IBAM- Fundamentals of Insurance

Question 1

Which of the following statements best defines the Aggregate Limit on a liability policy:
(1 mark)

a) It means that the policy limit is reinstated after each claim within the policy term.
b) It's the maximum amount paid for all bodily injury claims during the policy term.
c) It's the sum of all claims paid during the policy term.
d) It's the maximum amount paid for all valid claims during the policy term.

Explanation: The aggregate limit is the maximum total amount an insurer will pay for all covered or valid claims during the entire policy period. Once that overall limit is exhausted, no further payments are available under that limit for the remainder of the term.

Question 2

A Travel Insurance policy would provide coverage for this claim only:
(1 mark)

a) The insured suffered from high-altitude sickness while climbing Mt. Everest -- a hazardous activity -- and had to be rescued by helicopter.
b) The insured was seriously injured in a shark attack while swimming off a beach in California.
c) The insured was hospitalized in Hawaii because she gave birth to her baby 4 weeks before its expected due date.
d) The insured sustained bullet wounds when he was shot during a cocaine deal that went wrong.

Explanation: The shark attack is a sudden and accidental event that would ordinarily fall within travel medical coverage. The other options involve common exclusions or restrictions, such as hazardous activities, childbirth-related circumstances, or injuries arising from criminal activity.

Question 3

All of the following "elements" must be present if your client's legal liability for a tort is to be established, except one. Pick the exception.
(1 mark)

a) The plaintiff was owed a legal duty.
b) The duty owed to the plaintiff was breached by the defendant.
c) The defendant's action(s) was the proximate cause of the damages.
d) The results of the defendant's action(s) were unforeseeable.

Explanation: A negligence-based tort generally requires a duty of care, a breach of that duty, causation, and resulting damages. Foreseeability is normally relevant to establishing liability, so an unforeseeable result is the exception.

Question 4

Statements made by an applicant for insurance that undermine the insurer's ability to properly assess the risk are deemed a Misrepresentation. Which one of the following situations is an example of Misrepresentation?
(1 mark)

a) The applicant for insurance failed to disclose the automatic sprinkler system installed in the building.
b) The applicant for insurance described the type of construction as frame when the building is mainly constructed of masonry materials.
c) The applicant for insurance withheld information about a major fire loss, which occurred two years ago.
d) The applicant for insurance failed to disclose the name of the previous brokerage.

Explanation: Misrepresentation involves providing false or inaccurate information to the insurer. Describing a mainly masonry building as frame construction is an affirmative incorrect statement that could materially affect the insurer's assessment of the risk.

Question 5

A Bailee for Hire has temporary custody of another's personal property and has a legal duty owed to the third party. The extent of their liability may be a matter of:
(1 mark)

a) Tort law.
b) Contract law.
c) Custodial law.
d) Both tort and contract law.

Explanation: A bailee's liability can arise under contract law because of the agreement governing the custody of the property, and under tort law if the bailee fails to exercise the required standard of care and causes loss or damage.

Question 6

A person whose presence on the premises is connected with the owner's business or with an activity the owner conducts on the premises is deemed to be a(n):
(1 mark)

a) Trespasser.
b) Licensee.
c) Invitee.
d) Tortfeasor.

Explanation: An invitee is someone who enters premises for a purpose connected with the occupier's business or activities, often with express or implied permission. The occupier generally owes an invitee a duty to take reasonable care for their safety.

Question 7

When the insurer terminates an insurance policy, all of the following conditions apply, except one. Pick the Exception.
(1 mark)

a) the insured is entitled to 15 days written notice of termination sent by registered mail or five days written notice personally delivered.
b) the refund due to the insured shall be calculated on a short rate basis.
c) unless otherwise stated, the refund shall accompany the notice of termination.
d) the refund shall be in form of money, postal or express company money order or cheque payable at par.

Explanation: A short-rate refund is generally associated with cancellation initiated by the insured, where an administrative penalty or retention may apply. When the insurer terminates the policy, the refund is generally calculated on a pro rata basis, making option b the exception.

Question 8

An item of information about a risk that, if known, would affect an underwriter's decision to accept or decline the risk is known as:
(1 mark)

a) A misrepresentation.
b) Utmost good faith.
c) A material fact.
d) A non-disclosure.

Explanation: A material fact is information that would influence an insurer's or underwriter's decision about whether to accept a risk or on what terms. Because it affects the underwriting decision, it must generally be disclosed accurately.

Question 9

All Homeowners and other Habitational Package Policies include liability insurance. Coverage E: Personal Liability would respond in all of the following instances, except one. Pick the exception.
(1 mark)

a) Bodily Injury or Property Damage caused by the insured arising out of a personal non-business activity.
b) Bodily Injury suffered by a residence employee as a direct result of the insured's negligence.
c) Fire damage to a cottage rented by the insured when a curling bonspiel took place.
d) Property damage to a third party resulting from the personal actions of a Named Insured who does not reside at the insured premises.

Explanation: Personal liability coverage is generally designed to protect insured persons as defined in the policy. A Named Insured who does not reside at the insured premises may not meet the policy's definition of an insured for the particular coverage, making this the exception.

Question 10

Property policies contain two types of exclusions – one for property excluded and one for perils excluded. All of the following perils are normally excluded by property policies, except one. Pick the exception.
(1 mark)

a) Flood.
b) Wear and tear.
c) Increased costs of repair or construction due to enforcement of municipal by-law.
d) Explosion of natural, coal or manufactured gas.

Explanation: Flood, wear and tear, and increased costs resulting from by-law enforcement are commonly excluded or restricted under standard property policies. Explosion involving natural, coal, or manufactured gas is generally treated differently and may be covered, subject to the policy wording.

Question 11

Your client's insurance policy was recently cancelled for non-payment of premium. Six days after the notice of termination was mailed by the insurer, your client has a loss. Is the loss covered by the policy?
(1 mark)

a) The loss is not covered because no premiums had been paid.
b) The loss is not covered because the mailing of the notice automatically cancels the policy after five days.
c) The loss is covered because 15 days notice must be given by registered mail.
d) The loss is covered but only in proportion to the time the policy was in effect.

Explanation: Where termination notice is sent by registered mail, the required notice period must generally be observed before coverage ends. Because only six days have passed, the policy would still be in force if the applicable 15-day notice requirement applies.

Question 12

All Homeowners Forms include Coverage D: Additional Living Expense. An insured may be eligible for payment of additional living expenses, if necessary, up to the limit of insurance stated on the policy. This would apply in all of the following instances, except one. Pick the exception.
(1 mark)

a) The insured lived in a hotel for six months during the reconstruction of the dwelling, which had been destroyed by fire.
b) The insured was sheltered in the local community centre for a period of one week after the insured was denied access to the home due to a raging forest fire in the area.
c) The insureds were residing with friends for a period of two months while contractors carried out repairs to their dwelling after it was damaged by a fallen tree.
d) The insured went on a two week vacation to escape the poor air quality caused by smoke that had blown into the area from forest fires burning in the region.

Explanation: Additional Living Expense coverage is intended to reimburse necessary extra living costs when an insured cannot occupy their home because of insured damage or a covered loss. A voluntary vacation to escape poor air quality is not the same as necessary additional living expenses arising from loss of use of the insured premises.

