Free and Premium IIC C11 Dumps Questions Answers

To calculate premiums rated per $100 of insurance, the formula is:

Premium = (Amount of Insurance ÷ 100) × Rate

Step-by-step:

$500,000 ÷ 100 = 5,000 rating units

5,000 × $0.80 =$4,000

Thus, the annual premium for the building is$4,000, makingOption Cthe correct answer.

Option A is too low, while Options B and D do not match the rating calculation. Underwriters rely on these standardized rating methods to ensure consistent and adequate premium development.

A commercial property floater is designed for businesses that regularly transport goods, equipment, or samples away from their main premises. In this case, MacMan Inc.’s traveling sales staff carry product samples across Canada. These samples are considered business property, not personal property. Therefore, they must be insured under a commercial floater, which provides coverage regardless of location—hotel rooms, vehicles, trade shows, or customer visits.

Option C, personal property floater, applies toindividualproperty such as jewelry, fine arts, or sporting goods, not business merchandise. Option A, aviation insurance, is irrelevant unless aircraft are owned or used by the business for transport. Option B, accident insurance, covers personal injuries, not physical property.

Because the exposure involves business-owned goods off-premises, the correct coverage is the commercial property floater. It ensures protection against theft, loss, or damage while the goods are in the custody of traveling employees.

An oral binder is a legally recognized temporary contract that provides immediate insurance coverage before a written policy is issued. While oral binders are valid in all Canadian provinces, their reliability depends entirely on whether the intermediary actually has binding authority from the insurer. If the broker or agent who gives the oral binder doesnothave the authority to commit the insurer, then the binder may not be valid, and coverage may not exist. This makes lack of authority the primary risk associated with oral binders.

Option A is incorrect—oral binders are legal across Canada.

Option B is incorrect—a binder cannot override policy warranties; it simply provides temporary coverage.

Option C is unrelated; privacy documentation is not what makes a binder valid or invalid.

Thus, the key problem is that the intermediary may not have binding authority, making D the correct answer.

Under Canadian privacy legislation (such as PIPEDA), personal information may only be used for the specific purpose for which it was originally collected unless the client provides informed consent for additional use. Insurance intermediaries must therefore obtain explicit permission from the client before using or disclosing their information for any new purpose, such as marketing, cross-selling, or sharing data with third-party providers.

Option B—simply notifying the client—is insufficient without consent. Option C is incorrect, as the ombudsperson deals with complaints, not privacy approvals. Option D is incorrect because privacy officers do not grant permissions; the law requires consent from the individual, not from government officials.

Since consent is central to privacy compliance in insurance operations, the intermediary must obtain permission from the client, making A the correct answer.

Purchasing insurance that covers customers’ goods in transit enhances the company’s ability toattract more clients, which is referred to asgreater acquisition potential. Clients feel more confident choosing a mover that offers protection for their belongings, especially when transporting high-value items. This competitive advantage increases business opportunities and strengthens the company’s reputation.

Option B—“feeling of security”—is a benefit but applies to theinsured party, not the business’s competitive positioning. Option C is incorrect because purchasing insurance does not provide additional capital; it is a business cost. Option D (subscription policies) has no connection to transit insurance.

Therefore, the most direct business benefit for the moving company isA: Greater acquisition potential.

Insurers must ensure they collect enough premium to cover potential losses while remaining competitive. One of the most important methods is maintaining a good spread of risk—diversifying exposures across different geographical areas, classes of business, and types of insureds. This spreads the impact of losses, reducing the chance that a single catastrophic event or concentration of similar risks will threaten the insurer’s financial stability.

Option B, specialization, increases dependence on a narrow market segment and may elevate risk volatility. Option C is unrealistic because insurers cannot rely solely on “superior risks,” nor can they guarantee such a selection. Option D—concentrating business in one location—is dangerous because natural disasters, economic downturns, or localized events could cause severe aggregated losses.

Thus, insurers most effectively manage loss volatility through A: a good spread of risk.

