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OTL Exam E Answer Key: Insurance Principles and Practices, Exams of Insurance law

Jamestown Business CollegeInsurance law

A comprehensive set of multiple-choice questions and answers covering key concepts in insurance principles and practices. It focuses on topics such as insurance policy components, statutory conditions, risk management, and homeowner's insurance coverage. Designed to help students prepare for an exam on insurance principles and practices.

Typology: Exams

2024/2025

Available from 12/06/2024

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RBC Learning and Development
OTL Exam E Answer Key
1. Which of the following is an important requirement for many licensed insurance
professionals to renew their licenses?
a) Attend at least five (5) insurance-related seminars every quarter
b) Complete Adjuster’s Training
c) Complete the Chartered Insurance Professionals (CIP) designation
d) Complete the required number of Continuing Education (CE) hours
2. What does the Statutory Condition—Replacement require when an insurer chooses to repair,
rebuild, or replace property following a loss?
a) Work must commence as soon as practicable
b) Insurer must notify the insured within seven days giving reasons for its decision
c) Insured is no longer required to prove the amount of loss and is therefore not required to
provide proof of loss
d) Insurer must restore the property to its original state even if the cost is in excess of the
amount of insurance
3. Which part of an insurance policy states the perils insured against?
a) Preamble definitions
b) Authority clause
c) Statutory conditions/Quebec General conditions
d) Insuring agreements
4. With respect to the Québec General Condition relating to subrogation, which one (1) of these
statements is TRUE
a) Insurers have subrogation rights against all third parties
b) Insurers have the right to subrogate from third parties for losses paid, except from members
of insureds’ household
c) Insurers have subrogation rights against members of the insured’s household
d) Insurers have subrogation rights against other insurers but not other third parties
5. What kind of offer is needed in order to establish a legally binding contract?
a) The offer must be made and accepted
b) The offer must be witnessed and signed by a lawyer
c) The offer must be written, rather than oral
d) The offer must be for a specific amount of money
6. The Civil Code of Québec has specific sections relating to the same subject matter as the
Statutory Conditions in common law provinces that must be included in all fire, as well as
other types of policies. However, it does NOT determine which of the following?
a) Which items must be dealt with
b) Exact wording to be used
c) How each item must be dealt with
d) Policy cancellation requirements
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Download OTL Exam E Answer Key: Insurance Principles and Practices and more Exams Insurance law in PDF only on Docsity!

OTL Exam E Answer Key

  1. Which of the following is an important requirement for many licensed insurance professionals to renew their licenses? a) Attend at least five (5) insurance-related seminars every quarter b) Complete Adjuster’s Training c) Complete the Chartered Insurance Professionals (CIP) designation d) Complete the required number of Continuing Education (CE) hours
  2. What does the Statutory Condition—Replacement require when an insurer chooses to repair, rebuild, or replace property following a loss? a) Work must commence as soon as practicable b) Insurer must notify the insured within seven days giving reasons for its decision c) Insured is no longer required to prove the amount of loss and is therefore not required to provide proof of loss d) Insurer must restore the property to its original state even if the cost is in excess of the amount of insurance
  3. Which part of an insurance policy states the perils insured against? a) Preamble definitions b) Authority clause c) Statutory conditions/Quebec General conditions d) Insuring agreements
  4. With respect to the Québec General Condition relating to subrogation, which one (1) of these statements is TRUE a) Insurers have subrogation rights against all third parties b) Insurers have the right to subrogate from third parties for losses paid, except from members of insureds’ household c) Insurers have subrogation rights against members of the insured’s household d) Insurers have subrogation rights against other insurers but not other third parties
  5. What kind of offer is needed in order to establish a legally binding contract? a) The offer must be made and accepted b) The offer must be witnessed and signed by a lawyer c) The offer must be written, rather than oral d) The offer must be for a specific amount of money
  6. The Civil Code of Québec has specific sections relating to the same subject matter as the Statutory Conditions in common law provinces that must be included in all fire, as well as other types of policies. However, it does NOT determine which of the following? a) Which items must be dealt with b) Exact wording to be used c) How each item must be dealt with d) Policy cancellation requirements
  1. What is the term used to describe when a broker or agent can accept a risk without first sending the application to the insurer for approval? a) Binding authority b) Utmost good faith c) Material change in risk d) Confirmation ability
  2. What can be a consequence of the applicant misrepresenting material facts on the application for insurance? a) The applicant could be charged with criminal fraud b) A premium penalty could be charged c) The loss could be denied or the insurance policy could be voided d) The broker could be charged a penalty fee by the insurer
  3. A single homeowner dies. Her WILL indicates that her home should be left for her adult son. The insurance policy in this case would receive automatic consent under which of the following policy Statutory Conditions? a) Change of interest b) Property of others c) Material change d) Notice
  4. Personal line property insurance may be written on a replacement cost basis which is: a) Same as actual cash value replacement. b) Replacement or repair of the damaged property as it cost at the time of the loss with property of like kind and quality, with a deduction for depreciation. c) Same as B above, without deduction for depreciation. d) Is not an endorsement.
  5. Under the Homeowner’s policy in regards to exclusions, which statement is CORRECT? a) Accidental fire damage resulting from the application of heat is excluded. b) Loss, destruction or damage to goods undergoing the process involving the application of heat is excluded. c) If the building insured has been vacant or unoccupied for the last twenty- five (25) days loss is excluded. d) All of the above are excluded.
  6. The Basic Homeowner policy covers: a) Building, personal property, summer cottage. b) Building, detached private structures, additional living expenses. c) Building, legal liability, increased personal property. d) Building, personal property and fine arts endorsements.
  7. Your parents have given you a very old and expensive painting, it should be covered under: a) Schedules Article endorsement. b) Under Additional coverage of your Homeowner’s policy.