Question 13

All of the following automobile insurance coverages are included in basic AUTOPAC except one. Pick the exception:
(1 mark)

a) Accident Benefits.
b) Personal Injury Protection Program.
c) Physical Damage Coverage.
d) Third Party Liability.

Explanation: Basic AUTOPAC includes compulsory coverages such as personal injury protection, physical damage coverage, and third-party liability. “Accident Benefits” is not the terminology used as a separate basic AUTOPAC coverage in this context, making it the exception.

Question 14

Contracts covering an extended period of time will usually permit changes to be made to them. The document used by the insurer to change the terms of the contract is referred to as a(n):
(1 mark)

a) Rider.
b) Endorsement.
c) Floater.
d) Binder.

Explanation: An endorsement is a formal document attached to or issued with an insurance policy to add, remove, or modify coverage or other policy terms after the original contract has been issued.

Question 15

All of the following factors will affect the premium to be charged for AUTOPAC, except one. Pick the exception:
(1 mark)

a) Where you live.
b) Your driving record.
c) The type of vehicle you are registering.
d) Your age.

Explanation: AUTOPAC premiums are generally determined using factors such as the vehicle, its use, location, and the driver's record or rating information. Age by itself is not one of the rating factors in the way described by the question.

Question 16

When depreciation is being calculated as a part of the claim settlement, all of the following factors are used to determine the amount of depreciation to be applied to lost or damaged property, except one. Pick the exception.
(1 mark)

a) Condition of the object.
b) Sentimental value.
c) Replacement value.
d) Normal life expectancy.

Explanation: Depreciation is based on objective factors affecting the property's actual value, such as its age, condition, expected useful life, and replacement cost. Sentimental value is personal and does not form part of a depreciation calculation.

 17) You would advise your business clients to purchase "Temporary Locations" coverage when their stock and/or equipment would likely be:
(1 mark)

a) Temporarily stored at their home.

b) At the premises of another business for repairs or storage.

c) In transit.

d) At a warehouse where the insured has rented storage space for two months.

Explanation: Temporary Locations coverage is intended to protect the insured's property when it is temporarily located away from the insured's usual premises, such as at another business for repairs or storage. This coverage addresses property that is temporarily situated at a location that is not normally listed or specifically insured under the policy.

18)

Your client recently purchased a Homeowners Comprehensive Form (IBC 1155), which you told her covered her property for "all risks" of direct physical loss or damage. Last week, her home was broken into and $30,000 of jewellery was stolen. Under the policy's Special Limits of Insurance, how much will the insurance company pay for the stolen jewellery?
(1 mark)

a) $1,000

b) $2,000

c) $5,000

d) $30,000

Explanation: Although the Homeowners Comprehensive Form provides broad "all risks" coverage for personal property, certain categories of property are subject to special limits of insurance. Jewellery is one of these categories, so the insurer's payment for theft is limited to the applicable special limit rather than the full $30,000 value of the stolen jewellery.

19)

The legal duty of a Bailee for Hire is
(1 mark)

a) To exercise ordinary care.

b) To exercise the highest standard of care.

c) To warn customers that damage to their property may occur while in the custody of the bailee.

d) To shift all liability for damage to customer's property to the customer.

Explanation: A bailee for hire is a person or business that takes possession of another person's property in exchange for compensation, such as a repair shop. The bailee has a legal duty to exercise ordinary or reasonable care in protecting the property while it is in their custody, but is not automatically responsible for every loss or damage.

20)

The Commercial General Liability Policy insures the liability exposures common to most businesses. Your client is an electrical contractor, who replaced the wiring in a customer's building. Two days after the work was finished a fire broke out, and the fire chief determined that it was caused by a faulty connection. Which liability coverage in the CGL would respond to this claim?
(1 mark)

a) Premises and Operations Liability.

b) Products Liability.

c) Completed Operations Liability.

d) Personal Injury Liability.

Explanation: Completed Operations Liability applies when bodily injury or property damage arises after the insured's work has been completed. In this case, the electrical contractor had finished replacing the wiring before the faulty connection caused the fire, so the loss arose out of completed work rather than ongoing operations.

Question 21

Under all Homeowners Forms, the coverage for certain Personal Property articles is restricted to "Special Limits of Insurance" unless the insured has purchased additional insurance. All of the following objects are subject to "Special Limits" except one. Pick the exception.
(1 mark)

a) Computer games and other software with a combined value of $3,600.
b) A mountain bike valued at $6,000.
c) A coin collection valued at $1,200.
d) A gold watch valued at $1,800.

Explanation: Certain categories of personal property, such as collections, jewelry or watches, and some computer-related property, may be subject to specific limits under a homeowners policy unless additional coverage is purchased. A mountain bike, however, is generally treated as ordinary personal property rather than falling within one of these listed special-limit categories.

Question 22

When making an underwriting decision, an underwriter can choose to:
(1 mark)

a) Reject the risk.
b) Accept the risk with an increase in rate.
c) Accept the risk with an increase in the deductible.
d) All of these things.

Explanation: An underwriter may reject a risk, accept it with a higher premium/rate, or accept it subject to a higher deductible, depending on the characteristics and level of risk. Therefore, all of the options are possible.

Question 23

Every policy of "fire" insurance:
(1 mark)

a) Usually covers fire, smoke, and specified types of explosions.
b) Is required by law to cover fire, windstorm, and lightning.
c) Covers fire, explosion, and windstorm.
d) Is required by law to cover at least fire, lightning, and specified types of explosions.

Explanation: A standard fire insurance policy generally provides coverage for fire and may include related perils such as smoke and specified explosions. It is not generally required by law to include windstorm or lightning.

Question 24

The basic principle behind Business Interruption Insurance is:
(1 mark)

a) To restore the building to the condition that 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) To 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 existed prior to the loss.

Explanation: Business Interruption Insurance is designed to protect the business against loss of income resulting from an insured interruption. Its objective is essentially to put the business in the financial position it would have been in had the loss not occurred.

Question 25

Brokers must make every effort to provide conscientious, diligent and efficient service to customers. Which of the following would not meet this service standard?
(1 mark)

a) Failure to return phone calls.
b) Failure to inform clients of changes in coverages.
c) Failing to offer appropriate coverage.
d) All of the above.

Explanation: All three actions; failing to return calls, failing to inform clients of coverage changes, and failing to offer appropriate coverage—fall below the expected standard of conscientious, diligent and efficient service. Therefore, all of the above is correct

Question 26

A lawsuit alleging damage to a neighbouring property during excavation work was filed against the property owner and the contractor. All of the following statements regarding the legal liability for injury or property damage arising out of the work performed by a contractor are true, except one. Pick the exception.
(1 mark)

a) The owner will not be held legally liable if the owner hired a contractor who has the necessary expertise in performing the work.
b) The owner will not be legally liable if the work is considered reasonable.
c) The owner and the contractor will share the liability if the work was dangerous.
d) The owner will always be held liable for injury or property damage resulting from the work performed by the contractor.