Comprehensive and Detailed Explanation (150–250 words):

Amortgage clauseis a specialized provision within property insurance policies that protects the financial interest of amortgagee—typically a bank or lending institution—when real property is used as collateral for a loan. Under thePrinciples and Practice of Insurance, this clause creates aseparate contract of insurancebetween the mortgagee and the insurer. This is critical because it ensures that the mortgagee’s protection remains intact even if the insured violates policy conditions (such as failing to maintain the property or committing fraud).

This clause ensures that any loss settlement will first satisfy the mortgagee’s insurable interest before any residual payment goes to the property owner. It also obligates the insurer to notify the mortgagee of policy cancellation or material changes, providing the lender an opportunity to take protective measures, such as force-placed insurance.

The mortgage clause is distinct from other clauses: abailee clauserelates to property held by others for repair or cleaning, alienholder clauseis used for movable property like automobiles, and anadditional interest clauseoffers limited notice but not the full contractual protection afforded to a mortgagee. Thus, the correct and most protective clause for real property isB. Mortgage clause.

Thesubject of insuranceis the property, person, or legal liability exposure that is being insured. This is the central object of the policy—what the insurer agrees to indemnify or protect. For example, a house in a homeowner’s policy, a vehicle in an automobile policy, or a person’s life in a life insurance contract. Identifying the subject of insurance is essential because underwriting, policy wordings, rates, and coverage conditions all revolve around what is being insured.

Option B refers toperils, which are the causes of loss, not the insured item. Option C refers to the insurer itself and is unrelated to the definition. Option D refers to policy language but not the underlying exposure.

Thus, the correct meaning of the term isA: the thing being insured.

Pollution exposures—especially from oil refinery operations—arehigh-severity, high-complexity risks. Standard property and liability policiestypically exclude pollution, except for sudden and accidental events. Pollution arising from new drilling methods is considered aspecialized environmental liabilityand often requirescustomized financial transfer mechanisms.

Anon-insurance loss-financing transfer agreement(also called a contractual risk transfer or financial risk transfer mechanism) allows the company to shift the financial consequences of pollution losses to another entity or through non-traditional insurance structures (e.g., environmental impairment liability contracts, captive agreements, or specialized financial instruments). This is the most appropriate and realistic way to transfer complex pollution exposures.

Option A (retain the risk) is unsafe due to catastrophic loss potential.

Option B (surety bond) guarantees performance, not pollution losses.

Option D is incorrect because standard policiesdo not coverthis exposure.

Thus the best option isC.

Amanuscript wordingis a policy or endorsement crafted specifically for an individual client or an unusual risk exposure. It iscustom-writtenand negotiated between the insurer and the insured (or their broker). These wordings are used when standard forms do not adequately describe or protect a particular exposure, usually for large commercial clients, unique operations, or highly specialized risks.

Option A refers tostandardwordings, which are pre-written, commonly used forms approved by insurers or industry bodies.

Option B (chattel) refers to movable personal property, not policy wording.

Option C (treaty) refers to reinsurance agreements between insurers and reinsurers, not client-facing policy forms.

Therefore, the only option describing a custom-written policy wording isD: Manuscript.

This question is identical to Question 25, so the correct answer and reasoning are the same. Whether an adjuster is a staff employee or an independent contractor, they are hiredto represent the insurerin the claims process. They are both compensated by the insurer—staff adjusters through salary and benefits, independent adjusters through fees or billing arrangements. Both must meet licensing requirements established by provincial regulatory bodies, conduct investigations, and report their findings to the insurer. They are also both subject to authority limits on claim settlement.

Thus, the only option that correctly reflects their similarity isB: both serve and are paid by insurers.

Insurable interest exists when someone would suffer a financial loss if a person or property were damaged, lost, or deceased. Employers have a legitimate, recognized insurable interest in the lives of key employees, as their death or disability could result in financial loss—for example, reduced productivity, training costs, or loss of specialized expertise. Therefore, A represents a valid and legally recognized insurable interest.

Option B involves investment income earned by insurers—this is not an insurable interest but a financial outcome of operations. Option C reflects a business motive but not an insurable interest because an underwriter does not stand to personally lose financially if a policyholder dies or property is damaged. Option D is generally invalid unless the employee can demonstrate a direct financial dependency, which is typically not the case.

Thus, the only clear example of insurable interest is A: the employer’s interest in the life of an employee.

