OTl Practice Exam - Insurance Concepts
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Questions and Answers

If a broker/agent is aware of pertinent information the applicant did not disclose on an automobile application and doesn't forward the information to the insurer, what is the broker/agent violating?

  • The Civil Code
  • The doctrine of utmost good faith (correct)
  • The Criminal Code
  • The Insurance Act

    • Tim performs a risk exposures analysis with his clients to identify the exposures and to provide correct coverage suitable to his clients' needs. His client, Mary, has a claim and was not aware of a policy coinsurance clause and deductible on her policy. What has Tim failed to do?

  • Provide coverage in time
  • Explain effects of exclusions, restrictions, and exemptions (correct)
  • Place coverage
  • Provide correct coverage

    • Which type of assignment can occur without the consent of the insurer?

  • Assignments when property is sold
  • Assignments under the Insurance Act
  • Assignments of assets to an executor or administrator of a will (correct)
  • Assignments when the insured decides they want to

    • How is personal liability coverage for cemetery plots provided to insured homeowners?

    <p>Coverage for personal liability related to cemetery plots can be added with an endorsement.</p> Signup and view all the answers

    Which type of cause is required for an insurer to pay a loss when that cause is an insured peril?

    <p>The proximate cause of the loss</p> Signup and view all the answers

    Which conditions are required, by law, to be present in all home insurance policies?

    <p>Statutory conditions</p> Signup and view all the answers

    What is the last link in a chain of events?

    <p>Proximate cause</p> Signup and view all the answers

    Tenants legal liability insurance is used to pay for which type of damage?

    <p>Damage caused by the tenant to the premises they rent.</p> Signup and view all the answers

    Which statement describes the Additional Condition-Parts?

    <p>If a property consists of several parts, each part must be scheduled separately.</p> Signup and view all the answers

    The sharing of loss or liability between two or more insurance companies covering the same risk is the definition for which term?

    <p>Contribution</p> Signup and view all the answers

    What is commission?

    <p>The share of the premium paid to the intermediary for having produced the business</p> Signup and view all the answers

    Traditionally, the term flood applied to which type of water?

    <p>Overland water</p> Signup and view all the answers

    For an intermediary, what is the benefit of using the risk management process?

    <p>Client retention</p> Signup and view all the answers

    A letter published in a local newspaper was found to have defamed or injured a person's reputation. What is the author of the letter guilty of?

    <p>Libel</p> Signup and view all the answers

    What is the purpose of the Use of Recreational Vehicle endorsement?

    <p>Waives compliance with the statutory condition pertaining to qualification and age of the vehicle operator when it is operated off public highways.</p> Signup and view all the answers

    If a customer experiences bodily injury or property damage from the use of a product made by ABC Manufacturing which type of damages could the manufacturer be responsible to pay?

    <p>Punitive damages</p> Signup and view all the answers

    Which statement describes the requirements under the Fire Statutory Condition-Termination when an insured request's the termination of insurance?

    <p>The insurer is required to send written confirmation of cancellation to the insured, including any premium refund as soon as practicable for the insurer.</p> Signup and view all the answers

    Which policy would protect an insured against a loss caused by a dishonest employee?

    <p>Fidelity policy</p> Signup and view all the answers

    Which statement describes how coverage is provided by a comprehensive homeowners policy?

    <p>It is an all-risks policy and coverage is determined by the listed exclusions.</p> Signup and view all the answers

    When would physical damage and liability insurance for boats be covered by a homeowners policy?

    <p>Physical damage and liability coverage are automatically included for some types of smaller owned pleasure boats.</p> Signup and view all the answers

    Which peril is covered under a basic homeowners policy?

    <p>Damage from freezing of indoor plumbing</p> Signup and view all the answers

    What is an example of a speculative risk?

    <p>Gambling</p> Signup and view all the answers

    What type of manufactured home might be listed on an automobile policy?

    <p>A specialized trailer temporarily parked</p> Signup and view all the answers

    What are the four optional own damage coverages?

    <p>All perils, comprehensive, collision and upset and named perils</p> Signup and view all the answers

    Which legislation is enforced by the Office of the Superintendent of Financial Institutions (OSFI)?

    <p>The Insurance Act</p> Signup and view all the answers

    What two basic categories is the insurance business divided into?

    <p>Life and health insurance, and General insurance</p> Signup and view all the answers

    What do condominium unit purchasers own?