Explanation: A property owner is not automatically liable in every situation for damage or injury caused by an independent contractor. Liability depends on factors such as the nature of the work, the owner's duties, negligence, control over the work, and whether the activity involves special or inherently dangerous circumstances. Therefore, saying the owner will always be liable is the exception.

Question 27

The extent of coverage provided under the Homeowners Comprehensive Form (IBC 1155) is limited by certain losses that are specifically excluded. All of the following losses are excluded, except one. Pick the exception.

a) While riding his mountain bike the insured had a crash and caused irreparable damage to it.
b) The insured's dog broke through the sliding glass door leading to the outside when it spotted a bear in the yard.
c) Mechanical breakdown of the insured's furnace, which required complete replacement of it.
d) Substantial structural damage to the insured's dwelling caused by a mudslide, which followed a torrential rainstorm.

Explanation: The Comprehensive Form generally provides broad coverage subject to specified exclusions. Damage caused by domestic animals, mechanical breakdown, and earth movement such as mudslide are excluded. Accidental physical damage to the insured's mountain bike while being ridden, in the circumstances described, is the exception.

Question 28

To ensure your Third Party Liability is valid, the insured must follow the conditions of the policy. There are certain situations where coverage will not be afforded. Identify the situation below where coverage would not be provided.

a) The vehicle was driven during the day.
b) The vehicle was used by someone other than the registered owner.
c) The individual driving was not qualified or allowed by law to drive (an unlicensed driver).
d) The driver was under age 25.

Explanation: Liability coverage is subject to the policy conditions, including the requirement that a driver be legally qualified to operate the vehicle. An unlicensed or otherwise legally unqualified driver can result in coverage being denied. Simply driving during the day, being under 25, or being someone other than the registered owner does not automatically eliminate coverage.

Question 29

Which of the following does not have the legal capacity to contract?

a) Jasmine's Ted Emporium.
b) Easy Writer Pen & Paper Ltd.
c) Kim Burley a.k.a. Kim Burley Beauty Shops.
d) Flora's Garden Centre Inc.

Explanation: A business must have a legally recognized contracting entity behind it. Incorporated companies such as Easy Writer Pen & Paper Ltd. and Flora's Garden Centre Inc. have legal personality and capacity to contract. A business operating simply under a trade/business name, without being a separate legal entity, does not itself have independent legal capacity.

Question 30

The indemnity provided under property policies is for "direct damage" only. The owner of a fast food establishment makes a claim for the following losses after an explosion of his gas-fired oven and ensuing fire caused substantial damage to the premises and its contents. Which of the following claims will be covered by the policy as "direct damage"?

a) Damage to the freezer contents due to the disruption of power after the explosion.
b) Loss of business income for the three months that the business was interrupted.
c) Fire, smoke and water damage to stock and equipment caused by the explosion and resulting fire.
d) Amount of severance paid to employees who were laid off after the explosion.

Explanation: Direct damage refers to physical damage to insured property resulting directly from an insured peril. Fire, smoke, and water damage to the building's contents are physical losses. Lost business income, employee severance, and losses arising from power interruption are consequential or indirect losses rather than direct physical damage.

Question 31

The loss assessment coverage provided by the Condominium Unit Owners Package Form (IBC 1165) will respond when:

a) The coverage or limits of insurance on the Corporation's policy are inadequate to cover a loss to collectively owned property.
b) The value of improvements and betterments lost or damaged exceeds their original value.
c) Separate insurance has not been purchased for the unit owner's contents.
d) There is an uninsured loss to the insured's unit.

Explanation: Loss assessment coverage protects a condominium unit owner against certain assessments made by the condominium corporation. It can respond when a covered loss involving collectively owned property exceeds the corporation's available insurance coverage or limits, resulting in an assessment against individual unit owners.

Question 32

At approximately 3:00 p.m. yesterday, a person entered your client's store. He threatened a sales clerk with violence and demanded the cash from the cash register. Under the most basic of crime definitions, this is an example of:

a) Burglary.
b) Robbery.
c) Kidnapping.
d) Theft.

Answer: b) Robbery.

Explanation: Robbery involves taking property through the use of violence, force, or the threat of violence. Here, the individual threatened the sales clerk and demanded the cash. Theft does not necessarily involve force or threats, while burglary generally involves unlawful entry into premises with intent to commit a crime.

Question 33

Insurable interest means:

a) Interest gained on money in a bank.
b) Interest payable on a loan.
c) Personal interest people have in something they expect to inherit.
d) Financial interest a person has in something of value.

Explanation: An insurable interest exists when a person would suffer a financial loss if the insured property or subject matter were damaged or destroyed. It is the financial relationship between the insured and the subject of insurance that gives the person a legitimate interest in protecting it.

Question 34

The portion of a claim that's paid by the insured under an Umbrella Liability Policy is called the:

a) Deductible.
b) Franchise deductible.
c) Self-Insured Retention.
d) Disappearing deductible.

Explanation: A Self-Insured Retention (SIR) is the amount the insured must pay toward a covered loss before the umbrella insurer becomes responsible for the remaining amount, subject to the policy terms. It is similar in function to a deductible but is specifically referred to as an SIR in many liability and umbrella policies.

Question 35

Which of the following statements is true about Lloyd's of London?

a) It's an insurance company that specializes in commercial insurance.
b) Its membership is restricted to insurance companies only.
c) It's not an insurance company and does not transact any insurance business itself.
d) Lloyd's insurance policies are not available to Canadian insurance brokers.

Explanation: Lloyd's is an insurance marketplace rather than an insurance company itself. It provides the structure and marketplace through which underwriting members, traditionally organized into syndicates, conduct insurance business. Lloyd's risks can also be accessed through insurance brokers, including Canadian brokers.

Question 36

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) $7,500
b) $12,000
c) $30,000
d) $37,500

Explanation: The 80% co-insurance requirement means the insured should have carried at least $96,000 of insurance ($120,000 × 80%). Although the co-insurance calculation produces $37,500 ($30,000 ÷ $96,000 × $120,000), the policy only provides $30,000 of insurance. Therefore, the insurer cannot pay more than the policy limit, making the maximum settlement $30,000.

Question 37

The greatest risk of loss, other than fire, that many businesses face is the loss of money and securities and other valuable property due to criminal acts. Your client has purchased Robbery insurance. Which one of the following claims would this coverage respond to?

a) After entering the business premises in the morning, the insured found the backdoor open and most of the inventory was gone from the stock room.
b) The insured discovered that $2,000 was missing from the cash drawer and has no idea what happened to it.
c) A man walked up to the cashier and demanded that she open the cash register and hand over all the money contained in it.
d) While helping a customer, the insured didn't notice another person who entered the clothing store and left with several pairs of jeans without paying for them.

Explanation: Robbery involves the taking of property through actual or threatened force against a person. The man's demand for the cash accompanied by the threat implied in the situation constitutes robbery. The other scenarios describe possible burglary, unexplained disappearance, or theft/shoplifting rather than robbery.

38. In the following case, the insurer must give its consent to the transfer of an existing insurance contract when:

a) The insureds sell their home and the new owners want to continue the existing policy.
b) There has been a change in title to the insured property after the death of the insured.
c) There has been an authorized assignment under the Bankruptcy Act.
d) The insured becomes insane and title to the insured property is given to another by order of the court.