To be insurable, a peril must befortuitous, measurable, and not within the direct control of the insured.Cybersecurity risksmeet these criteria, which is why insurers offercyber liability and data breach insurance. These policies cover hacking, ransomware, privacy breaches, and business interruption caused by cyber events.

Mismanagement (B) is uninsurable because it results from internal decision failure.

Under-capitalization (C) is a business failure, not a fortuitous peril.

Product obsolescence (D) is a predictable business cycle risk and cannot be insured.

Thus, the only insurable peril listed isA: Cybersecurity.

Adirect lossis damage that resultsimmediately and directlyfrom the action of an insured peril. For example, fire burning a building, wind damaging a roof, or theft taking merchandise. The loss must be theproximate (dominant) causeand must flow directly from the peril named or covered in the policy.

Option A is incorrect because direct loss refers to a peril’s action, not to who caused it.

Option C describes extensions of coverage, not direct losses.

Option D describes anindirect (consequential) loss, such as business interruption resulting from a fire—not the physical damage itself.

Therefore, the correct definition of a direct loss isB: Damage to property by the direct action of an insured peril.

The Canadian property and casualty (P&C) insurance industry employs a range of specialized professionals who support the underwriting, claims, regulatory, and legal functions necessary for insurance operations. Lawyers are commonly employed directly by insurers to provide advice on policy interpretation, defend claims litigation, ensure regulatory compliance, draft contracts, and handle disputes. They play a crucial role in the claims process, particularly for liability claims and complex legal matters.

Mechanics, travel agents, and health professionals are not directly employed by the P&C insurance industry. Mechanics may work with insurers as third-party repair facilities, but they are not typically employees. Travel agents relate to travel services, not insurance employment. Health professionals may support life and health insurers or provide assessments for claims, but they are not ordinarily employed in theproperty and casualtysector. Therefore, the correct answer is A: Lawyer.

When two insurers cover the same property, theprinciple of contributionapplies. Each insurer pays a proportion of the loss based on its share of the total insurance in force. Here:

Total insurance = $300,000 + $100,000 = $400,000

Insurer A’s share = 300,000 / 400,000 =75%

Insurer B’s share = 100,000 / 400,000 =25%

Loss = $80,000

Insurer A pays 75% × 80,000 =$60,000

Insurer B pays 25% × 80,000 =$20,000

Thus,Cis correct.

Insurers in Canada are heavily regulated in the way they invest their capital because they must remain financially strong to pay future claims. Government regulations—federal for federally regulated insurers and provincial for provincially regulated insurers—set out specific investment restrictions, including prohibiting certain high-risk or illiquid investments. These rules protect policyholders by ensuring insurers maintain solvency and liquidity.

Insurers must invest prudently in order to meet long-term obligations, and therefore regulators specify the classes of investments deemed too risky or unsuitable. This includes limits on speculative investments or holdings that could jeopardize stability.

Option A is incorrect because insurers arenotrequired to invest in non-liquid assets; in fact, liquidity is important.

Option B is incorrect; although some foreign investments may be allowed, the statement is not a broad principle of regulation.

Option C is incorrect because insurers face significant restrictions, not complete freedom.

Thus, D is the correct answer.

One of the fundamental principles of insurance rating is that thepremium charged must accurately reflect the level of riskbeing insured. This principle ensures fairness and financial stability: individuals or businesses presenting a higher probability of loss or greater potential severity must payhigher premiums, while lower-risk policyholders pay less. This is essential because insurers must collect sufficient funds to cover expected claims, expenses, and maintain solvency.

Option B describes the pooling of funds, which is part of how insurance works but does not address how premiums are determined.

Option C relates to the general purpose of insurance, not premium adequacy.

Option D loosely refers to indemnification, not rating methodology.

Therefore, the only statement that accurately reflects the idea that premiums must be commensurate with the risk isA.

Under contract law principles referenced inPrinciples and Practice of Insurance, a contract is only valid when both parties givefree, informed, and genuine consent. Fraud occurs when one party intentionally misleads another through deception, false representation, or concealment to induce consent. In this scenario, John intentionally misrepresented the nature of the accommodation—promising his private residence while intending to place Louise in a different, inferior property.

