Question 1

A client would like you to review a property-insurance policy she recently purchased. One section of the contract explains the perils that the insurance company does not cover through the policy. Under what component of the insurance contract would this be covered?

Select one:

a.

Declarations

b.

Exclusions

c.

Conditions

d.

Ratings

Question 2

Joey took out a life insurance contract. When the policy was issued, he studied the terms carefully and decided he did not like the conditions. Nine days after the contract was issued, he cancelled it and received a full refund of his premium. All of the following statements are true, except.

Select one:

a.

Joey cancelled his policy according to his right of rescission.

b.

Joey cancelled his policy according to a right provided by federal legislation.

c.

Joey cancelled his policy according to a contractual right provided by the insurer.

d.

Joey had to cancel his policy before the tenth day in order to receive a full refund of the premium.

Question 3

Fred recently purchased a universal life insurance policy. His insurance agent also suggested he invest in one of the company's segregated funds, instead of a mutual fund. All of the following are features of a segregated fund, except.

Select one:

a.

Seg funds are at risk in the event of insolvency of the issuing company.

b.

The fund holder can designate a named beneficary.

c.

Taxable income earned by the seg fund flows through to the unitholders.

d.

The insurance company must provide a guarantee of principal if held to maturity.

Question 4

Melville is completing the final return and optional returns for his deceased brother, Darrell. Which of the following statements is false?

Select one:

a.

Melville can claim some tax credits in full on each of Darrell's returns.

b.

Melville can split some tax credits between Darrell's returns.

c.

Melville can claim only some tax credits against certain types of Darrell's income.

d.

Melville can claim all tax credits in full on each optional return.

Question 5

As a financial planner, statistics can be used to illustrate the importance of disability insurance for a client. Which of the following statistics could be used as examples to assist a financial planner in demonstrating the impact a disability could have on a client?

Select one:

a.

The probability of suffering a disability lasting 90 days or longer before the age of 65 is greater than the probability of death before that age.

b.

The probability of suffering a disability lasting 90 days or longer is more than twice the probability of death before the age of 53 years.

c.

At the age of 40, the probability of suffering a disability lasting 90 days or longer is more than three times the probability of death.

d.

Any of the above.

Question 6

Tucker and Tank ran an automotive body shop. They had an insurance contract on the building and contents. One night, the shop caught fire and was destroyed. The fire department declared that the fire was accidental. However, the police found evidence that the shop was used to change the appearance of stolen cars so they could be sold. Further investigations proved that dealing in stolen cars was the sole activity of the body shop. Tucker and Tank contacted their insurance company to claim compensation for the damage. Which of the following statements is true?

Select one:

a.

Their insurer will pay compensation to the extent of the coverage in contract.

b.

Their insurer will pay compensation for the building and equipment to the extent of the coverage in contract, but not for the stolen cars in the shop.

c.

Their insurer will pay compensation for the building to the extent of the coverage in contract, but not for the equipment and the stolen cars in the shop.

d.

Their insurer will not pay any compensation for the loss.

Question 7

Ten years ago, Normand purchased a permanent life insurance policy that required full medical underwriting. This life insurance policy does not have a cash surrender value, is not a participating policy, and does not pay dividends. What type of permanent life insurance policy does Normand own?

Select one:

a.

Endowment policy

b.

Guaranteed-issue policy

c.

Term-100 policy

d.

Universal life policy

Question 8

Jaclyn, Lionel, Reid, and Lizzie purchased disability insurance contracts through their alumni association in May 2000. Their contracts are standard, with no additional clauses. They each placed claims in January 2001. Which of the four claims is most likely to be accepted by the insurer?

Select one:

a.

Jaclyn's claim, resulting from a heart attack she suffered in December 2000 as a result of a medical condition of which she became aware in 1997.

b.

Lionel's claim, resulting from injuries sustained when a plate glass window fell on him as he was walking down the sidewalk.

c.

Reid's claim, resulting from injuries sustained from parachute jumping.

d.

Lizzie's claim, resulting from a medical condition caused solely by her pregnancy.

Question 9

Zenon works as a trader on the Toronto Stock Exchange. He is in his mid-forties and slightly overweight and finds the job of trading penny-mining stocks increasingly stressful. His family also has a history of heart problems. Consequently, he has decided to purchase a 10-year $100,000 term life insurance policy. All of the following statements, with respect to the calculation of the mortality cost on Zenon's policy, are true, except.

Select one:

a.

The mortality cost equals the death benefit, multiplied by the probability of Zenon's death in the year.

b.

Zenon may receive a rated policy.

c.

The insurance company will likely increase the probability of death in designing the policy to reflect Zenon's occupation and family health history.

d.

The monthly premium Zenon pays will increase in each year of the policy.

Question 10

Barney added an electric garage door to his home several years ago. Barney also made sure that his homeowners' policy covered the garage door against the negligent acts of a third party. He is covered for replacement cost. A couple of weeks ago, his neighbour crashed through his garage door. The insurance adjuster valued the replacement cost of the garage door at $2,200. What options does Barney have?

Select one:

a.

Barney can make a claim to his insurance company to recover the $2,200 loss.

b.

Barney can recover the $2,200 loss from his neighbour, and put in a claim for $2,200 with his insurance company.

c.

Barney would receive less than the $2,200 to reflect accumulated depreciation on the garage door.

d.

None of the options listed above are available to Barney.