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The correct answer is:

✅ Filed by the insured making claim against his/her own insurer.

Explanation:

A Proof of Loss is a formal statement made by the insured to their own insurer after a loss. It typically includes:

• The details of the loss
• The amount claimed
• Documentation or evidence to substantiate the claim

It is a sworn statement and is often a requirement before the insurer proceeds with settlement, especially for large or complex losses.

Why the other options are incorrect:

• ❌ “Only required if the loss is suspicious” – False. It is often required regardless of suspicion, particularly for property losses or when the claim amount is significant.
• ❌ “Filed by an appraiser acting for the insured” – Incorrect. Only the insured (or their legal representative) files the Proof of Loss, not an appraiser.
• ❌ “Submitted by the contractor carrying out repairs” – False. Contractors may submit invoices or estimates, but they do not file the Proof of Loss.

✅ Correct Answer:

Filed by the insured making claim against his/her own insurer.

The correct answer is:

• He/she cannot be a “Principal Broker” as that term is used in the regulation, nor may he/she act as a sole proprietor, nor may he/she control trust funds.

Explanation:

A RIBO license “restricted to Acting Under Supervision” means the individual:

• Must work under the supervision of a fully licensed (unrestricted) broker.
• Cannot act independently, including:
• Being a Principal Broker
• Operating as a sole proprietor
• Setting up their own brokerage
• Controlling trust funds

This restriction ensures that the individual gains experience under oversight before taking on full broker responsibilities.

Why the other options are incorrect:

• “Set up and establish his/her own firm” → ❌ Not allowed under a restricted certificate.
• “Establish and maintain a trust account…” → ❌ Trust fund control is not permitted under supervision.
• “Solicit… only if accompanied by a RIBO Member…” → ❌ The restricted broker does not need to be physically accompanied, but must be supervised — this statement misrepresents the requirement.

✅ Correct Answer: He/she cannot be a “Principal Broker” as that term is used in the regulation, nor may he/she act as a sole proprietor, nor may he/she control trust funds.

The correct answer is:

✅ The premises are unoccupied.

Explanation:

In insurance terminology, there is a key distinction between vacant and unoccupied:

• Unoccupied means:
  The contents remain in place, but no one is currently present. This is a temporary condition, like being away on vacation or a short closure.
• Vacant means:
  The premises are empty of both people and contents, and there is no intent for immediate use or occupancy.

In this case:

• The retail contents are undisturbed, and the owner intends to return after a three-month vacation.
• Therefore, the premises are not vacant, just temporarily unoccupied.

Why the other options are incorrect:

• ❌ “Vacant” – Incorrect. Contents are still in place, and there’s an intent to return.
• ❌ “Both vacant and unoccupied” – Incorrect. It cannot be vacant if the contents remain.
• ❌ “No material change” – Incorrect. Unoccupancy may be considered a material change in risk if not reported, depending on the policy.

✅ Correct Answer:

The premises are unoccupied.

The correct answer is:

✅ Both the insured and the insurer.

🔍 Explanation:

Statutory Conditions in a property insurance policy are legally mandated conditions that:

• Protect the rights and obligations of both parties—the insured and the insurer.
• Ensure clarity and fairness in areas such as proof of loss, notice of claim, abandonment of property, fraud, subrogation, and other important aspects.

They create a balanced framework for claims handling and policy enforcement.

❌ Why the others are incorrect:

• The insured only
  → ❌ Statutory Conditions also protect insurer rights.
• The insurer only
  → ❌ They equally protect the insured’s rights.
• The broker
  → ❌ Brokers are not directly protected by statutory conditions; these conditions govern insurer-insured relations.

✅ Final Answer:

Both the insured and the insurer.

The correct answer is:

✅ Factory Mutuals sell insurance to factory employees. — This statement is NOT correct.

Explanation:

Let’s review each statement:

✅ Correct Statements:

• “A stock insurance company is owned by its shareholders.”
  ✔️ True. Shareholders invest capital and own stock insurance companies. Profits are returned to them via dividends.
• “A mutual insurance company is owned by its policyholders.”
  ✔️ True. Mutual companies are owned by the people they insure, and profits may be distributed as dividends or reduced premiums.
• “Lloyd’s of London is NOT an insurance company.”
  ✔️ True. Lloyd’s is a marketplace where members (underwriters) join syndicates to insure risks. It is not an insurance company itself.

