OTL Practice Exam PDF

OTL PRACTICE EXAM 1. 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? a. The Civil Code b. The Insurance Act c. The doctrine of utmost good faith d....

OTL PRACTICE EXAM 1. 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? a. The Civil Code b. The Insurance Act c. The doctrine of utmost good faith d. The Criminal Code 2. 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? a. Explain effects of exclusions, restrictions, and exemptions b. Provide correct coverage c. Place coverage d. Provide coverage in time 3. Which type of assignment can occur without the consent of the insurer? a. Assignments when the insured decides they want to b. Assignments under the Insurance Act c. Assignments of assets to an executor or administrator of a will d. Assignments when property is sold 4. How is personal liability coverage for cemetery plots provided to insured homeowners? a. Coverage for personal liability related to cemetery plots can be added with an endorsement. b. Coverage for personal liability related to cemetery plots is provided under Coverage-G. c. Cemetery plots are typically included in the definition of premises under the personal liability section of homeowners policies. d. Cemetery plots are not an insurable premise for liability coverage under homeowners policies. 5. Which type of cause is required for an insurer to pay a loss when that cause is an insured peril? a. The immediate cause of the loss b. The last link in the chain of causes c. The remote cause of the loss d. The proximate cause of the loss 6. Which conditions are required, by law, to be present in all home insurance policies? a. Insurance conditions b. Additional conditions c. Policy conditions d. Statutory conditions 7. What is the last link in a chain of events? a. Distant cause b. Proximate cause c. Immediate cause d. Remote cause 8. Tenants legal liability insurance is used to pay for which type of damage? a. Damage caused by the tenant to the premises they rent. b. Damage caused by the tenant to the tenant’s own contents. c. Damage caused by the landlord to the premises rented by the tenant. d. Damage caused by the tenant to other units in the building. 9. Which statement describes the Additional Condition–Parts? a. If a property consists of several parts, the insurer is only liable for the insured value of the lost or damaged part(s). b. If a property is made up of several parts, loss, or damage to any one or more parts will be considered loss or damage to the entire property. c. If a property consists of several parts, the insurer will pay a reasonable and fair percentage of the value of the total set. d. If a property consists of several parts, each part must be scheduled separately. 10. The sharing of loss or liability between two or more insurance companies covering the same risk is the definition for which term? a. Salvage b. Subrogation c. Contractual provisions d. Contribution 11. What is commission? a. The profit-sharing amount paid to intermediaries at the end of the year b. The amount the intermediary receives as a referral fee c. The amount that the insured pays for the insurance policy d. The share of the premium paid to the intermediary for having produced the business 12. Traditionally, the term flood applied to which type of water? a. Sewer water b. A body of salt-water c. Overland water d. A body of freshwater 13. For an intermediary, what is the benefit of using the risk management process? a. A reason to charge a service fee b. Client retention c. Increased sales d. A method to pre-screen clients 14. 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? a. Slander b. Negligence c. Libel d. Nuisance 15. What is the purpose of the Use of Recreational Vehicle endorsement? a. Ensures compliance with the statutory condition pertaining to qualification and age of the vehicle operator when it is operated off public highways. b. Waives compliance with the statutory condition pertaining to qualification and age of the vehicle operator when it is operated on public highways. c. Ensures compliance with the statutory condition pertaining to drivers who are not licensed but borrow the recreational vehicle to drive on local roads. d. Waives compliance with the statutory condition pertaining to qualification and age of the vehicle operator when it is operated off public highways. 16. 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? a. Punitive damages b. Compensatory damages c. Pecuniary damages d. Direct damages 17. Which statement describes the requirements under the Fire Statutory Condition—Termination when an insured request’s the termination of insurance? a. The insurer is required to send written confirmation of cancellation to the insured, including any premium refund as soon as practicable for the insurer. b. The insured has 15 days to arrange other coverage. c. The insured is entitled to a premium refund as soon as practicable from the insurer, calculated on a short-term rate premium basis. d. The insured must provide at least five days’ advance notice to the insurer. 