Fundamentals of Insurance - Self Exam UPDATED Exam Questions and CORRECT Answers
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Course
Fundamentals of Insurance
Institution
Fundamentals Of Insurance
Fundamentals of Insurance - Self Exam
UPDATED Exam Questions and
CORRECT Answers
Main purpose of Insurance - CORRECT ANSWER- Allow the spread of risk
Definition of Insurance - CORRECT ANSWER- -Payment's made only when a certain peril
has damaged the insured object
-Payment's limited to act...
Fundamentals of Insurance - Self Exam
UPDATED Exam Questions and
CORRECT Answers
Main purpose of Insurance - CORRECT ANSWER- Allow the spread of risk
Definition of Insurance - CORRECT ANSWER- -Payment's made only when a certain peril
has damaged the insured object
-Payment's limited to actual amount of loss, no more and no less
-There's no payment for losses that are deliberately caused by an insured.
Five important points to the definition of insurance: - CORRECT ANSWER- -Spread of Risk
-Basis of Credit System
-Eliminates Worry/Encourages Entrepreneurship
-Loss Prevention and Loss Reduction
-Source of Employment and Investment Capital
Five important points as they relate to the definition of insurance: - CORRECT ANSWER- -
Provides a means of shifting one's financial responsibility for loss to another party
-Payment made only in the event of the happening of a certain risk or peril
-Payment restricted to amount required to indemnify insured
-Covers losses to which the object of insurance 'may' be exposed
-Indemnity can be in the form of money or other thing of value
Three types of insurance included within the broad area of 'Property and Casualty Insurance':
- CORRECT ANSWER- -Auto Insurance
-Property Insurance
-Liability Insurance
Two major types of insurers:
,Private Insurers - CORRECT ANSWER- Stock Companies
-operate via private funds or public sale of stock
-main goal to generate profit for shareholders (owners)
Mutual Companies
-owned by its policy holders
-main goal to provide insurance to its policy holders at as low a cost as possible
-profits returned to policy via dividends or rate adjustments
Two major types of insurers:
Government Insurers - CORRECT ANSWER- -Medical insurance
-employment insurance
-workers' compensation
-mandatory auto insurance (Sask, BC, MB and QC)
Three methods used by insurers to sell their products:
Direct Writing System - CORRECT ANSWER- -Salary or commission from employer
(insurer)
-Insurer owns all business
-Insurer performs administrative functions
Three methods used by insurers to sell their products:
Independent Brokerage System - CORRECT ANSWER- -Earn commissions from insurers
-Brokerage owns all business
-Provides client services for policy holders
Three methods used by insurers to sell their products:
Agency System - CORRECT ANSWER- -Paid commissions/bonuses by insurers
-Agents own their business
,Most common insurance distribution method in Canada: - CORRECT ANSWER- -
Independent Brokerage System
Three major categories of insurance needs: - CORRECT ANSWER- -Personal
-Property
-Liability Risk
Four options an insured may use in dealing with risk: - CORRECT ANSWER- -Avoidance
-Controlling
-Retention
-Transfer of Risk
Five elements required to be present in all contracts: - CORRECT ANSWER- -Agreement
-Consideration
-Legality of Object
-Legal Capacity of the Parties to Contract
-Genuine Intention
Three additional elements unique to insurance contracts and must be present if an insurance
contract is to be enforceable at law: - CORRECT ANSWER- -Insurable Interest
-Utmost Good Faith
-Indemnity
Three types of insurance forms used by insurers to make changes to an existing policy:
Endorsements/Riders - CORRECT ANSWER- -acknowledge a change in the terms of the
contracts
Three types of insurance forms used by insurers to make changes to an existing policy:
Floaters - CORRECT ANSWER- -provide coverage for property having a high degree of
mobility
Three types of insurance forms used by insurers to make changes to an existing policy:
, Separate Policies - CORRECT ANSWER- -Provide additional coverages needed by insureds
PCICC role when an insurer becomes insolvent: - CORRECT ANSWER- -Pays all valid
claims
-Charges companies an assessment to cover the total amount of claims
Fiduciary obligations of insurers - CORRECT ANSWER- -Premiums paid aren't fully earned
until expiry of policy
-Unearned premiums considered to be held in trust to refund the insureds in event the policy's
cancelled prior to expiry date
Fiduciary obligations of brokers: - CORRECT ANSWER- -Commissions aren't fully earned
until expiry of policy
-Considered to be held in trust to refund to insureds in event the policy's cancelled prior to
expiry date
The provisions of the 'Removal Clause' contained in policies of fire insurance: - CORRECT
ANSWER- -Property necessarily removed insured at unnamed locations
-Amount available for loss to property while at unnamed location will be reduced by amount
paid for loss at named location
-Obligation on insurer to extend coverages at unnamed location is for limited time only
Three coverages required to be provided on all policies of fire insurance: - CORRECT
ANSWER- -Fire
-Lightning
-Explosion of Natural Gas, Coal or Manufactured Gas
Primary role of underwriters: - CORRECT ANSWER- -To select those risks likely to be most
profitable for the insurer
Three sources of information used by the underwriters when making a decision regarding
suitability of a risk: - CORRECT ANSWER- -The application
-The broker
-Loss experience data and inspection reports
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