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IIC Principles and Practice of Insurance Sample Questions:

1. What best describes a direct loss?

A) Damage to property caused directly by the insured
B) A loss covered by an insured peril, but not caused directly by the peril
C) A loss not covered on the policy but covered by an endorsement
D) Damage to property by direct action of a peril insured against


2. Why does the need for liability insurance arise?

A) Fulfill legal obligations to others
B) Reduce personal risk to oneself
C) Uphold ethical feelings of responsibility
D) Meet societal obligations and norms


3. How are staff adjusters and independent adjusters similar?

A) Neither has any limitation on their authority to settle claims
B) Both are licensed only in Quebec and New Brunswick
C) Neither is allowed to perform an investigation
D) Both work on behalf of, and are paid by, the insurer


4. Why does the Office of the Superintendent of Financial Institutions (OSFI) control the types of investments insurers are allowed to make?

A) To minimize industry indemnifications
B) To minimize insurers' investment loss exposures
C) To maximize industry profits
D) To maximize insurers' returns on investments


5. A company suffers an $80,000 theft loss from its commercial property.
Insurer A covers the property for $300,000.
Insurer B covers the same property for $100,000.
Assuming both policies have identical terms, how is the $80,000 loss shared?

A) Insurer A pays $0; Insurer B pays $60,000
B) Insurer A pays $60,000; Insurer B pays $20,000
C) Insurer A pays $80,000; Insurer B pays $0
D) Insurer A pays $40,000; Insurer B pays $40,000


Solutions:

Question # 1
Answer: D
Question # 2
Answer: A
Question # 3
Answer: D
Question # 4
Answer: B
Question # 5
Answer: B

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