    <p>Shared interest in a specific unit within a building and a shared interest in the common elements</p> Signup and view all the answers

    What relationship do agents and brokers have with the premiums they collect?

    <p>They hold the funds in trust on behalf of the insurers</p> Signup and view all the answers

    Which act establishes and governs the automobile statutory conditions?

    <p>The Insurance Act</p> Signup and view all the answers

    Which tenants policy extensions of coverage is defined as indirect damage resulting from physical damage to dwelling by an insured peril causing a change in temperature?

    <p>Loss due to temperature change</p> Signup and view all the answers

    What coverage is included in the extension of coverage-property temporarily removed-of a tenants policy?

    <p>Contents temporarily moved to a nursing home with an elderly parent</p> Signup and view all the answers

    Which section of the policy states the commencement date, term, and expiry date?

    <p>Coverage summary</p> Signup and view all the answers

    What is, the aggregate limit of a CGL policy?

    <p>The maximum total amount that can be paid out in actual claims during a policy year.</p> Signup and view all the answers

    Peter emails his broker/agent to request a reduction to the third-party liability limit on his automobile policy (from $500,000 to $100,000). Why would Peter's request be refused?

    <p>Liability limits cannot be purchased below the mandatory minimum of $200,000 in NB.</p> Signup and view all the answers

    A condominium unit owner installs custom-made closet organizers in every closet in her unit. In the event of a loss which section of her insurance would provide coverage?

    <p>The unit owner's improvements and betterments coverage</p> Signup and view all the answers

    What are the elevators, hallways, gardens, and parking areas of a condominium building considered?

    <p>Common elements</p> Signup and view all the answers

    Which special class of loss payee has a registered interest on real property as security for the money that they have loaned the property owner?

    <p>Mortgagee</p> Signup and view all the answers

    A broker collects $1000 premium from the insured and earns a 20% commission. How much is deposited to the operating account?

    <p>$800</p> Signup and view all the answers

    For which type of policy must a named peril give rise to direct loss or damage for coverage to apply?

    <p>Basic homeowners policy</p> Signup and view all the answers

    Which coverage section of a comprehensive homeowner policy covers a standalone garage?

    <p>Coverage B-Detached Private Structure</p> Signup and view all the answers

    What is the role of an adjuster?

    <p>Investigates insurance claims, makes recommendations regarding the payment of benefits from insurance policies, and negotiates payments and settlements</p> Signup and view all the answers

    What is the term for the period within which an insured must make a claim?

    <p>Prescription</p> Signup and view all the answers

    Which type of fire is arson?

    <p>Hostile fire</p> Signup and view all the answers

    How is the limit for additional living expense established in a tenants policy?

    <p>As a percentage of the personal property insurance limit</p> Signup and view all the answers

    What are the rates for insuring musical instruments based on?

    <p>If the instrument is used for personal or professional purposes</p> Signup and view all the answers

    Signup and view all the answers

    Study Notes

    OTl Practice Exam - Study Notes

    • Question 1: If a broker/agent knows pertinent information was not disclosed on an application and doesn't share it, they violate the doctrine of utmost good faith.

    • Question 2: If a client isn't aware of a policy's coinsurance clause and deductible, the broker has failed to provide correct coverage.

    • Question 3: Assignments of assets to an executor or administrator of a will can occur without insurer consent.

    • Question 4: Personal liability for cemetery plots is typically covered by an endorsement to homeowners policies.

    • Question 5: The proximate cause of loss is required for an insurer to pay an insured peril.

    • Question 6: Statutory conditions are required in all home insurance policies.

    • Question 7: The last link in a chain of events is the proximate cause.

    • Question 8: Tenants' legal liability insurance covers damage done by the tenant to the premises they rent, not damage to the landlord's property.

    • Question 9: If a property has several parts, the insurer is only liable for the insured value of the damaged or lost part(s).

    • Question 10: Contribution is the sharing of loss or liability between two or more companies covering the same risk.

    • Question 11: Commission is the profit-sharing/referral fee an intermediary receives, not the premium paid by the insured.

    • Question 12: The term "flood" traditionally refers to a body of freshwater.

    • Question 13: Risk management helps with client retention and pre-screening.

    • Question 14: Publishing a defamatory letter in a newspaper is considered Libel.