Because Louise agreed based on amaterial misrepresentation, the contract is voidable due tofraud, meaning she can invoke nullity and have the contract deemed without effect. Fraud differs from error in that the misinformation wasdeliberatelycreated by John. It is not lesion (which relates to unfair disadvantage in value) nor violence (which involves physical or psychological coercion). Therefore, the correct answer isB. Fraud.

Net income is calculated by subtractingexpensesfromrevenues:

Net Income=Revenues−Expenses\text{Net Income} = \text{Revenues} - \text{Expenses}Net Income=Revenues−Expenses

For this retailer:

$250,000−$100,000=$150,000\$250{,}000 - \$100{,}000 = \$150{,}000$250,000−$100,000=$150,000

The projection of $50,000 sustained growth next year is irrelevant because the question asks specifically forlast year’snet income. Many insurance-based financial questions test the ability to isolate actual financial performance from future projections.

Options B, C, and D incorrectly combine revenue, expense, or growth figures.

Thus, the correct net income isA: $150,000.

Hazards are conditions thatincrease the likelihood or severity of a losscaused by an insured peril. Underwriters assess hazards (physical, moral, and morale hazards) to determine whether a risk is acceptable and at what price.

If hazards make an insured perilmore likely to occur, the underwriter willincrease the rateto reflect higher expected losses. This aligns exactly with option C.

Option A is close but incorrectly states “insured event,” not “insured peril,” and is less precise.

Option B misinterprets the law of large numbers; it applies to loss predictability, not hazard listing.

Option D misunderstands rating—rates are not calculated by multiplying premium by insured value.

Thus, the correct statement isC.

The coinsurance clause requires the insured to carry insurance equal to a specified percentage (commonly 80%, 90%, or 100%) of the property's value. If the insured carries less than the required amount, they become a coinsurer and share in any partial loss. This prevents underinsurance and encourages insureds to maintain adequate coverage levels.

Here, Deanna insures a $1,000,000 property for only $500,000—50%. If the policy requires 80% coinsurance, she should be carrying at least $800,000. Because she does not, she will not be fully reimbursed for partial losses; her payment will be reduced proportionally based on the coinsurance formula.

Option A (forfeiture) applies to breaches of policy conditions. Option C (contribution) applies when multiple insurers cover the same risk. Option D (subscription) applies when several insurers share a single risk by percentage participation.

Thus, the clause that could reduce Deanna’s recovery is B: Coinsurance.

The agency or production department within an insurance company is responsible for generating new business, managing distribution channels, working with brokers and agents, and promoting the insurer’s products. These functions align directly with sales and marketing departments found in other industries. Their goals include increasing premium volume, maintaining relationships with intermediaries, and ensuring the insurer’s products reach the marketplace effectively.

Option B is incorrect because finance and production refer to cost control and manufacturing, neither of which parallels insurance distribution. Option C does not align because administration and HR handle internal operations, not customer acquisition. Option D deals with internal systems and support functions, unrelated to the business-production role of generating and selling insurance.

Therefore, the insurer’s agency or production department corresponds to A: Sales and marketing.

In insurance law, the insurer bears the burden of proving that the insured failed to disclose a material fact. Material facts are those that would influence an underwriter’s decision to accept, rate, or decline the risk. If an insurer alleges concealment or misrepresentation, the onus lies with the insurer to establish—through underwriting evidence, policy documentation, and testimony—that the fact was material and that nondisclosure affected the insurer’s judgment.

Option A is incorrect because the broker is merely an intermediary. Option C is not correct because the insured’s role is to answer questions truthfully, but the legal burden of proof in court rests with the insurer when making the accusation. Option D, a third party, has no role in proving concealment.

Therefore, the insurer must satisfy the court that a material concealment occurred, making B correct.

Loss control refers to strategies used to minimize the frequency or severity of losses. In insurance principles, loss control is divided intoloss prevention(reducing likelihood) andloss reduction(reducing severity once loss becomes imminent or unavoidable).