Explanation: An insurance policy is generally a personal contract between the insurer and the insured and cannot simply be transferred to a new owner without the insurer's consent. When a property is sold and the purchaser wishes to continue the existing insurance contract, the insurer must approve the transfer.

39. The law would hold an employer liable for damages in the following instance only:

a) When injury or damage is caused by employees who are on a frolic of their own.
b) When injury or damage arises out of the failure of employees to follow specific instructions provided by the employer.
c) When employees delegate work designated to them to others and injury or damage results.
d) When injury or damage results out of the employees' use of the employer's property without authorization for their own purposes.

Explanation: An employer may be held vicariously liable for an employee's actions when those actions occur in the course of employment. Failure to follow specific instructions while carrying out assigned duties can still occur within the scope of employment, unlike a personal "frolic" or unauthorized activity for the employee's own purposes.

40. Which of the following statements is true when a Standard Mortgage Clause is attached to a policy?

a) The insurer could be called upon to pay a loss to the mortgagee, even though the insured violated a policy or other condition.
b) The insurer can reduce coverages at any time at the request of the insured, even if such changes prejudice the position of the mortgagee.
c) The insurer may cancel the policy at any time by providing the mortgagee with seven days' notice of cancellation by registered mail.
d) Neither the insured nor the insurer may cancel the policy until the mortgage has been paid off.

Explanation: A Standard Mortgage Clause provides important protection to the mortgagee. The mortgagee's interest is treated separately from that of the insured, so certain acts or breaches by the insured do not necessarily defeat the mortgagee's right to recover.

41. The Statutory Conditions provide that the insured must promptly notify the insurer of any material change. A "material change" is one which:

a) Results in damage to goods caused by their undergoing a process involving the application of heat.
b) Due to a by-law change, provides for use of materials inferior to those that existed at the time the insurance policy was purchased.
c) Results in damage to buildings/contents caused by alterations or additions.
d) Introduces a new feature which increases the chance of loss.

Explanation: A material change is a change in circumstances that substantially increases or changes the risk insured against. A new feature that increases the probability or severity of a loss is therefore material and must be reported to the insurer.

42. The emergency removal coverage provided by the Mobile Home Insurance Form insures all of the following, except one. Pick the exception.

a) Cost to disconnect water services.
b) Cost to disconnect power services.
c) Towing or transporting costs.
d) Cost to repair damage caused during moving.

Explanation: Emergency removal coverage is intended to cover reasonable costs associated with moving the mobile home to protect it from an insured peril, such as disconnecting utilities and towing or transporting it. Damage caused during the move itself is not included as an emergency removal expense.

43. Glass Insurance policies contain very few exclusions. Three common exclusions are:

a) Smoke, fire, and nuclear energy hazard.
b) Fire, windstorm, and nuclear energy hazard.
c) Fire, windstorm, and war.
d) Fire, war, and nuclear energy hazard.

Explanation: Glass insurance is designed primarily to cover accidental breakage of insured glass, but certain major hazards are commonly excluded. Fire, war, and nuclear energy hazards are among the standard exclusions associated with this type of coverage.

44. Under the Homeowners Forms, all of the following personal property items are subject to a Special Limit of Insurance, except one. Pick the exception:

a) Watercraft.
b) Garden tractors and their accessories.
c) Computer hardware.
d) Business property.

Explanation: Homeowners policies impose special limits on certain categories of personal property, including watercraft, certain recreational or motorized equipment, and property used for business purposes. Computer hardware, however, is not treated as a separate special-limit category in the way these listed items are.

45. Each province's Insurance Act defines the meaning of "insurance," which establishes the Principle of Indemnity. The Principle of Indemnity means that in the event of an insured loss the amount of the payment is based on:

a) The value of the object of insurance at the time it was purchased.
b) The current replacement value of the object of insurance.
c) The value of the object of insurance at the time it was insured.
d) The actual amount of the loss, no more and no less, reflecting the value of the object of insurance immediately prior to the loss.

Explanation: The principle of indemnity is intended to restore the insured financially to approximately the same position they occupied immediately before the loss. Insurance is not intended to create a profit; therefore, the payment generally reflects the actual insured loss, subject to the policy terms and limits.

46. There are certain situations when your physical damage coverage (all perils) will not cover a loss. Below is a list of these situations. Identify the loss that would be covered by the all perils coverage.

a) The vehicle was in a speed test or motor race.
b) The damage was caused when the door was torn off as it was opened into traffic.
c) The accident occurred while the insured was fleeing police.
d) The driver was convicted of impaired driving.

Explanation: All-perils physical damage coverage contains specific exclusions, including use of the vehicle in racing or speed tests and certain prohibited activities. A conviction for impaired driving does not automatically mean that the physical damage itself falls within those specific exclusions, so this represents the covered situation among the choices.

47. The Property and Casualty Insurance Compensation Corporation (PACICC) was formed to:

a) Have all insurers share in the payment of claims arising out of a single catastrophe.
b) Spread the costs of suspected fraudulent claims amongst all insurers.
c) Provide consumers with insurance protection in the event of an insurer's insolvency.
d) Monitor the solvency of federally licensed insurers.

Explanation: PACICC provides a safety net for eligible policyholders when a member property and casualty insurer becomes insolvent. Its purpose is to help protect consumers against the financial consequences of an insurer's failure.

48. In addition to the coverage provided for the explosion of boilers and pressure vessels, Boiler and Machinery policies also provide this important coverage:

a) Wear and tear.
b) Gradual deterioration.
c) Mechanical and electrical breakdown.
d) Latent defect.

Explanation: Boiler and Machinery insurance, now commonly associated with equipment breakdown coverage, is designed to cover sudden and accidental mechanical or electrical breakdown of insured equipment. Ordinary wear and tear and gradual deterioration are generally not covered.

49. All of the following statements respecting Voluntary Medical Payments coverage, which is provided on all Homeowners Forms, are true except one. Pick the Exception.

a) Are limited as to amount.
b) There is no requirement that the insured be legally liable for the injury before payment will be made.
c) Are payable for up to five years from the date of the accident.
d) Are designed to pay surgical, dental, hospital, and other expenses.

Explanation: Voluntary Medical Payments coverage can pay reasonable medical expenses without requiring the insured to be legally liable for the injury, subject to the policy's limits and applicable time requirements. The statement that payments are available for five years is therefore the incorrect statement.

50. Statutory Conditions found in all policies of "fire" insurance:

a) Outline the duties and responsibilities of the insured and the insurer.
b) Specify the coverages provided.
c) State the rights of third parties.
d) Are not expressly required by law.

Explanation: Statutory Conditions are legally prescribed conditions that establish important duties and obligations of both the insured and insurer. They address matters such as notification of loss, proof of loss, changes in risk, and other responsibilities arising under the insurance contract.

51. When a licensed insurance broker represents the interest of the client, the broker's primary duty to the client is to:

a) Identify the client's insurance requirements and to offer the coverages needed.
b) Place insurance always with the insurer that charges the lowest premium.
c) Provide the client only with the broadest coverage available.
d) Ensure that the client receives a policy with the lowest deductible available.