18. Which policy would protect an insured against a loss caused by a dishonest employee? a. Robbery policy b. Fidelity policy c. Theft policy d. Burglary policy 19. Which statement describes how coverage is provided by a comprehensive homeowners policy? a. It provides coverage for new construction homes, but not resale homes. b. It is an all-risks policy and coverage is determined by the listed exclusions. c. There are no exclusions contained in the policy. d. It provides all-risks coverage on buildings and named-perils coverage on contents. 20. When would physical damage and liability insurance for boats be covered by a homeowners policy? a. Physical damage coverage for all types of boats is included but not liability. b. Physical damage and liability coverage are automatically included for some types of smaller owned pleasure boats. c. Liability coverage for all types of boats is included but not physical damage. d. Physical damage under $5000 and liability coverage under $10,000 is included. 21. Which peril is covered under a basic homeowners policy? a. Damage from freezing of indoor plumbing b. Farm buildings c. Riot d. War risks 22. What is an example of a speculative risk? a. Physical injury b. Gambling c. Economic loss d. Unemployment 23. What type of manufactured home might be listed on an automobile policy? a. A mobile home set on a foundation b. A seasonal home available all year round c. A unit that remains mobile d. A specialized trailer temporarily parked 24. What are the four optional own damage coverages? a. Collision or upset, specified perils, comprehensive, and all perils b. Specified perils, named perils, collision and upset, and all perils c. All perils, comprehensive, collision and upset, and accident benefits d. All perils, comprehensive, collision and upset and named perils 25. Water found beneath the earth's surface is the description for which term? a. Flood water b. Septic water c. Overland water d. Ground water 26. What is a manuscript wording? a. A policy that is identical for all companies and has general use within the industry b. A policy written on a custom basis for a specific situation c. A document that is the instrument evidencing the contract d. A policy attachment to change conditions while the policy is in force 27. Warren was convicted of driving under the influence in a collision with another driver. Will his insurance company pay for the damage to his car? a. No, as he did not purchase All Perils coverage b. Yes, all insureds go to their own policies for coverage in NB c. No, this is excluded due to his conviction under the criminal code d. Yes, if he purchased the optional coverage of Collision and Upset 28. Which situation would be covered by the personal liability section of a homeowners policy? a. A criminal, trips and breaks his leg during a break-in at the insured’s home. b. The insured is negligent during his business activities. c. The insured is negligent when flying his small single engine airplane. d. While driving a golf cart on the course, the insured accidentally runs over and injures another golfer. 29. Additional costs associated with the demolition, construction, or repair, after a loss, to comply with a law regulating these actions, is insured by which type of coverage? a. Construction insurance b. The bylaw endorsement c. Repair endorsement d. Repair insurance 30. Which legislation is enforced by the Office of the Superintendent of Financial Institutions (OSFI)? a. The Insurance Companies Act b. The Highway Traffic Act c. The Insurance Act d. The Compulsory Automobile Insurance Act 31. What two basic categories is the insurance business divided into? a. Property insurance and Liability insurance b. Property insurance and Casualty insurance c. Personal insurance and Commercial insurance d. Life and health insurance, and General insurance 32. What do condominium unit purchasers own? a. Clear and full ownership of a specific unit within a building and a shared interest in the common elements b. Shared interest in a specific unit within a building and a shared interest in the common elements c. Clear and full ownership of a specific unit within a building and full ownership of the common elements d. Shares in a corporation that owns the condominium building 33. What relationship do agents and brokers have with the premiums they collect? a. They hold the funds in trust on behalf of themselves b. They hold the funds in trust on behalf of third parties who may submit future claims c. They hold the funds in trust on behalf of the insurers d. They hold the funds in trust on behalf of the provincial superintendent of insurance 34. Which act establishes and governs the automobile statutory conditions? a. The Insurance Companies Act b. The Insurance Act c. The Compulsory Insurance Act d. The Statutory Accident Benefits Act 35. 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? a. Loss due to temperature change b. Property temporarily removed c. Vandalism and malicious mischief d. Additional living expenses 36. What coverage is included in the extension of coverage-property temporarily removed—of a tenants policy? a. Contents being held in a storage unit within the building b. Personal property of a student temporarily living away from home c. Personal property of others being stored by the tenant d. Contents temporarily moved to a nursing home with an elderly parent 37. Which section of the policy states the commencement date, term, and expiry date? a. Signature clause b. Policy conditions c. Coverage summary d. Statutory conditions 38. What is, the aggregate limit of a CGL policy? a. The maximum amount of coverage available for a specified exposure under the policy. b. The maximum amount that can be paid toward compensatory damages for each claim. c. The maximum number of deductibles that can be charged for claims during a policy year. d. The maximum total amount that can be paid out in actual claims during a policy year. 39. 