    • Question 15: The Use of Recreational Vehicle endorsement ensures compliance with vehicle operator qualification and age, specifically when operating off public highways.

    • Question 16: A manufacturer might be responsible for compensatory damages in the case of a customer experiencing injury or property damage from their product.

    • Question 17: Insurers must provide written confirmation of cancellation to the insured, including any applicable premium refund, as reasonably soon as possible when the insured requests the termination of the policy.

    • Question 18: A fidelity policy protects against dishonest employee losses.

    • Question 19: A comprehensive homeowners policy is an all-risks policy with listed exclusions.

    • Question 20: Physical damage & liability for boats is covered under a homeowner's policy if the boat's value is below a threshold.

    • Question 21: Damage from freezing of indoor plumbing is covered in basic homeowners policies.

    • Question 22: Gambling is an example of speculative risk.

    • Question 23: Mobile homes set on a foundation can be included on an auto policy.

    • Question 24: Four optional own-damage coverages for auto policies are Collision/Upset, Specified Perils, Comprehensive, and All Perils.

    • Question 25: Ground water is beneath the earth's surface.

    • Question 26: Manuscript wording is a policy written specifically for a particular situation.

    • Question 27: If an insured is found guilty of DUI in a collision, their insurance may or may not cover the damage depending on the circumstances & policy details.

    • Question 28: A golfer being injured by the insured while on a golf course is covered under the homeowners policy's Personal Liability section.

    • Question 29: Additional costs for modifications to comply with regulations due to loss are covered under repair/construction insurance.

    • Question 30: OSFI enforces the Insurance Companies Act.

    • Question 31: The two main categories of insurance businesses are property/liability and life/health/general insurance.

    • Question 32: Condominium unit purchasers own a unit and share ownership of the common elements.

    • Question 33: Agents and brokers hold funds in trust for insurers and various parties involved in insurance claims.

    • Question 34: The Insurance Act establishes and governs auto statutory conditions.

    • Question 35: A tenants policy can have an extension for indirect damages when a change in temperature is caused by an insured peril.

    • Question 36: A Tenant's policy will usually include coverage for personal property removed temporarily from the premises, like for storage or if away from home.

    • Question 37: Specific policy section details the commencement date, term, and expiry.

    • Question 38: Aggregate limit refers to the maximum amount payable in total through a claims process during a policy term.

    • Question 39: Insurers often refuse to reduce limits below what is often seen as a reasonable or mandated minimum.

    • Question 40: Custom-made closet organizers are often covered under the Condominium Corporation's loss assessment coverage.

    • Question 41: Common elements in a condo include elevators, hallways, gardens, and parking areas.

    • Question 42: A mortgagee is a special class of loss payee that has a registered interest in real property.

    • Question 43: If the broker receives a 20% commission on a $1000 premium, $200 is deposited to their operating account.

    • Question 44: For a homeowners policy, a named peril must happen for a direct loss or damage.

    • Question 45: Standalone garage protection is usually in Coverage B-Detached Private Structure within a comprehensive policy, which usually covers all risks.

    • Question 46: An adjuster investigates claims, makes recommendations, negotiates settlements, and ensures policies and benefits are followed.

    • Question 47: Prescription is the period within which an insured must file a claim.

    • Question 48: Arson is a hostile fire, that is intentional.

    • Question 49: Additional living expense limits vary though often they are a percentage of the building’s value or the sum assured for personal property.

    • Question 50: Musical instrument rates depend on storage location, training level and professional or personal use.

    • Question 51: Burglary is defined as the unlawful removal of property from a premise using visible force.

    • Question 52: Independent brokerage uses independent agents that represent multiple companies for clients.

    • Question 53: Non-disclosure is a failure to disclose essential information.

    • Question 54: An insured is bound by the minimum coverage requirements when legally responsible for the loss—in this case, the higher Nova Scotia amount.

    • Question 55: Underwriters evaluate a risk and assess whether it is eligible for insurance.

    • Question 56: A binder is a written or oral agreement for insurance coverage until a formal policy is issued.

    • Question 57: Actuaries determine fair risk calculation of premiums based on data.

    • Question 58: A request for insurance is an application.

    • Question 59: Brokers have a duty to act in the best interests of their clients, including avoiding remunerative gain or disadvantaging clients by disclosing material facts truthfully.

    • Question 60: Negligent acts and intentional acts are covered by liability policies, not illegal or criminal activities..

