OTL Lesson 3 Quiz – Master copy January 14 2025

Question 1 of 52

1 point(s)

Contribution

Is the sharing of loss or liability between two or more insurance companies

The amount of loss which the insured must pay

Amount of loss a third party must pay for their responsibility

Stated amount payable on the occurrence of the event insured against

Question 2 of 52

1 point(s)

This is the process of establishing rates for each class of insurance

Rating which is done by actuaries

Ratemaking which is done by underwriters

Rating which is done by underwriters

Ratemaking which is done by actuaries

Question 3 of 52

1 point(s)

Which of the following is essential for a contract to be valid and enforceable?

Offer and acceptance

Legality of object

Legal capacity

All of the above

Question 4 of 52

1 point(s)

The likelihood of a risk resulting in a loss is referred to as

Rating by example

Conditions in the past

Loss Probability

The Law of Large Numbers

Question 5 of 52

1 point(s)

Under the rules of offer and acceptance which of the following is correct.

An invitation to deal contains all the necessary elements of a valid offer and acceptance

An offer that has not been revoked, must be honoured despite the date of acceptance even if it is a year later.

Acceptance of an offer with minor changes to the offer is acceptable.

Legality of Object is part of the condition of offer and acceptance.

Question 6 of 52

1 point(s)

An additional charge included in an insurance rate to reflect a hazard not contemplated in the basic rate for this class

Rate

Loading

Premium

Consideration

Question 7 of 52

1 point(s)

One feature that an insurance contract does not share with other types of contracts is

Consideration

Offer and Acceptance

Utmost Good Faith

Legality of Object

Question 8 of 52

1 point(s)

A legal person is one who

Contracts for a legal purpose

Acts within the legal boundaries of the law in all things

Can sue and be sued

Does nothing that goes against public policy

Question 9 of 52

1 point(s)

The Standard Mortgage Clause outlines:

That the insurer shall give fifteen (15) days notice to the mortgagee if the insured fails to renew

The terms and conditions of the agreement between the insured and mortgagee

The coverage for the benefit of the mortgagee

The obligations and rights of the insurer and mortgagee

Question 10 of 52

1 point(s)

The price of a unit of insurance for a period of one year is called the

Rate

Premium

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Classification

Question 11 of 52

1 point(s)

If the Insured wishes to cancel the policy the cancellation takes effect:

On the date the insured requests and cancellation is provided in writing

Fifteen (15) days after receipt of a registered letter requesting cancellation

As soon as the insured receives payment of the return premium

Five (5) days after a written request has been delivered to the insurer

Question 12 of 52

1 point(s)

When someone is placed back in the same financial position that they were in just prior to a loss, that is

Indemnity

Contribution

Actual Cash Value

Consideration

Question 13 of 52

1 point(s)

Persons who stand in such a legal relationship to property that they may be financially prejudiced by its loss and financially benefit from its continued existence are said to have

Legal capacity in the property

Insurable interest in the property

A right of subrogation in the property

Legal liability in the property

Question 14 of 52

1 point(s)

Statutory Conditions in a property policy are primarily to protect the rights of:

The agent/broker

The Insurer

The insurer and the insured

The insured

Question 15 of 52

1 point(s)

Which of the following parties would be considered to have an insurable interest?

A fur shop owner who has a mink stolen in his/her care, custody and control.

A daughter who is going to inherit her parents property when they die.

A member of a country club.

A prospective purchaser of an automobile.

Question 16 of 52

1 point(s)

Which of the following is not one of the 8 application questions

Named Insured

Prior Insurance

Loss Payees

Policy wording

Question 17 of 52

1 point(s)

The special class of a loss payee that has a registered interest on chattel property is known as

Mortgagor

Lessor

Lienholder

Mortgagee

Question 18 of 52

1 point(s)

Actual cash value is which of the following?

The original price paid for an item

The value of the item to be insured

The current cost of replacing an item with one of the same kind and condition less depreciation

All of the above

Question 19 of 52

1 point(s)

What forms the basis of most insurance contracts?