Explanation: A broker acting for the client must first understand the client's insurance needs and recommend appropriate coverage. The cheapest premium, broadest coverage, or lowest deductible is not necessarily the most suitable solution for the client's particular circumstances.

52. The co-insurance clause is designed to:

a) Prevent the chance of a total loss.
b) Transfer part of the risk to another insurer.
c) Discourage the insured from gambling on suffering only a partial loss.
d) Penalize the insured in the event of over-insurance.

Explanation: The co-insurance clause encourages an insured to carry insurance up to the required proportion of the property's value. If the property is underinsured and a partial loss occurs, the insured may receive only a proportionate amount of the loss, discouraging deliberate underinsurance.

Question 54

Property policies describe how the insurer arrives at the amount of the claim settlement payable to the insured. Which of the following statements correctly describes the value on which the amount of the payment made to the insured is based?
(1 mark)

a) The amount of the payment is the Actual Cash Value, no more and no less.

b) The minimum the insured is entitled to receive is the amount of insurance purchased.

c) The insured is entitled to an amount, which is the least of the Actual Cash Value, the insured’s interest, and the amount of insurance.

d) The insured receives the Actual Cash Value and must then settle with other Loss Payees who have an insurable interest stated on the policy.

Explanation: The amount payable under a property policy is limited by the least applicable amount. The settlement cannot exceed the property's Actual Cash Value, the insured's actual financial interest in the property, or the policy limit.

Question 55

The professional liability exposure of insurance brokers is ONLY insured under a policy of:
(1 mark)

a) Personal liability insurance.

b) Commercial general liability insurance.

c) Malpractice insurance.

d) Errors and omissions insurance.

Explanation: Professional liability insurance protects professionals against claims arising from errors, omissions, or negligent professional services. In insurance-broker terminology, this exposure is commonly associated with professional liability/E&O coverage.

Question 56

The Additional Living Expense coverage provided under the Homeowners Forms pays:
(1 mark)

a) Accommodations only.

b) All costs as incurred by the insured for food, transportation, and accommodations after an insured loss.

c) Those increased costs for items such as food, transportation, and accommodations which are incurred by the insured after an insured loss, so long as such costs do not serve to increase the insured’s standard of living.

d) All mortgage payments that the insured must continue to make after an insured loss.

Explanation: Additional Living Expense coverage is intended to pay the increased costs the insured incurs because an insured loss makes the home unavailable for normal living. It is not intended to improve the insured's standard of living or pay ordinary expenses that would have existed anyway.

Question 57

Which one of the following statements about AUTOPAC is false?
(1 mark)

a) AUTOPAC operates without a facility association.

b) The AUTOPAC system is a Pure No Fault System.

c) Better drivers receive a premium reduction based on their driving record.

d) The AUTOPAC program is regulated by the Highway Traffic Act, the Off Road Vehicle Act, and the Insurance Act.

Explanation: AUTOPAC is not a pure no-fault system. Although it contains important no-fault benefits, the automobile insurance system also incorporates other liability/tort principles, so describing it as entirely pure no-fault makes the statement false.

Question 58

An indifferent attitude towards losses because of the presence of insurance indicates the presence of:
(1 mark)

a) Gross negligence.

b) Physical hazard.

c) A material change.

d) Moral hazard.

Explanation: Moral hazard refers to a change in a person's attitude or behaviour toward risk because insurance exists. An insured who becomes indifferent to losses because they expect the insurer to compensate them demonstrates moral hazard.

Question 59

An insured’s liability for sickness, disease or death caused to third parties is insured by liability policies under the coverages provided for:
(1 mark)

a) Personal injury.

b) Bodily injury.

c) Medical payments.

d) Supplementary payments.

Explanation: Bodily injury coverage addresses liability for physical injury to third parties and, in liability insurance terminology, includes consequences such as sickness, disease, and death. Medical payments coverage is a separate coverage and is not the liability coverage described in the question.

Question 60

The major difference between the Highway Traffic Act and the Off Road Vehicle Act is:
(1 mark)

a) they were written by different governments.

b) only one was written in 1971.

c) the Off Road Vehicle Act is not subject to the Personal Injury Protection Program.

d) there is no penalty under the Off Road Vehicle Act for operating an Off Road Vehicle while intoxicated.

Explanation: The important distinction tested here is that vehicles governed under the Off Road Vehicle Act are treated differently from vehicles governed by the Highway Traffic Act with respect to the Personal Injury Protection Program. Therefore, the key difference is the exclusion identified in option C.

Question 61

When discussing Homeowners Insurance with a client it is important to establish who, in addition to the Named Insured(s), occupies the dwelling. Under the provisions of the Homeowners policies only certain persons are automatically qualified as an "insured". Which of the following persons is not considered an "insured"?
(1 mark)

a) Your client and her common law husband who jointly own the dwelling.

b) The elderly mother who permanently lives with the insured.

c) The 20 year old daughter of friends who is renting the basement suite in the insured's dwelling.

d) The insured's 24 year old son who is currently living in Toronto while completing his Master's Degree in economics.

Explanation: A person does not automatically become an insured merely because they occupy the dwelling. A 20-year-old daughter of friends who is renting a basement suite is a tenant and is not automatically included within the policy's definition of an insured in the same way as qualifying family members or persons otherwise specifically included by the policy.

Question 62

Crime policies define certain terms as they relate to coverage. The broadest meaning is given to:
(1 mark)

a) Burglary.

b) Theft.

c) Kidnapping.

d) Robbery.

Explanation: Theft is the broadest concept among the listed crime terms. Burglary and robbery describe more specific circumstances in which property is taken, while theft is the more general term encompassing the unlawful taking of property.

Question 63

Question 63 is not visible in the screenshots provided, so I will not invent or reconstruct it.

Question 63

The definition of person insured under the AUTOPAC program would exclude:
(1 mark)

a) the actual owner of the vehicle.

b) the insured’s mechanic while the vehicle is in their care custody or control.

c) a properly licensed sister or brother as long as they had permission to operate the vehicle from the insured.

d) the registered owner of the vehicle.

Explanation:
The correct answer is b) the insured’s mechanic while the vehicle is in their care custody or control. Under the AUTOPAC program, persons such as the actual or registered owner and certain authorized family members or drivers can qualify as insured persons. However, a mechanic who has temporary care, custody, or control of the vehicle in the course of servicing or repairing it is not included in the definition of an insured person under AUTOPAC.

Question 64

Which of the following is not a function of insurance?
(1 mark)

a) Spread of risk.

b) Basis of credit system.

c) Loss prevention and loss reduction.

d) Maintenance contract

Explanation: Insurance performs important functions such as spreading risk, supporting credit arrangements, and encouraging loss prevention and reduction. A maintenance contract, however, is a service arrangement rather than a fundamental function of insurance.

Question 65

A business such as a travel office could readily, except for a significant outlay of up-front dollars, resume its business after only a very short interruption. The following policy can be purchased to pay those up-front costs associated with a short period of interruption.
(1 mark)

a) Earnings Form.

b) Profits Form.

c) Rent or Rental Value Form.

d) Extra Expense Form.

Explanation: The Extra Expense Form is designed to cover additional expenses incurred to minimize or avoid an interruption of business operations. For a business that can resume quickly by spending money upfront, this coverage can provide the funds needed to get operations running again.