In this scenario, the hurricane threat is already occurring and cannot be prevented. Jack’s actions—placing sandbags, boarding windows, and securing the premises—are aimed atreducing the amount of damagefrom an impending peril. This aligns exactly withloss reduction, which focuses on mitigating the extent of loss after a peril has already materialized or cannot reasonably be avoided.

Avoidance (option A) would involve eliminating the risk entirely, such as relocating the business out of hurricane-prone regions. Risk transfer (option B) involves shifting financial consequences to an insurer. Diversification (option C) spreads exposure across multiple assets or locations. Jack is instead applying a protective measure to reduce damage, makingD. Loss reductionthe correct choice.

When more than one insurer covers the same property under policies with identical terms, the loss is often shared according to the proportion of insurance each company provides. This is commonly referred to as contribution “pro rata by limits.”

First, determine the total amount of insurance:

Insurer X: $400,000

Insurer Y: $100,000

Total insurance: $500,000

Next, determine each insurer’s percentage of the total:

Insurer X: 400,000 ÷ 500,000 = 80%

Insurer Y: 100,000 ÷ 500,000 = 20%

The total loss is $100,000, so each insurer pays its proportion of the loss:

Insurer X: 80% × $100,000 = $80,000

Insurer Y: 20% × $100,000 = $20,000

There is no deductible to adjust these amounts. Thus, Insurer X pays $80,000 and Insurer Y pays $20,000, making Option C correct.

With a guaranteed replacement cost policy, the insurer agrees to pay the full cost of replacing the damaged or destroyed property (subject to conditions), even if that amount approaches or, in some forms, exceeds the stated limit. Here, the total replacement cost of the loss is $500,000.

However, some furniture is salvageable and valued at $4,000. Since Dominika elects to keep this salvage, she is effectively retaining part of the value of the damaged property. To maintain the principle of indemnity and avoid overpayment, the insurer deducts the salvage value from the total amount they would otherwise pay.

Step-by-step:

Replacement cost of loss: $500,000

Less salvage value retained by insured: $4,000

Subtotal: $496,000

Less deductible: $1,000

Net settlement: $495,000

Therefore, Dominika will recover $495,000, making Option A correct.

In determining liability, the immediate (proximate) cause refers to the most direct, unbroken cause leading to the injury. In this sequence, the firecracker explodes in Celina’s hands immediately after she receives it from Sandra. Although Antonio initiated the chain of events and Brett contributed, their actions are more remote.

The last voluntary act that directly placed the dangerous object in the position where it caused harm was Sandra’s throw to Celina. Sandra’s action is therefore the immediate cause, even though earlier individuals may share legal responsibility in a broader causation analysis.

Option D is incorrect because Celina did not cause her own injury; she merely received the firecracker.

Option C includes Antonio and Brett, but neither was the final actor in the chain.

Therefore, the immediate cause of loss is B: Sandra.

When apolicyholder(the insured) cancels a policy before its natural expiry date, insurers applyshort rate cancellation. Under short rate cancellation, the insurer refunds the unearned premiumminus a penalty. This penalty is applied because early cancellation disrupts expenses already incurred by the insurer, such as acquisition and administrative costs.

By contrast:

Pro rata cancellation (A)applies when theinsurercancels the policy — this provides the insured with thefullunearned premium refund, without penalties.

Half-term (B)is not a recognized cancellation method.

Partial-term (D)is also not an insurance cancellation method.

Thus, when the insured initiates cancellation, the correct method applied isshort rate.

New business clients often want to present themselves aslow-riskto secure better premium rates. As a result, they may be cautious about reporting small claims or may practice better loss prevention—at least initially. This can make new business perform better from a loss-ratio perspective.

However,renewal clients may become less cautiousover time or more willing to submit smaller claims once they are already insured. Additionally, insurers sometimes relax underwriting scrutiny on renewals compared to new applications, which can further widen performance differences.

Option A (automated renewals) does not inherently affect claims behaviour.

Option B is incorrect—renewal underwriting is typicallyless strict, not more.

Option C is false; reinsurance availability does not differ based on new vs. renewal status.

Thus, the factor most likely contributing to poorer renewal performance isD: New business clients limit claims to keep premiums low, improving their initial results relative to renewals.

If you haveQuestions 85 onward, feel free to send them!