Indemnity

Subrogation

Contribution

Prevention of Risk

Question 20 of 52

1 point(s)

Jane Smith bought a new car in 1989 for $15,000. Today the car sells for $28,000. What amount would the insurer pay if that car were destroyed today?

$15,000 and the insurer keeps the salvage

$30,000 and the insurer keeps the salvage

Today's market value and the insured keeps the salvage

Today's market value and the insurer keeps the salvage

Question 21 of 52

1 point(s)

Pure premium is the

Rate or unit of premium required

Total premium required by the insurance company

Premium required to meet the inflated anticipated losses

Premium required to meet the losses after that occurs

Question 22 of 52

1 point(s)

A deductible clause in a policy

Specifies the amount in excess of which an insurer will pay a loss

Applies separately to each item that is lost or damages

Applies only to the contents loss if both the building and contents are insured in the same policy

Is not permitted if the policy only covers fire and extended perils

Question 23 of 52

1 point(s)

In arranging a contract of insurance an agent or broker must always

Pass on to the Insurer all relevant information whether requested or not

Have an application signed

Disclose the commission on every policy

Collect the full premium at the time of the inception date

Question 24 of 52

1 point(s)

An act of legislature declaring or prohibiting something is called

Civil Law

A Precedent

Codified Law

A Statute

Question 25 of 52

1 point(s)

A material fact is

Information that is helpful in rating a risk, though the insured is not obligated to supply it

Must be divulged only if the underwriter specifically asks for the information

Any fact that relates to the subject of insurance

Any fact that might cause the underwriter to apply conditions when accepting the risk

Question 26 of 52

1 point(s)

The legal process by which an insurer, who has paid a loss, pursues any rights of recovery against a responsible third party is called

Indemnification

Consideration

Subrogation

Contribution

Question 27 of 52

1 point(s)

Where a loss occurs under an insurance binder before a policy has been issued, the insurer will

Cancel the binder by registered letter and deny liability

Demand that the broker or agent pay the loss

Pay the claim in accordance with the coverage bound

Take no action until the policy is issued

Question 28 of 52

1 point(s)

A void contract is one that is:

a contract that never existed

a contract that was cancelled once misrepresentation was discovered

a contract that was entered into legally

a contract that was accepted and signed and then cancelled by the insured midterm

Question 29 of 52

1 point(s)

What term is meant to provide compensation for loss or expenses incurred as a result of the insured peril?

Indemnify

Insurance

Contract

Risk

Question 30 of 52

1 point(s)

What does it mean to underwrite?

Scrutinize a risk and decide on eligibility for insurance.

Assess the validity of claims

Administer the company’s investment program

Record, summarize, and analyze the company’s financial transactions

Question 31 of 52

1 point(s)

What should insurers rely on to help predict future losses?

The underwriting gain/loss from the previous year

The ROE from the previous year

The law of large numbers

The combined loss ratio from the previous year

Question 32 of 52

1 point(s)

When can an offer be legally revoked?

At any time before it is accepted

Within 72 hours of having been accepted

Once an offer is made it cannot be revoked

Within 24 hours of having been accepted

Question 33 of 52

1 point(s)

What are the five (5) elements of a contract in common law provinces?

Capacity to contract; Genuine intention; Ability to complete; Legality of purpose; and Termination

Capacity to contract; Consideration; Genuine intention; Written approval; and Completion

Agreement; Consideration; Capacity to contract; Genuine intention; and Legality of purpose

Agreement; Consideration; Legality of purpose; Written approval; and Completion

Question 34 of 52

1 point(s)

What are the three (3) additional requirements of insurance contracts?

Utmost good faith; Subrogation; Materiality

Insurable interest; Indemnity; Utmost good faith

Materiality; Subrogation; Indemnity

Disclosure; Utmost good faith; Indemnity

Question 35 of 52

1 point(s)

Which statement best describes the principle of indemnity?