Question 66

Which one of the following claims would be insured by the Homeowners Basic Form (IBC 1151) under the peril of theft?
(1 mark)

a) Theft of insured's registered Labrador dog.

b) Damage to a door and lock by someone attempting to break into the insured's dwelling.

c) Theft of personal property from a seasonal dwelling owned by the insured and that had not been occupied by the insured for almost two months.

d) Theft of building materials from the site of the insured's new dwelling prior to its completion.

Explanation: Damage to the dwelling caused by an attempted break-in is associated with the peril of theft and can be covered under the applicable homeowners theft coverage. The other choices involve circumstances or property that may fall outside the applicable theft coverage or its conditions.

Question 67

All the following statements are true about supplementary travel insurance policies, except. Pick the exception.
(1 mark)

a) There is no standard industry policy.

b) There is an industry standard policy.

c) Policies can be issued for single trips, or on an annual basis.

d) Policies can be issued for an individual, or may include family members.

Explanation: The exception is B because there is no single standard industry-wide travel insurance policy. Travel insurance policies can differ between insurers and can be issued for single trips or annually, and coverage may be arranged for individuals or families.

Question 68

When the insurer opts to repair, rebuild or replace damaged property rather than make payment in the form of a cash settlement, it must:

a) First provide the insured with the option of accepting or rejecting the proposed basis of settlement.
b) Provide the insured with written notice of its intention to do so within 30 days after receipt of proof of loss.
c) Seek the consent of the insured’s mortgagee.
d) Advise the insured’s broker or agent of its decision.

Explanation: The selected answer is b). Where an insurer chooses to settle a covered property loss by repairing, rebuilding, or replacing the damaged property instead of making a cash payment, it must give the insured written notice of that intention within the required period after receiving proof of loss. This ensures that the insured is formally informed of the insurer’s chosen method of settlement.

Question 69

When more than one person was engaged in an action that resulted in injury or property damage to others and neither one accepts a share of the responsibility, the courts resolve this dispute in the following manner:

a) The courts appoint an arbitrator to apportion the liability among the responsible parties.
b) The courts will wait until the responsible parties have reached an agreement to equally share the liability.
c) The courts hold each person liable for the full amount of the damages.
d) The judge will transfer the case to the criminal court to impose punitive sanctions against the responsible parties.

Explanation: The selected answer is c). Where multiple parties are responsible for causing injury or property damage and responsibility is disputed between them, the legal principle of joint and several liability can result in each responsible party being held liable for the full amount of the damages. The injured party is therefore not necessarily required to wait for the responsible parties to agree among themselves about how the liability should ultimately be divided.

Question 70

All of the following statements regarding the Builders’ Risk – Broad Form are true, except one. Pick the Exception.

a) coverage normally ceases when the building becomes occupied.
b) coverage automatically ceases when there has been no construction activity for more than 30 consecutive days.
c) coverage can be added for materials in transit or at any other location.
d) coverage limit to be purchased at inception must be no less than 50% of the completed value of the project.

Explanation: The selected answer is d). This is the exception because the stated requirement that the coverage limit purchased at inception must be no less than 50% of the completed value of the project is not a correct statement of the Builders’ Risk – Broad Form requirements. The other statements describe circumstances or extensions associated with this type of construction insurance coverage.

Question 71

The chief advantage of replacement cost coverage is:

a) No deduction for depreciation.
b) Only limited depreciation is charged the insured.
c) The insured receives a settlement based on replacement cost, even if the property is not replaced.
d) It removes the effect of the by-laws exclusion.

Explanation: The selected answer is a). The principal advantage of replacement cost coverage is that depreciation is not deducted when determining the replacement-cost settlement, subject to the applicable policy requirements. This allows the insured to recover the cost of replacing the damaged property with property of like kind and quality rather than receiving only its depreciated actual cash value.

Question 72

Insurable interest is an element that specifically applies to contracts of insurance and must be proved before an insured is entitled to the indemnity. All of the following parties are deemed to have an insurable interest, except one. Select the exception.

a) The insured’s father whose name is stated on the policy as a Loss Payee.
b) The insured’s sixteen year old son who is named in the insured’s last will and testament as the sole beneficiary of the insured’s estate.
c) The insured’s business partner.
d) The insured that operates as an appliance repair service for local customers named “Break and Mend Ltd.”.

Explanation: The selected answer is b). Being named as a beneficiary in a will does not, by itself, establish the required insurable interest in the insured property or risk. An insurable interest generally exists where a person has a legally recognized financial or other interest such that they would suffer a loss if the insured subject matter were damaged or destroyed.

Question 73

Which of the following statements is correct in connection with an 80% co-insurance clause?

a) The amount payable is restricted to less than 80% of the actual cash value of the property.
b) The insured can collect only 80% of any loss.
c) If the amount of insurance is less than 80% of the value of the property, payment may be less than the actual loss.
d) The amount of insurance carried must, by law, be not less than 80% of the value of the property.

Explanation: The selected answer is c). An 80% co-insurance clause requires the insured to carry insurance equal to at least 80% of the applicable value of the property in order to avoid a co-insurance penalty. If the amount of insurance carried is below that required percentage, the insurer may reduce the amount payable for a partial loss, meaning the payment can be less than the actual amount of the loss.

Question 74

The Insurance Act requires that all people who sell insurance be licensed. All of the following statements are true, except one. Pick the exception:

a) To obtain an initial license, an applicant must pass an approved examination.
b) Once obtained, the initial license automatically entitles the licensee to transact insurance 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 provision of the Insurance Act.

Explanation: The selected answer is b). An insurance licence does not automatically authorize a licensee to conduct insurance business in every province. Insurance licensing is subject to the applicable provincial or territorial regulatory requirements, so obtaining a licence in one jurisdiction does not by itself provide unrestricted authority to transact insurance business throughout all provinces.

Question 75

The Insurance Act requires that both the dates on which the insurance policy commences and expires be stated on the policy. Under the provisions of the Insurance Act, insurance coverage takes effect at:

a) 12:01 a.m. Standard Time at the location of the property insured.
b) 12:01 p.m. Standard Time at the location of the property insured.
c) 12:01 a.m. Standard Time at the address of the Named Insured as stated herein.
d) 24 hours after the broker binds coverage.

Explanation: The selected answer is c). Under the provision stated in the question, the commencement of coverage is tied to 12:01 a.m. Standard Time at the address of the Named Insured specified in the policy. This establishes a specific and consistent point in time from which the insurance contract becomes effective.

Question 76

Only the following person has the authority to waive a term or condition contained in a contract of insurance:

a) The insured.
b) Person authorized for that purpose by the insurer.
c) Insured’s broker.
d) Mortgagee of the insured property.

Explanation: The selected answer is b). A term or condition of an insurance contract can only be waived by someone who has the authority of the insurer to do so. The insured, broker, or mortgagee cannot independently waive a contractual condition simply because they are involved with the insurance arrangement.

Question 77

What is the most common cause of errors and omissions claims, accounting for nearly 50% of all claims?

a) Policy change errors.
b) Processing delays.
c) Cancellation and renewal errors.
d) Inadequate coverage.