a) Includes boats of all sizes. b) Covers claims arising out of the ownership, use or operation of watercraft up to a specified size or horsepower. c) Coverage for Watercraft is not included under a home policy and has to be purchased separately. d) Coverage includes watercraft use for business purposes.

  1. The insured’s dining room furniture was badly damaged when a fire broke out. The claim was settled by paying an amount equal to the replacement cost minus physical depreciation. This illustrates the application of: a) Extended coverage. b) Actual Cash Value. c) Replacement Cost. d) Optional Loss Settlement.
  2. Not all property of the insured is automatically covered under the Homeowner’s All Risk policy. Which of the following is NOT TRUE? a) Windstorm damage to the tool shed (detached) is covered. b) Smoke damage to the drapes following a kitchen fire is covered. c) Fire damage to the insured’s seasonal residence is covered. d) Two weeks hotel expenses for the insured while the house is repaired; following collapse of the roof due to ice is covered.
  3. Condominium insurance, which of the following is CORRECT? a) The Condo unit package does not insure contents. b) The Condo unit owner must buy insurance for their part of the building’s common elements. c) The Condo Corporation does not own the land where the building is located. d) The Condo unit owner owns the space inside the unit, the contents and improvements by the owner.
  4. Which of the following statements is CORRECT in connection with Comprehensi ve Homeowner’s insurance? a) The policy can extend to include personal property of a student insured under the policy that is temporarily living away from home to attend university. b) Special limits of insurance do not apply to a Comprehensive Home Owners Policy. c) Expenses incurred while the client is in the process of renovating their 30 year old home. d) Detached Private Structures is an optional coverage that can be purchased under a Comprehensive Homeowners Policy.
  5. Under the Entry, Control, Abandonment, the insurer is not entitled to: a) Enter to survey damage without the consent of the insured. b) The control or possession of the property. c) Enter property after it has been secured. d) Right of access to make appraisement.
  1. The Basic Home Insurance Policy will cover losses caused by? a) Falling Objects. b) Riot. c) Electric current damage due to electrical appliances. d) All of the Above.
  2. Which of the following is required by law in a Fire policy? a) Extended coverage endorsement. b) Statutory conditions. c) A wording. d) Basic fire policy.
  3. Personal Liability Coverage under a Basic Home Insurance Policy: a) Extends to provide 30-day automatic coverage for a newly acquired principal residence. b) Does not cover land in Canada that will be occupied by the insured. c) For more than 90 days. d) All of the Above.
  4. Which of the following clauses or endorsements would have to be attached to a policy, if loss settlement is to be made without deduction for depreciation? a) Rebuilding clause. b) Extended coverage endorsement. c) Loss clause. d) Replacement cost.
  5. In which of the following is there no special limit with regard to theft? a) Jewellery, watches and furs b) Coins c) Computer hardware d) Bicycle
  6. Which policy has the most similarities with regards to coverage to a Mobile Home policy? a) Farm policy b) Tenants policy c) Homeowner’s policy d) Condominium owner’s policy
  7. The roof of a condominium is damaged by an insured peril. The building’s policy does not cover the full amount of the loss. To cover such a situation, a unit owner should have: a) Additional living expense coverage b) Off premises coverage c) Condominium unit owner’s additional protection insurance d) Extended liability coverage
  1. Mrs. Roe bought a coffee maker, which, due to a manufacturer’s defect caused severe fire damage to her kitchen. Mrs. Roe sued the manufacturer. Which policy would protect the manufacturer? a) Products and Completed Operations b) Contractual Liability c) Premises and Operations d) Owners’ and Contractors’ Protective Liability
  2. Two young men were arrested and jailed for a crime they did not commit. The officers would be protected under: a) Bodily injury and Property Damage Liability b) Tenant’s Legal Liability c) Errors, Omissions and Malpractice d) Personal Injury Liability
  3. Jack hired an electrician to install light fixtures in his home. The electrician fractured his wrist when a chair slipped out from under him. He is not eligible for Worker’s compensation. He is not suing. The employee could receive payment under: a) Employer’s liability b) Personal liability c) Voluntary Medical Payments d) Bodily injury liability
  4. Medical payments made under Liability: a) Are made without regard to fault for bodily injury arising out of an accident subject to exclusions b) Are made with no exclusions when bodily injury occurs c) Are not paid unless negligence is proven d) Are paid without question or delay
  5. An Umbrella policy a) Covers the self-insured retention b) Is purchased to avoid gaps in insurance c) Is purchased when a high limit is needed on only one specific type of coverage d) Usually provides very limited territorial coverage
  6. Which is of the following statements about a Farmer’s Liability policy is false? a) Premises liability coverage applies only to premises specified in the policy. b) The liability section of the policy differs from the Homeowner’s form in that it is split into two parts c) Liability arising out of the farm premises, farming activities and products liability are covered on the same policy d) Separate liability policies are required for the farm and the residence.
  7. Which of the following is INCORRECT with respect to business insurance:

a) Is used to underwrite buildings and contents. b) Also known as Commercial lines insurance. c) Available to a business owner to protect against losses and to insure the continuing operation of the business. d) Does not include Life, Accident and Sickness.

  1. Which policy would best suit the needs of accountants and real estate agents? a) Office Equipment Floater. b) Commercial Property Floater. c) Commercial Building and Stock. d) Small Retail Business Package.
  2. A surety bond : a) Is a contract between two parties b) Is normally issued for one year c) Requires two signatures under seal d) Protects the principal
  3. Which is NOT part of the Equipment Breakdown policy? a) Covers Boilers and Pressure vessels. b) Covers machinery if an accident does occur. c) The major peril when insuring boilers and pressure vessels is breakdown. d) An example of machinery would be electric motors.
  4. Which best describes an Extra Expense form? a) A reduced operation for a period of time. b) Insures loss of income and profit. c) This is not an extension of Business Interruption insurance. d) None of the above.
  5. The type and extent of the business activities that Underwriters accept as part of the Homeowner’s insurance depends on which of the following? a) Nature of the business conducted on the premises b) Individual insurer’s underwriting guidelines c) Both (a) & (b) d) None of the above
  6. Business Interruption insurance is defined as, under the Profit Form: a) Until the damaged property has been restored and business reopens. b) For as long as the business results are affected by the interruption, subject to 1 00% co- insurance. c) Same as B above, except 80% co-insurance. d) It only applies to manufacturing businesses.
  7. Extra Expense Form under RBC is designed to: a) Insure loss of income and profit.
  1. Which is true as it applies to Occurrence Basis Property damage? a) Covers damage happening gradually over a period of time. b) Pollution is covered only if sudden and accidental. c) It insures the unexpected result of a deliberate act. d) It covers acts done by the insured with the intent to cause damage.
  2. Dr. Smith’s office is damaged in a fire. He is, however, able to continue his practice at another location, as he has purchased: a) A Profits form policy b) A fire policy c) Extra Expense Insurance d) Gross Earnings Policy
  3. What kind of bond does an executor of wills require? a) Performance bond b) Bid bond c) Fiduciary bond d) Fidelity bond
  4. An importer who receives goods from abroad or sends them overseas, will usually need : a) Inland Transportation insurance b) Transportation floater c) Trip transit d) Customs or Excise Bonds
  5. Which of the following is not taken into consideration when rating for Glass Insurance? a) Geographical location b) Whether fixed or movable c) Height of lowest edge from the ground d) Fire protection
  6. For insurance purposes in Ontario, is a snowmobile considered an automobile? 9i a) No, because it does not have a license plate b) Yes, but only when being operated on a public highway c) Yes, because it does have a license plate d) No, if it is being operated by an underage driver
  7. How is the Income Replacement Benefit under the OAP 1 Owners Policy calculated? a) 80% of net income, to a maximum of $ b) 80% of gross income, to a maximum of $ c) 70% of net income, to a maximum of $ d) 70% of gross income, to a maximum of $
  1. A garage door is damaged when a car accidentally drives into it. The car also has some damage. Both the home and car are owned by the driver of the vehicle. What damage will be covered by the Own Damage coverage of the automobile policy? a) Damage to both the car and the garage door will be covered b) No damage will be covered c) Damage to the car will be covered d) Damage to the garage door will be covered
  2. An insured with an existing OAP 1 Owners Policy purchases a snowmobile and advises the insurance professional that his 14-year-old son will also operate the vehicle. What should the insurance professional recommend to ensure there is coverage? a) There will only be coverage for the physical damage to the snowmobile if the son is operating it. b) Add OPCF 32—Recreational Vehicle Endorsement, to provide coverage for the underage operator. c) There is no coverage while the son is driving as he is under 16 years of age and the coverage cannot be obtained. d) Add OPCF 44R—Family Protection Endorsement, to cover any accident the son may have.