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? a. The broker believes this is an inadequate liability limit. b. A request for a reduction in coverage must be made in-person to obtain a signature. c. Liability limits cannot be purchased below the mandatory minimum of $200,000 in NB. d. The insurance company does not offer liability limits lower than $500,000. 40. 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? a. The unit owner’s personal property coverage b. The unit owner’s improvements and betterments coverage c. The condominium corporation’s loss assessment coverage d. The condominium corporation’s master property policy 41. What are the elevators, hallways, gardens, and parking areas of a condominium building considered? a. Common elements b. Commercial property c. Improvements and betterments d. Personal property of the unit owners 42. 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? a. Named insured b. Lessee c. Mortgagee d. Insured 43. A broker collects $1000 premium from the insured and earns a 20% commission. How much is deposited to the operating account? a. $200 b. $1200 c. $1000 d. $800 44. For which type of policy must a named peril give rise to direct loss or damage for coverage to apply? a. Broad policy b. Comprehensive homeowners policy c. Farm policy d. Basic homeowners policy 45. Which coverage section of a comprehensive homeowner policy covers a standalone garage? a. Coverage B—Detached Private Structure b. Coverage D—Additional Living Expenses c. Coverage A—Dwelling Building d. Coverage C—Personal Property 46. What is the role of an adjuster? a. Reviews loss statistics and decides what price the insurer should charge for providing coverage b. Acts on behalf of an insured in placing business with insurance companies c. Investigates insurance claims, makes recommendations regarding the payment of benefits from insurance policies, and negotiates payments and settlements d. Approves applications for insurance on behalf of the insurer 47. What is the term for the period within which an insured must make a claim? a. Contribution b. Prescription c. Subrogation d. Forfeiture 48. Which type of fire is arson? a. Unintentional fire b. Hostile fire c. Friendly fire d. A controlled fire 49. How is the limit for additional living expense established in a tenants policy? a. As a percentage of the value of the dwelling building b. As a percentage of the personal property insurance limit c. As a dollar amount requested by the insured d. As a dollar amount requested by the insurer 50. What are the rates for insuring musical instruments based on? a. How and where the instrument is stored b. The training and experience of the insured in using the instrument c. If the instrument is used for personal or professional purposes d. How often during the year the instrument is used 51. What is the term for unlawful removal of property from a premise by visible forcible entry or exit? a. Theft b. Malicious mischief c. Vandalism d. Burglary 52. Which insurance distribution system uses a commission paid independent sales force and represents several companies? a. Direct writing b. Exclusive agency c. Independent brokerage d. General agency 53. Silence where there is an obligation to speak is the description of which term? a. Utmost good faith b. Discrimination c. Non-disclosure d. Material fact 54. Greta lives in NB and has $300,000 third-party liability coverage. She is at-fault for an accident in Nova Scotia where the minimum coverage limit is $500,000. If applicable, which limit would Greta’s insurer be bound to pay? a. Nova Scotia’s $500,000 minimum limit. b. Ontario’s $200,000 minimum limit. c. An average of the NB and Nova Scotia minimum limits which is $350,000. d. The policy’s $300,000 limit. 55. Who scrutinizes a risk and decides if it is eligible for insurance? a. Adjusters b. Actuaries c. Underwriters d. Brokers/agents 56. What is a binder? a. A certificate issued at renewal, with all the terms listed to continue for another year b. An amount of the loss that the insured is responsible for c. An attachment to the policy that varies the terms of the contract d. A written/oral agreement provided by an insurer to cover a risk, pending the issuance of the formal policy documents 57. Who uses data to create rates for different classes of risk ensuring fair calculation of premiums? a. Adjusters b. Underwriters c. Rate-makers d. Actuaries 58. What is another term for a request for insurance? a. A peril b. A policy c. An endorsement d. An application 59. Which of the following is a duty the broker has to the client? a. To avoid being influenced by remunerative gain b. To act as a legal counsel c. To overstep the terms of the broker agreement if it will benefit the client d. To avoid disclosing relevant material facts to the insurer if it will disadvantage the client 60. Which act would be covered