Fundamentals of Insurance Practice Exam| 100 questions| with complete solutions
Course
Fundamentals of Insurance
Institution
Illinois State University
The coverage limits on Homeowners Insurance Policies are determined after calculating the Replacement Cost of the dwelling building. Once this value is determined, the rest of the coverage limits are calculated. Which of the following coverage limits is correct?
a) Personal Property- 100% of Cover...
fundamentals of insurance practice exam| 100 questions| with complete solutions
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Illinois State University
Fundamentals of Insurance
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Fundamentals of Insurance Practice Exam| 100
questions| with complete solutions
The coverage limits on Homeowners Insurance Policies are determined after calculating the
Replacement Cost of the dwelling building. Once this value is determined, the rest of the
coverage limits are calculated. Which of the following coverage limits is correct?
a) Personal Property- 100% of Coverage A
b) Detached Private Structures - 10% of Coverage A
c) Additional Living Expenses- - 10% of Coverage A
d) Dwelling- 100% of Personal Property Coverage Correct Answer: The answer is B
Insurance has been around for a long time and can be traced back hundreds of years. The birth of
Fire insurance can be traced back to:
A) London, England in June 1660
B) London, England in September 1666
C) London, England in June 1666
D) London, England in September 1888 Correct Answer: The answer is B
London, England in September 1666
Which of the following is NOT one of the 5 "Functions of Insurance"?
A) Spread of Risk
B) Employment
C) Loss Prevention and Loss Reduction
D) Loss Control and Loss Transfer Correct Answer: The answer is D
Loss Control and Loss Transfer
Insurance is based on the "Principle of Indemnity". Which of the following definitions best
describes this principle?
a) Ensures that people receive the actual amount of their loss, no more no less
b) Ensures that the limits of insurance are always reinstated after a loss
c) Ensures that people will receive a cash settlement for all insured losses
d) Ensures that people will be provided with a place to stay when their dwelling is deemed unfit
for occupancy after a loss Correct Answer: The answer is A
Ensures that people receive the actual amount of their loss, no more no less
The 2 different types of Private Insurers are Stock Companies and Mutual Companies. These 2
types of companies have many similarities and some differences. One main difference is the
ownership. Who are mutual Companies owned by?
a) Stockholders
b) Policyholders
c) Employees
d) The Federal Government Correct Answer: The answer is B
Policyholders
,There are several different types of Government Insurance plans in Canada. Which of the
following is NOT considered one of these plans?
a) Compulsory Government Automobile Insurance
b) Provincial Medical Plans
c) The Facility Association in Automobile Insurance (available in Private Insurance provinces)
d) Workers Compensation plans Correct Answer: The answer is C
The Facility Association in Automobile Insurance (available in Private Insurance provinces)
Lloyds of London has proven to be a valuable option for clients and their specific risks. Which of
the following statements about "Lloyds of London" is true?
a) Provides Habitational Insurance for New Homes
b) Is an Insurance Company specifically for complex risks
c) Operates as an insurance market
d) Is not available in Canada as it is based in London, England, and is not licensed in North
America Correct Answer: The answer is C)
Operates as an insurance market
Insureds may choose from a number of different ways to deal with the chance of financial loss
associated with their property. One of these ways is "Controlling of Risk", which of the
following would be a way for an insured to control their risk?
a) Elect to stay home as it is safer than the outside world
b) Install an immobilizer in their vehicle
c) Purchase Insurance
d) Decide to not claim damage to a window in their dwelling as their deductible is substantially
high than the cost to replace the window Correct Answer: The answer is B
Install an immobilizer in their vehicle
When it comes to Contracts, there are 5 elements that must be present for the contract to be
enforceable by law. Which of the following best describes "Consideration"?
a) When all parties are considered to be legally capable to enter the contract
b) When an unconditional offer has been made and accepted
c) The exchange of something of value between parties
d) The consent of both parties in the contract Correct Answer: The answer is C
The exchange of something of value between parties
Insurance Contracts contain 3 additional elements that must be present. One of these is
"Insurable Interest". Which of the following would be considered to have an "Insurable
Interest"?
a) Mortgages
b) Owners
c) Any person who may be held legally responsible to a third party for injury or damage
d) All of the above Correct Answer: The answer is D
All of the above
Insurers grant the ability to Brokers/Agents to "Bind" coverage on their behalf without approval;
provided the risk falls within their established guidelines, called "Binding Authority."
, Where can "Binding Authority" be found and referenced?
a) The policy documents
b) The policy wordings
c) The application
d) The Insurers Agency Agreement Correct Answer: The answer is D
The Insurers Agency Agreement
Mr. Smith is interested in adding additional coverage to his Habitational Insurance Policy for a
new piece of fine art he purchased on a recent trip to Europe. Which of the following documents
would be used to add coverage to the policy?
a) A Rider
b) A Floater
c) An Endorsement
d) A separate policy is required as "fine art" is an exclusion under Section I Correct Answer:
The answer is A
A Rider
Both the Federal and Provincial governments have specific responsibilities when it comes to the
Regulation of Insurers. Which of the following is NOT the responsibility of the Provincial
Government when it comes to the Regulation of Insurers?
a) Supervising the terms and conditions of insurance contracts
b) Issuing licenses to insurance brokers and agents
c) Issuing licenses to insurers
d) Monitoring financial stability of provincially licensed insurers Correct Answer: The answer is
B
Issuing licenses to insurance brokers and agents
In the event an Insurance Company cannot meet their financial obligations, they are considered
to be "insolvent". Which of the following corporations is responsible for paying all valid claims
of insolvent insurers?
a) Property and Casualty Insurance Payment Association (PACIPA)
b) Property and Casualty Insurance Insolvency Board (PACIIB)
c) Property and Casualty Insurance Company Association (PACICA)
d) Property and Casualty Insurance Compensation Corporation (PACICC) Correct Answer: The
answer is D
Property and Casualty Insurance Compensation Corporation (PACICC)
Both Insurers and Brokers/Agents are "Fiduciaries" which means that they handle the money of
others. Due to this, they have certain responsibilities. What is the "Fiduciary Responsibility" of
Insurance Brokers?
a) Premiums must be held in trust in the event the insured cancels their policy and is owed a
refund
b) Commissions must be held in trust in the event the insured cancels their policy and is owed a
refund
c) To exercise reasonable care, skill, and diligence
d) To tell the truth about all risks submitted to an underwriter Correct Answer: The answer is B
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