Explanation: The selected answer is d). Inadequate coverage is identified as the most common source of errors and omissions claims in the question. This can occur when the coverage arranged does not adequately address the client’s needs, leaving the client exposed to a loss that they expected their insurance to cover.

Question 78

The occupier of a property owes the greatest duty of care to:

a) Children.
b) Invitees.
c) Trespassers.
d) Licensees.

Explanation: The selected answer is a). Children can require a particularly high degree of care because they may not fully appreciate or recognize dangers in the same way as adults. An occupier therefore has a heightened responsibility where children may reasonably be expected to be present, particularly where an attractive or potentially dangerous condition could draw them onto the property.

Question 79

All of the following are "insureds" under the Homeowners Forms, except one. Pick the exception:

a) Insured’s grandmother who lives with them.
b) 16 year old foster child left in the care of the insureds.
c) Insured’s twins, age 22, who are living at home while attending university.
d) Roomers or boarders living with the insured

Explanation: The selected answer is d). Roomers or boarders who live with the insured are not automatically included within the definition of “insured” under the Homeowners Forms simply because they reside in the same dwelling. In contrast, certain family members and children in the insured’s care may qualify as insureds under the applicable policy wording.

Question 80

The Homeowners forms contain a number of "Extensions of Coverage". One such coverage is that for freezer food. All of the following statements respecting this extension of coverage are true, except one. Pick the exception.

a) Coverage is provided when there is an accidental interruption of electrical power on or off the insured’s premises.
b) Coverage is provided for loss to freezer food due to mechanical breakdown of the food freezer.
c) Coverage is provided for loss to freezer food due to the accidental or intentional disconnection of the power supply or the operation of circuit breakers or fuses.
d) Coverage is provided for damage to a food freezer when it is due to food spoilage covered by this extension.

Explanation: The selected answer is d). The freezer-food extension is intended to cover loss of food under specified circumstances, such as certain interruptions of electrical power or mechanical breakdown. It does not provide coverage for physical damage to the food freezer itself merely because food spoilage is covered under the extension.

Question 81

A "peril" is best defined as the:

a) Chance of a loss.
b) Occurrence of a loss.
c) Cause of a loss.
d) Result of a loss.

Explanation: The selected answer is c). A peril is the cause of a loss. Examples of perils in insurance include fire, theft, windstorm, and certain other events that can cause damage or loss. This differs from a hazard, which is a condition that increases the likelihood or severity of a loss. Question 85

Personal Injury liability insurance:
(1 mark)

a) Covers bodily injury.
b) Is a form of voluntary medical insurance.
c) Provides coverage for offences such as slander and libel.
d) Provides limited Accident and Sickness benefits to persons injured on the insured’s premises.

Explanation: Personal Injury liability is concerned with non-physical injuries arising from specified offences, such as libel and slander. Bodily injury is dealt with under bodily injury liability coverage, while voluntary medical payments and accident/sickness benefits are different forms of coverage.

82)

Property insurance contracts are designed to pay for loss or damage arising out of the happening of a specific event. Which one of the following statements regarding the events insured by property insurance contracts is correct?

(1 mark)

a) The event must be a future event and it must be accidental.
b) The event may happen with the co-operation of the insured.
c) The event may happen with the intent of the insured.
d) The event may occur accidentally or be caused deliberately by the insured.

Explanation: An insurable event under a property insurance contract must be fortuitous, meaning it is uncertain and accidental rather than intentionally caused by the insured. The event must also be a future event when the contract is entered into. Deliberately causing a loss would generally defeat the purpose of insurance and is not an insurable accidental event.

83)

Generally, the fire rate charged by the insurer on a Commercial Property Insurance policy will not be affected by the:

a) type of building construction.
b) distance from other commercially rated buildings.
c) level of available fire protection.
d) length of time remaining on the building lease.

Explanation: The fire rate for commercial property is influenced by physical characteristics of the risk, including construction and the surrounding exposure. The level of fire protection is also a factor considered in assessing the risk, while the remaining length of a building lease does not directly affect the physical fire hazard or likelihood of loss. Therefore, c) is the selected answer.

Question 84)

Which one of the following statements regarding Accident Benefits coverage that is available through the Off Road Vehicle Act is false?

a) Funeral expenses when insured’s death is the result of an Off Road Vehicle accident.
b) Death benefits to surviving spouse and dependants when insured’s death is the result of an automobile accident.
c) Weekly income benefit when insured is injured in an automobile accident and is unable to work.
d) Cost to repair or replace clothing and other personal property which is lost or damaged as the result of an automobile accident.

Explanation: Accident Benefits are intended to provide benefits such as medical, rehabilitation, income-loss, death and funeral benefits following an automobile accident. They do not provide a benefit for repairing or replacing ordinary clothing and other personal property damaged in the accident.

Question 85)

Personal Injury liability insurance:

a) Covers bodily injury.
b) Is a form of voluntary medical insurance.
c) Provides coverage for offences such as slander and libel.
d) Provides limited Accident and Sickness benefits to persons injured on the insured’s premises.

Explanation: Personal injury liability is concerned with non-physical injuries to a person's rights or reputation, such as libel and slander. Bodily injury is dealt with under bodily injury liability coverage, while voluntary medical insurance and Accident and Sickness benefits are different forms of coverage.

Question 86)

Insurers are fiduciaries and, therefore, must comply with government regulations that set out the fiduciary responsibility in terms of handling the monies paid by insureds. Under these regulations insurers are required to:

a) Report to the Superintendent the income earned from premium investments .
b) Maintain accurate records of claims pending and paid.
c) Hold the unearned portion of the premiums in trust.
d) Hold the entire annual premium in trust until the expiry of the policy .

Explanation: When an insurer receives a premium for a policy period, the portion relating to the period that has not yet elapsed is the unearned premium. Because the insurer has not yet provided the corresponding period of coverage, that unearned portion must be treated as trust money rather than being regarded as fully earned income.

Question 87

In a contract of insurance, "consideration" is the:
(1 mark)

a) Exchange of something of value between the parties.
b) Amount the insured can collect in the event of a claim.
c) Object of insurance.
d) Underwriter’s review of the details of a risk to be insured.

Explanation: Consideration is one of the essential elements of a legally enforceable contract and means that each party gives something of value. In insurance, the insured provides the premium or promise to pay the premium, while the insurer provides its promise to provide coverage according to the policy.

Question 88

Generally, all of the following, except one, are seen to be "incompetent" or lacking the legal capacity to contract. Pick the exception.
(1 mark)

a) A corporation.
b) A child.
c) A trade name.
d) A senile person.

Explanation: A corporation is a recognized legal entity and therefore generally has the legal capacity to enter into contracts. By contrast, children and persons lacking mental capacity may lack contractual capacity, while a trade name itself is not a legal person capable of contracting.

Question 89

In which of the following situations would a landlord be responsible for ensuring that a building rented to others is fit for the purpose for which it is rented?
(1 mark)

a) The landlord did not warrant the building was fit for the purpose for which it’s rented.
b) The landlord revealed adverse conditions to the tenant.
c) The landlord rents an unfurnished premises to a tenant.
d) The landlord has contracted to maintain the premises and fails after reasonable notice to do so.