  3. The Facility Association (FA) can be described as which of the following? a) A group of insurance carriers that write the insurance risks on automobiles owned by their agents/brokers and their staff. b) A reinsurance device for accommodating automobile policyholders who wish to have particularly high limits of insurance. c) An insurance pool subscribed to by all automobile insurance carriers that share the writing of risks not ordinarily written in the regular market. d) The provincial government insurance office charged with the responsibility of accepting applications from all automobile owners who cannot get insurance anywhere.
  4. What is the purpose of the Facility Association (FA)? a) Act as a not-for-profit association to develop and maintain driver education facilities b) Ensure availability of automobile insurance for owners and operators who may otherwise have difficulty obtaining it c) Provide a level of cover for policyholder and claimants d) Negotiate fair wordings for all automobile insurers and act as a lobbyist with the federal government
  5. Which of the following statements about the OAP 1 Owners Policy Direct Compensation— Property Damage coverage is INCORRECT? a) The policy on the other vehicle must be issued by an Ontario licensed insurer or one that has filed with the Ontario Insurance Commission to provide this coverage. b) The insured collects from her insurer even though the operator of the vehicle, with the insured’s consent, was not entirely at fault for the accident. c) The accident may occur anywhere in Canada and at least one of the other automobiles involved is insured under a motor vehicle liability policy.

d) 72 hours after the theft has been reported to the insurer or to the police

  1. An 18-year-old enters your office and requests insurance on his new Chevrolet Corvette. You know that most insurers are not keen on insuring young drivers with powerful automobiles. Which of the following options is the CORRECT approach? a) Give him an application for automobile insurance to complete, which you will then submit to an insurer. b) Recommend that he register the vehicle in his father’s name, as it’s the only way he can obtain insurance. c) Refer him to another broker who writes this class of business. d) Advise him that none of your insurers will insure him.
  2. Which of the following statements about Uninsured Automobile coverage is CORRECT? a) It must be added by endorsement to the OAP 1 Owners Policy. b) It only covers bodily injury, but never property damage. c) It can cover accidental damage to the insured’s automobile, provided the uninsured owner o r driver of the other automobile is identified. d) It provides coverage for third parties if the insured causes bodily injury and has breached a Statutory Condition.
  3. As an insurance professional, and to ensure adequate coverage, what advice would you offer someone who purchases and installs a $5,000 stereo system into her car? a) Be sure to always lock the car, as there is no coverage if the system is stolen when the car is unlocked. b) There is no coverage on the system without an approved security system in the car. c) No further action is needed. The new system is automatically covered under the OAP 1 Owners Policy as part of the car. d) To have her OAP 1 Owners Policy endorsed to cover its full value, she needs to provide you with a copy of the invoice.
  4. In the Additional Agreements of the Insurer, Own Damage, the insurer agrees to waive subrogation against which one (1) of the following? a) A neighbour driving the auto with the insured’s consent b) A neighbour who had care or custody of the auto for repair purposes c) Anyone, other than the named insured, who has breached any condition of the policy d) Someone who was storing the auto in a parking garage
  5. Section 7—Optional Loss or Damage Coverages of the OAP 1 Owners Policy is usually subject to a deductible. However, the deductible does NOT apply to loss or damage caused by which of the following perils? a) Water b) Lightning c) Vandalism d) Windstorm
  6. Who is responsible for approving Ontario’s automobile insurance application form?