by a liability policy? a. Illegal acts b. Negligent acts c. Criminal acts d. Intentional acts 61. What is the primary function of insurance? a. A method of profiting after a loss occurs b. Protecting assets and securing credit c. Providing employment, directly and indirectly, in the industry d. A method of sharing the losses of a few people among many people 62. Which situation is an example of a peril? a. Fire damage to a kitchen b. Loose carpet on stairs c. Slippery sidewalk in winter d. Poorly maintained heating system 63. Which section of a homeowners policy provides coverage to protect individuals and their families for damage or injury they cause to others? a. Premises Liability b. Compensatory Damage c. Umbrella Liability d. Personal Liability 64. Which type of business interruption insurance is preferred if the business will still be affected by the loss even after it has reopened? a. Business Income; Profits b. Income Replacement; Profits c. Extra Expense; Earnings d. Income Replacement; Earnings 65. While working in the insured’s home, a housekeeper severely injures her hand. Which section of a homeowners policy would provide coverage? a. Voluntary Medical Payments b. Voluntary Payment for Damage to Property c. Voluntary Compensation for Residence Employees d. Voluntary Payment for Bodily Injury 66. 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? a. Slander b. Negligence c. Nuisance d. Libel 67. For which exposure does the Non-owned Automobile policy provide coverage? a. Employees using their employer’s commercial vehicle for personal use b. Employees using their employer’s personal vehicle for personal use c. Employees using their employer’s commercial vehicle for purposes of the employer’s business d. Employees using their personal vehicles for purposes of their employer’s business 68. In NB, what are the four optional “own damage” coverages? a. Specified perils, named perils, collision and upset, and all perils b. Collision or upset, specified perils, comprehensive, and all perils c. All perils, comprehensive, collision and upset, and accident benefits d. All perils, comprehensive, collision and upset and named perils 69. Which type of homeowners property policy provides all-risks coverage for direct physical loss or damage to both building and contents subject to the exclusions and conditions stated in the policy? a. A comprehensive homeowners policy b. A basic homeowners policy c. A named-perils policy d. A broad policy 70. Who deals with federal licensing and supervision of insurance companies? a. The Office of the Superintendent of Financial Institutions (OSFI) b. The Superintendent of Insurance c. The Lieutenant-Governor d. The Minister of Transportation 71. Which type of adjuster usually handles small straightforward losses that do not require the adjuster to see the damaged article or to visit the loss location? a. Claims examiners b. Remote adjusters c. Independent adjusters d. Telephone adjusters 72. Which item(s) may be scheduled on a personal articles endorsement of a homeowner’s policy? a. An employer issued laptop b. Shrubbery in the yard/garden c. A snowmobile d. Musical instruments 73. Your client wants to insure some items of historical value. What do you advise your client? a. Items of historical value are fully covered under an all-risk policy. b. Purchase a fine arts floater. c. Insure the items with a broker who specializes in items of historical significance. d. Purchase a personal articles endorsement. 74. What type of information is found in the coverage summary? a. Perils insured against b. Premium and rate c. Exclusions d. Policy conditions 75. What are the three decisions an underwriter can make about a risk? a. Accept the risk with conditions; Increase the rate for the risk; Place the risk with another insurer b. Accept the risk; Reject the risk; Accept the risk with conditions c. Accept the risk; Reject the risk; Change the underwriting rules d. Accept the risk; Reject the risk; Place the risk with another insurer 76. Which optional coverage is offered under Section C—Loss or Damage Coverage (Automobile)? a. Comprehensive b. Accident benefits c. Liability d. Uninsured automobile 77. What coverage is provided by a basic homeowner’s policy? a. Named-perils coverage for buildings, personal property, and additional living expenses. b. All-risks coverage for buildings, personal property and additional living expenses. c. All-risks coverage with listed exclusions for buildings, personal property and additional living expenses. d. Named-perils coverage on the building and all-risk coverage for personal property and additional living expenses. 