicle being involved in a claim and how much repair would cost b.) Purchase price of the vehicle and the amount it would cost to replace or repair it c.) Manufacturer's suggested retail price of the vehicle d.) Territory the vehicle is in and the how attractive the vehicle is to thieves - ANSWER A.) Canadian Loss Experience Automobile Rating (CLEAR) is a method for classifying different models of cars for insurance purposes by using historical claims data, including collision, comprehensive, direct compensation-property damage, and accident benefits coverages.
B. Traditional rating makes premium prices more individualized because it uses actuarial studies of aggregated historical data (law of large numbers) to produce rating factors. C. Usage-based insurance rating results in higher - ANSWER A.) In usage-based insurance, driving behaviours and mileage are tracked so that the mileage can become a variable factor and used in combination with other factors to calculate the premium. Usage-based insurance will monitor which of the following driving behaviours? A. Driving record B. Vehicle type C. Rapid acceleration D. Credit-based insurance score - ANSWER C.) Usage-based insurance is concerned with rapid acceleration. Describe the two components of automobile insurance rates. - ANSWER Two components of automobile insurance rates The first component of an automobile insurance rate is the pure premium. Pure premium is the portion of the total premium that is needed to pay expected losses. It does not take into account money needed for company expenses. The second component of an automobile rate is the expense loading, which covers additional costs the insurer incurs in taking on the risk. This includes acquisition costs, such as the commission cost of the insurer's sales structure. Other expenses are processing, servicing, and administration costs, taxes, contingencies, and insurer profit.
How rating control boards use benchmarks to control automobile insurance rates - ANSWER The boards set rates that are known as a benchmark, prior to the rates being used by the insurers. Insurers can use the benchmark rates as is. Or insurers can vary them, based on a board-approved percentage. If an insurer wishes to deviate up or down from the benchmark, or vary the classes or other rating factors, a hearing (usually public) with the rating board is usually required. The board then allows, disallows, or varies the application. An endorsement is - ANSWER an amendment to a policy that changes the terms and conditions of the policy. Endorsements override any policy provisions that contradict them, unless the endorsement states otherwise. WHAT are the several additional products that insureds can purchase to specialize their coverage. - ANSWER The following are automobile insurance endorsements or special coverages: Automobile storage Automobile value changes Underinsured motorists Loss of use Driving of non-owned automobiles Describe the optional loss of use coverage to cover the loss of use of the vehicle due to reasons other than theft of the entire vehicle. - ANSWER Loss of use due to theft
Non-owned vehicle damage policy - ANSWER Protects insureds who operate and wish to purchase own damage coverage for vehicles and trailers belonging to others Rental vehicle policy - ANSWER For private passenger cars, commercial vehicles, motor homes, trailers, and motorcycles Off-road vehicle insurance - ANSWER For snowmobiles, snow vehicles, ATVs, off-road motorcycles and dirt bikes, utility terrain vehicle, golf carts (with some exceptions) Unlicensed vehicle policy - ANSWER Covers certain types of off-road vehicles while they are being used off the highway Vintage motor vehicle certificate - ANSWER Covers vehicles that carry vintage number plates; must be 30+ years old with original component parts and not operated for general use Excess special equipment endorsement Covers - ANSWER Covers vehicle equipment not supplied by or available from the manufacturer that has a combined value greater than $1,000 for permanently attached and shuttle-mounted sound or communication equipment; or $5,000 for other permanently attached equipment, including a custom paint finish. Limited depreciation policy - ANSWER Optional coverage that protects against the effects of depreciation on the value of a new vehicle (3 years or less) in the event of a loss. Excludes losses related to warranties as well as some perils in year 3. Replacement cost endorsement - ANSWER Optional coverage that protects a new vehicle against the effects of inflation and depreciation on the value of the vehicle in the event of a loss. Excludes losses related to warranties and replacement costs for alterations (rebuilt, altered, custom, speciality).
Vehicle in storage policy - ANSWER Third-party liability coverage, own damage coverage, and accident benefits for a vehicle in storage. Also covers vehicles during conveyance; in the care, custody, or control of a garage service operator; or on consignment. Which statement about automobile insurance endorsements is true? a. The insured must sign all endorsements enhancing or adding coverage for them to be valid. b. The insured must sign all endorsements reducing or restricting coverage for them to be valid. c. The insured must sign all endorsements relating to loss of use and non-owned automobiles for them to be valid. d. The insured must sign all endorsements for them to be valid. - ANSWER B.) The insured is only required to sign all endorsements relating to a reduction or restriction of coverage. Which of the following would be accomplished using an endorsement? a.) Applying a surcharge for an automobile that is parked at a location that is different than the insured's principal residence address b.) Providing insurance coverage to non-owned automobiles used by the insured c.) Offering a conviction-free discount d.) Providing insurance to a person who is using the car with the insured's permission and is not a member of the insured's household - ANSWER C.) Endorsements would be used for providing insurance coverage to non-owned automobiles used by the insured Why is using endorsements to change the statutory conditions of an automobile insurance policy a risk for the insurer? a.) Insurers can't use endorsements to change policy terms to result in coverage that would be less than what is mandated by the statutory conditions. b.) Statutory conditions can be changed at the request of insureds but not insurers. c.) If insurers use endorsements to change policy terms to result in coverage that would be less than what is mandated by the statutory conditi - ANSWER A.) Insurers can't use endorsements to change policy terms to result in coverage that would be less than what is mandated by the statutory conditions.