Explanation: Generally, a landlord is not responsible for ensuring that rented premises are fit for a particular purpose, but an important exception arises where the landlord has undertaken a contractual obligation to maintain the premises. If the landlord receives reasonable notice of the need for maintenance and fails to act, liability can arise.

Question 90

Your brokerage is moving to a new location, and the lease for the office space has just been signed. To prepare the premises for occupancy new carpeting, light fixtures, alarm system have to be installed, and walls will have to be erected to create separate work areas. Based on your understanding of the description of building, stock and equipment in commercial property policies, these values would have to be insured under:
(1 mark)

a) Building, because these are permanent improvements made to the building.
b) Stock, as they fall under "similar property belonging to others, which the insured is under obligation to insure or for which the insured is legally liable.
c) Equipment, because these are tenant’s improvements.
d) None of the above, because the landlord’s building insurance covers these values.

Explanation: Under the commercial property definitions used in this context, tenant’s improvements are included within the definition of equipment. They are improvements, alterations and betterments made at the tenant’s expense to a building occupied by the tenant but not owned by the tenant. The carpeting, light fixtures, alarm system and partitions described in the question are examples of such improvements.

Question 91

The Insurance Act requires that all people who sell insurance must be licensed. All of the following statements are true, except one. Pick the exception.
(1 mark)

a) To obtain an initial license, an applicant must pass an approved examination.
b) In all Canadian provinces, the initial course of study is the only course required for licensing.
c) Brokers/salespersons must be licensed in each province in which they do business.
d) A license may be terminated when the licensee proves to be incompetent or untrustworthy.

Explanation: The exception is b) because licensing requirements are not limited everywhere to one initial course of study. Insurance licensing is subject to provincial requirements, and additional education, examinations, or continuing licensing requirements may apply depending on the jurisdiction and licence class. Therefore, it is incorrect to say that the initial course is the only course required in all Canadian provinces.

 Question 92)

The Builder's Risk – Broad Form can be used to insure all of the following items, except one. Pick the Exception.

a) all materials and supplies entering into the completed project.
b) value of landscaping.
c) temporary buildings on project site.
d) contractor's tools and equipment.

Explanation: Builder’s Risk Broad Form is intended to cover property and materials that form part of the construction project, including temporary structures at the site. The contractor’s own tools and equipment are generally not part of the completed project and require separate coverage.

Question 93)

All of the following statements regarding liability policies are true, except one. Pick the exception.

a) Liability insurance covers the bodily injuries of an insured, but only when the injury was due to an unintentional act caused by another insured.

b) Liability policies are designed to respond when the insured is legally liable for injury or property damage to a third party.

c) Liability policies include Supplementary Payments, which the insurer covers in addition to the limit of insurance stated on the policy.

d) Liability policies are designed to cover the payment of compensatory damages only.

Explanation: Liability insurance is principally third-party coverage. It responds to the insured’s legal liability for bodily injury or property damage suffered by others, rather than providing liability coverage for bodily injury suffered by the insured themselves.

Question 94)

The Homeowners forms contain a number of "Extensions of Coverage". All of the following statements respecting these coverage extensions are true, except one. Pick the exception.

a) Coverage is provided for lock replacement when the keys to the insured dwelling have been lost or stolen and the loss reported to the authorities.

b) Property which is necessarily removed to protect it from loss or damage is insured for 30 days or until the expiry of the policy, whichever occurs first.

c) If the amount payable for loss, including expense for debris removal, is greater than the amount of insurance, an additional 5% of that amount will be available to cover debris removal expense.

d) Coverage is automatically extended for a maximum of 30 days to insure personal property while in transit to and at another location in Canada which is to be occupied by the insured as their principal dwelling.

Explanation: The standard Homeowners extensions include provisions for property temporarily removed, additional debris-removal coverage, and personal property in transit to a new principal residence. Lock replacement following lost or stolen keys is not one of these standard extensions.

Question 95)

All Homeowners policies contain the section "Extensions of Coverage". All of the following losses are covered under this section, except one. Pick the exception.

a) Damage to personal property during transportation to the insured's new principal residence located in Sidney, Nova Scotia, which is to be occupied by the insured within the next 10 days.

b) The cost to repair the "tear out" damage to the insured's driveway that was necessarily caused to replace the ruptured water main.

c) The cost to replace the insured's freezer food, which spoiled as a result of a power failure caused by lightning.

d) Loss of the insured's indoor trees and plants due to exposure to extreme temperatures after a severe storm damaged part of the roof.

Explanation: The Homeowners extensions provide coverage for situations such as personal property being transported to a new principal residence and certain freezer-food and plant losses. The cost of tearing out part of a driveway to access and replace a ruptured water main is not an extension covered under this section.

Question 96)

Personal property that's temporarily removed is insured under the Homeowners forms is covered:

a) When normally kept at any other location owned by the insured.
b) Anywhere in the world.
c) Only in North America excluding Mexico.
d) Only in Canada, Mexico or the United States of America.

Explanation: Homeowners personal-property coverage generally follows the insured property when it is temporarily removed, providing worldwide coverage subject to the policy’s applicable terms, conditions and limits. Therefore, “Anywhere in the world” is the correct choice.

Question 97)

All of the following statements pertaining to insurance-policy Warranties are true, except one. Select the exception.

a) A warranty is a promise made by the insured that certain facts are truly as they are represented and will remain so.

b) A warranty requires the exact compliance by the insured.

c) The insured is not entitled to a claims payment after an insured loss when it has been found that the insured breached a warranty.

d) The insured is entitled to a claims payment even when there has been a breach of a warranty as long as the loss was not caused by the breach.

Explanation: A warranty is an undertaking requiring compliance, and traditionally a breach could discharge the insurer from liability. The important point for revision is that warranties are treated more strictly than ordinary policy conditions.

Question 98)

When is the owner of a dog legally liable for its behaviour?

a) Only after it bites a second person.
b) When the dog has not been domesticated.
c) Never.
d) Always.

Explanation: The principle being tested is that the dog owner can have legal responsibility for the behaviour of the animal and resulting injury or property damage. Liability can arise through applicable animal-liability rules or negligence; it does not require waiting for a second bite.

Question 99)

All perils coverage is a mandatory component of Manitoba's AUTOPAC program. Identify the property that would be covered under this coverage.

a) A worn out tire.
b) A semi-trailer.
c) A tape stolen from the vehicle while left in the attached tape deck.
d) Damage to a vehicle as a direct result of a nuclear energy hazard.

Explanation: All-perils coverage is intended to cover accidental loss or damage to an insured vehicle and permanently attached equipment, but there are important exclusions. Manitoba’s current MPI guidance specifically excludes wear-and-tear damage, vehicle contents such as tapes, certain semi-trailers, and nuclear-related losses.

Question 100)

An Umbrella Liability Policy will:

a) increase the limits of the primary policies.
b) increase the coverage of the primary policies.
c) increase limits on the primary automobile policy.
d) all of the above.

Explanation: An umbrella liability policy provides an additional layer of liability protection above underlying policies and increases the amount of liability protection available when the underlying limits are exhausted. Umbrella policies can sit over several underlying liability policies, including automobile and homeowners/general liability policies.