78. What are the sections of insurance coverage in a tenant’s policy? a. Personal property; Personal liability; Improvements and betterments b. Personal property; Personal liability; Additional living expense c. Personal property; Personal liability; Loss assessment coverage d. Personal property; Personal liability; Detached private structures 79. Which province(s) require(s) individuals to have a licence to operate as an insurance intermediary (agent/broker)? a. All provinces and territories b. Alberta, Manitoba, and New Brunswick c. Ontario and British Columbia d. Ontario, British Columbia, and Nova Scotia 80. What is the generic term for someone other than the named insured to whom the proceeds of insurance will be paid? a. Loss payee b. Additional payee c. Applicant d. Assignee 81. What type of insurance would best suit the needs of an insured who owns a cottage that is in use all year long and has many features of a primary residence? a. Cottage or Seasonal Dwelling Form b. Rental Property Form c. Seasonal Homeowners Form d. Homeowners Form 82. Is there any insurance coverage for the fire department charge when they put out an automobile fire? a. No, fire department charges are a speculative risk and therefore not insurable. b. No, fire department charges are part of civic responsibility. c. Yes, only if the insured has purchased all risk coverage. d. Yes, the policy will pay the charges presented by the fire department. 83. If an insurer cancels an automobile policy, how is the amount owing or refund calculated? a. On a pro rata basis b. Based on market insurance rate c. On a short rate basis d. Based on daily interest rates 84. What is the proximate cause of a loss? a. The right of recovery after a loss b. The immediate and effective cause of the loss c. The last event in the chain of events d. A cause that is not the immediate cause 85. What is personal-lines insurance? a. Insurance for lawyers b. Insurance for directors and officers of businesses c. Insurance for individuals and families d. Insurance for business owners 86. Which clause requires the insured, in the event of a loss, to do whatever is reasonably necessary to protect the insured property? a. Termination b. Cost of removing debris c. Sue and labour d. Time and manner of payment of insurance money 87. What is pure premium? a. Total premium required by the insurance company b. Premium required to meet the inflated anticipated losses c. Premium required to meet losses that occur d. Rate or unit of premium required 88. How many insurance companies does a direct writer/agent typically represent? a. Ten (10) b. Two (2) c. Unlimited d. One (1) 89. When items covered by a personal articles endorsement have more sentimental value than financial value, on what basis are they covered? a. A valued basis b. A depreciated basis c. A coinsurance basis d. A retail cost basis 90. Which coverage would apply when an automobile collides with a moose? a. Third-party liability b. Uninsured motorist c. Comprehensive d. Specified perils 91. How would a comprehensive homeowners policy respond to the theft of the insured’s antiques that are on exhibit at a local fair? a. There is theft coverage with a special limit. b. There is no coverage as property on exhibit is excluded. c. There is coverage provided for half the loss. d. There is no coverage as antiques are excluded. 92. What is the role of a broker? a. To act on behalf of an insured in placing business with insurance companies b. To make recommendations about the payment of benefits c. To approve changes to standardized application forms for the industry d. To review loss statistics and establishes rate by each coverage 93. Which example best describes the temporary substitute automobile? a. The insured rents an automobile while on a vacation in Florida. b. The insured takes their partner’s automobile for a test drive. c. The insured uses their own company’s vehicle to move a few things. d. The insured borrows a vehicle from a neighbour while his own vehicle is being repaired. 94. If there is a fire in Tim’s rental property and his tenants must move out for six months while it is being repaired, what is the loss of the rental income considered to be? a. Direct loss b. Indirect loss c. Income risk d. Speculative risk 95. Who manages the special industry’s risk sharing pools in automobile insurance? a. The Financial Services Commission of Ontario (FSCO) b. The Financial Services Regulatory Authority (FSRA) c. The Facility Association d. The Superintendent of Insurance 96. What is a pure risk? a. One with a chance of loss and no chance of profit b. One with a chance of profit and no chance of loss c. One with no chance of profit or loss d. One with a chance of loss and chance of profit 97. What general term is used in the insurance industry to refer to when an arrangement for transportation is set up through a mobile application? a. Uber b. Ridesharing c. Turo d. Carsharing 98. Which statement best describes an indirect cyber risk? a. Funds directly lost due to fraud b. Costs to fix and restore the system c. Loss of competitiveness d. Employee loss due to attrition 99. Which situation includes an indirect loss? a. Betty accidentally damages her neighbour’s car while clearing snow from her driveway with a plough. b. A wind storm causes a tree to fall on Betty’s car destroying it and damaging personal items in the trunk. c. A neighbour’s child spills paint on Betty’s living-room carpet. d. Betty’s home is damaged by fire and she needs to stay in a hotel while the damage is repaired. 100. What is the purpose of the anti-concurrent causation clause? a. To decrease limits should more than one water damage peril occur within a year. b. To add coverage should more than one water damage peril occur simultaneously. c. To limit coverage should more than one water damage peril occur simultaneously. d. To increase limits should more than one water damage peril occur within a year.