    • Question 61: The primary function of insurance is to protect assets.

    • Question 62: Damage to a kitchen by fire is a covered peril.

    • Question 63: Homeowners policies usually include a Personal Liability section covering injuries or damage to others.

    • Question 64: If a business is still affected even after reopening, Business Income (replacements for income loss for business) or Extra Expenses (expenses incurred for business) are preferred.

    • Question 65: Voluntary Compensation for Residence Employees would cover housekeeper injuries during employment in the home.

    • Question 66: Publishing a defamatory letter in a newspaper constitutes libel.

    • Question 67: Non-owned auto policies cover situations where the insured uses a vehicle not owned by the insured and not necessarily the employer, for a purpose related to their job/business.

    • Question 68: Four optional “own damage” coverages include collision or upset, comprehensive, specified perils, and all perils (often associated with auto insurance).

    • Question 69: Comprehensive homeowners typically covers all risks for physical damage; the named perils policy only covers direct loss related to those listed.

    • Question 70: The Office of the Superintendent of Financial Institutions in Canada deals with federal licensing and supervision of insurance companies.

    • Question 71: Remote adjusters typically handle non-complex losses where site visits are not required.

    • Question 72: An employer-issued laptop may be covered under a homeowner's personal articles endorsement.

    • Question 73: Items with historical value should be insured by a fine arts floater policy.

    • Question 74: Coverage summaries include perils covered, premium and rates, exclusions, and policy conditions.

    • Question 75: Underwriters will decide whether to accept a risk. They are also permitted to adjust rates, and place a risk with another insurer.

    • Question 76: The loss/damage policy section for automobile usually covers comprehensive losses.

    • Question 77: A basic homeowners policy covers most perils for buildings and contents, usually with a few exclusions.

    • Question 78: Renters/tenant policies have sections for personal property, personal liability, and sometimes additional living expenses.

    • Question 79: Depending on the province, you may not need a license/certification to be an insurance agent. Licensing requirements may vary for insurance agents/brokers across different Canadian provinces/territories.

    • Question 80: The term for the person receiving the benefits from the insured person's policy, besides the named insured, is a loss payee.

    • Question 81: Cottage owners seeking suitable coverage may find the Seasonal Homeowner's form a useful tool for insurance planning.

    • Question 82: Yes, if a fire department charge is related to a policy covered peril, the policy typically will pay.

    • Question 83: Policies typically use the pro rata method of calculating the amount owed or refunded for cancellation.

    • Question 84: The proximate cause of a loss is the primary factor directly causing the loss, not other indirect causes.

    • Question 85: Personal-line insurance is designed for individual and families.

    • Question 86: The Sue and Labor clause requires the insured to protect the insured property from further loss or damage when there is a claim.

    • Question 87: Pure premium is the cost of insurance needed to pay claims.

    • Question 88: Direct writers can typically represent an unlimited number of insurance companies.

    • Question 89: Valued items of historical significance should be covered on a valued basis, not a depreciated or insurance cost basis. Items with sentimental value must be addressed differently.

    • Question 90: An automobile collision with a moose would most likely be addressed under a comprehensive coverage.

    • Question 91: Items displayed at a fair are not automatically covered; instead, there are additional coverages available.

    • Question 92: A broker acts on behalf of the insured in placing insurance business.

    • Question 93: The temporary substitute is usually defined as the same vehicle being used for the same type of activity.

    • Question 94: Loss of rental income caused by damage is considered an indirect loss.

    • Question 95: The special entities managing risk-sharing pools in automobile insurance (typically managing pooled premium funds for auto claims) will vary across jurisdictions/organizations.

    • Question 96: Pure risk does not offer any chance of gaining or profit in an insurance scenario.

    • Question 97: Ridesharing is the term for arrangement through mobile applications, for example, Uber, Lyft.

    • Question 98: An indirect loss in the case of a damaged car may include damages to the vehicle in the case of a windstorm or tree impacting the vehicle.

    • Question 99: Example situations with indirect losses may be different from indirect losses related to other circumstances or conditions in regards to the car.

    • Question 100: A clause regarding anti-concurrent causes may limit coverage should multiple water perils occur during the same policy duration.

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    Description

    Test your understanding of insurance principles and terminology with this OTl practice exam. The questions cover critical aspects of insurance policies, broker responsibilities, and liability coverage. Perfect for those studying insurance regulations and practices.

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