Salvage items and offer a cash settlement for fifty percent of the value of any lost articles

Repair all damage and include a thirty percent increase to counteract inflation

Place people back into the same financial position that they were in before the loss

Replace all lost or damaged articles with better quality products where possible

Question 36 of 52

1 point(s)

What are the two (2) methods for calculating indemnity for insurance contracts?

Fair market value and valued contracts

Fair market value and policy of compensation

Actual cash value (ACV) and valued contracts

Actual cash value (ACV) and Replacement value

Question 37 of 52

1 point(s)

Information that can influence whether an insurer accepts or rejects a risk is the definition for which term?

Material fact

Indemnity

Binding authority

Insurable interest

Question 38 of 52

1 point(s)

What is a form of temporary insurance that can be legally binding whether expressed orally or in writing?

Cover note

Endorsement

Certificate of insurance

Manuscript wording

Question 39 of 52

1 point(s)

Which document is evidence of a contract and states the exact terms and provisions of the agreement between the insured and the insurer?

Insurance policy

Endorsement

Cover note

Certificate of insurance

Question 40 of 52

1 point(s)

Are statutory conditions included with temporary insurance?

No, there is no requirement for them to be included, but they still apply

No, they are not required because they do not apply until the policy is issued

Yes, they are required to be included to protect the consumer as soon as the risk is bound

Yes, they are required to be included because binders represent the policy

Question 41 of 52

1 point(s)

When a policy is cancelled early at the request of the insured, how does the insurer determine the correct amount of premium (if any) that should be returned?

Short rate cancellation is used to determine any refund

Pro rata cancellation is used to determine any refund

Full refund of all premium is required

No refund is required

Question 42 of 52

1 point(s)

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

Assignments when property is sold

Assignments when the insured decides they want to

Assignments under the Bankruptcy Act

Assignments under the Insurance Act

Question 43 of 52

1 point(s)

What is the main benefit of having an insurance application completed in writing and signed by the applicant?

Allows the insured to get a premium discount of fifteen percent

Provides accurate documentation of the coverage requested and confirms the accuracy of the information.

Is less costly for the insurer to underwrite written applications than oral applications

Allows the insured to choose which questions to answer and which to leave blank

Question 44 of 52

1 point(s)

What is fundamental to maintaining utmost good faith in all insurance transactions?

Managing a risk

Ratemaking

Duty of disclosure

Subrogration

Question 45 of 52

1 point(s)

What must the applicant have in relation to the subject of insurance to be considered the named insured on a policy?

No loss history

A mortgagee

A co-applicant

Insurable interest

Question 46 of 52

1 point(s)

What term is used to refer to the measurement of how large losses are likely to be?

Exposures

Retentions

Frequency

Severity

Question 47 of 52

1 point(s)

One of the requirements under provincial and territorial insurance acts is for an intermediary to provide service in a competent and trustworthy fashion. This requirement also embodies what basic insurance principal?

Indemnity

Insurable interest

Utmost good faith

Pure risk

Question 48 of 52

1 point(s)

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

Salvage

Subrogation

Contractual provisions

Contribution

Question 49 of 52

1 point(s)

How is a policy’s existence continued at the end of the original term?

A new application is required

It is renewed

It is deemed cancelled and a new policy is issued

It is deemed void and a new policy issued

Question 50 of 52

1 point(s)

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

Assignments under the Insurance Act

Assignments when property is sold

Assignments when the insured decides they want to

Assignments of assets to an executor or administrator of a will

Question 51 of 52

1 point(s)

The portion of the premium earned or charged for the period of time a policy remains in effect is

Unearned premium

Unearned premium reserve

Earned premium

None of the above

Question 52 of 52

1 point(s)

Which of the following does not have an Insurable Interest?

The owner of a home

The bank holding the mortgage on a home

The leasing company leasing the 2002 Audi to the homeowner

A prospective purchaser of the home

OTL Lesson 3 Quiz – Master copy January 14 2025

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