a. FSCO/FSRA b. Federal Department of Insurance c. The Facility Association d. The Insurance Act

  1. The OPCF 44R—Family Protection Coverage a) applies to property damage caused by unidentified and uninsured motorists. b) applies a deductible to injury losses. c) is part of every Canadian owner’s automobile policy. d) allows an insured to recover up to the limit of his own policy.
  2. Under the OAP 1 Loss of Use Due to Theft section, when does reimbursement end? a) On the date the repairs or replacement is complete b) On the date the insurer tenders settlement c) Either on the date the repairs or replacement is complete, or the date the insurer tenders settlement, whichever occurs first d) Both on the date the repairs or replacement is complete and the date the insurer tenders settlement, as settlement will only be tendered when the repairs or replacement is complete
  3. Which of the following statements about provincial Insurance Acts governing automobile insurance applications is CORRECT? a) A policy cannot be issued without a completed and signed application form. b) A policy can be issued without a completed and signed application form, but the insured must sign a copy of the application within 24 hours. c) If a policy is issued without a signed application, the insurer can print and indicate in the signature line “verbal application.” d) If a policy is issued without a signed application, the insurer must send a true copy of the application to the insured for a signature
  4. Which of the following is the CORRECT way to insure a snowmobile? a) With an OAP 1 Owners Policy to cover all the exposures to be insured b) By an endorsement to a Homeowners or Tenants Policy to cover the Third Party Liability and a Personal Articles Floater for direct damage to the machine c) With an OAP 1 Owners Policy to cover Third Party Liability and Accident Benefits, and an Inland Marine Floater for direct damage to the machine d) With a Snowmobile Floater to cover all the exposures to be insured
  5. Which of the following statements about lawsuits related to automobile accidents in Ontario is FALSE? a) Permitted with respect to economic loss under certain circumstances b) Not permitted with respect to non-economic loss unless the threshold has been met c) Not permitted with respect to most health care expenses d) Not permitted with respect to catastrophic impairment
  6. A vehicle is broken into and thieves steal various items. A Specified Perils policy will cover which one (1) of the following items?

a. Alan has no financial assistance, because his roommate took the car without consent, which is considered theft, and comprehensive coverage excludes theft by anyone in the insured's household. b. Alan will claim for financial assistance under the All Perils section of his insurance policy. c. Alan will receive financial assistance from the roommate’s insurance policy under the collision section. d. Alan will charge his roommate with theft and then it will be covered under the comprehensive section of his insurance policy.

  1. How much notice must an insurer give to an insured when terminating an automobile contract of insurance that has been in effect for at least 60 days for the reason of non payment of premium? a. 5 days by registered mail or 15 days if hand delivered b. 30 days by registered mail or 10 days if hand delivered c. 10 days by registered mail or 30 days if hand delivered d. 15 days by registered mail or 5 days if hand delivered
  2. What are the two purposes of the OPCF 27 endorsement? a. To provide physical damage protection and extend accident benefits coverage to drivers not listed on the policy b. To provide legal liability protection for physical damage to a non-owned automobile and to extend liability insurance to drivers specifically added on this endorsement c. To provide legal liability protection as well as physical damage protection to a non-owned automobile d. To provide accident benefits coverage and legal liability to a non-owned automobile
  3. What is NOT a function of the OPCF 6C and 6F Public Transportation? a. Give coverage for bodily injury to passengers and damage to their property b. Give the option of a single limit coverage, including passenger hazard and property damage c. Give permission for the automobile to carry passengers for hire d. Give permission for the automobile to be used for driver training schools
  4. Where are the details of the accident benefits coverages found? a. Statutory Accident Benefits Schedule b. Statutory Conditions c. The Civil Code d. Highway Traffic Act
  5. When are passengers of public transit vehicles eligible to receive statutory accident benefits? a. When injuries to passengers of the public transit vehicle are serious in nature. b. When the public transit vehicle driver is convicted of negligence. c. When two or more public transit vehicles collide with one another. d. When the public transit vehicle has collided with another automobile or object.