❌ Incorrect Statement:

• “Factory Mutuals sell insurance to factory employees.”
  ❌ False. Factory Mutuals (e.g., FM Global) provide industrial property insurance to businesses, especially those with significant property values and risk management programs.
  They do not sell personal insurance to factory workers or employees.

✅ Correct Answer:

Factory Mutuals sell insurance to factory employees.

The correct answer is:
✅ It is the right of the insurer to seek recovery from the responsible party following payment of a loss.

🔍 Explanation of Subrogation:

Subrogation is a legal principle in insurance which allows an insurer to “step into the shoes” of the insured after a loss has been paid out. It enables the insurer to recover the amount of the loss from the party that caused or contributed to it.

Example:

If your car is hit by another driver and your insurer pays for the repairs under your collision coverage, your insurer may then sue the at-fault driver to recover the amount paid to you.

❌ Why the other options are incorrect:

• “It is the percentage of risk taken by each insurer on a subscription policy.”
  → This refers to subscription policies, not subrogation.
• “It is the co-insurance where more than one property is destroyed in the same fire.”
  → This confuses co-insurance and loss distribution, not subrogation.
• “It is the insurer’s right to deny a claim for misrepresentation.”
  → This relates to voiding a policy for misrepresentation, not subrogation.

✅ Final Answer:

It is the right of the insurer to seek recovery from the responsible party following payment of a loss.

The correct answer is:

✅ Respond to the claim in accordance with the coverage bound by the broker.

🔍 Explanation:

When an insurance broker binds coverage on behalf of an insurer, that binding is legally enforceable, even if the premium hasn’t yet been paid.

• Binding coverage creates a legal contract of insurance, meaning the insurer is obligated to honor the coverage as if the policy were issued — including defending and indemnifying the insured in the event of a claim.
• The insurer may pursue premium collection later, but it cannot deny coverage simply because the payment has not yet been received, as long as the broker had authority to bind.

❌ Why the other options are incorrect:

• “Obtain a signed ‘Waiver of Subrogation’ from the applicant/insured.”
  → Not relevant. Subrogation relates to the insurer’s right to recover damages from third parties — not to the initial payment of premiums.
• “Deny the claim because no premium had been paid.”
  → Incorrect. Payment is not a prerequisite for claim response once coverage is bound.
• “Investigate the claim but take no further action.”
  → Incorrect. The insurer is obligated to act, not just investigate.

✅ Final Answer:

Respond to the claim in accordance with the coverage bound by the broker.

The correct answer is:

✅ Continuing medical treatment if the insured is not medically fit to return to the country of residence following emergency treatment.

🔍 Explanation:

This option is not a commonly found limitation — in fact, **most travel health insurance policies will extend coverage if the insured is medically unable to return home following a covered emergency. The policy often continues until the insured is stable enough to travel, sometimes with prior approval from the insurer’s assistance provider.

❌ Why the other options are commonly found limitations:

• The medical condition or death of a person who is ill, when the purpose of the trip is to visit that person.
  → ✅ Many travel policies exclude trip cancellation or interruption for visiting someone who is already seriously ill.
• Hospital or medical treatment where the policy is sought specifically for the purpose of obtaining such treatment.
  → ✅ This is called “medical tourism” and is explicitly excluded from virtually all travel health plans.
• Civil disorders, war or act of war (whenever war be declared or not)
  → ✅ This is a standard exclusion in nearly all travel insurance policies, due to the high and unpredictable risk.

✅ Final Answer:

Continuing medical treatment if the insured is not medically fit to return to the country of residence following emergency treatment.
(This is covered, not excluded, in most travel health plans.)

The correct answer is:

✅ If the individual, for remuneration, transacts insurance solely on behalf of one insurer and a Facility Association Carrier.

🔍 Explanation:

Under the Registered Insurance Brokers Act (RIB Act) in Ontario, registration is required for any individual who:

• Transacts insurance on behalf of more than one insurer, or
• Even if working for only one insurer, also places business through the Facility Association (which is a market of last resort for high-risk drivers).

This combination means the individual is not strictly an agent (who typically works exclusively for one insurer) and is therefore regulated as a broker under the Act.

❌ Why the other options are incorrect:

• “Recommends to friends…”
  → ❌ Casual recommendations with no remuneration or intent to transact insurance do not require registration.
• “Acts solely as a reinsurance broker”
  → ❌ Reinsurance brokers are not subject to RIBO registration. They operate in a different regulatory category.
• “Provides risk management/loss prevention services for compensation”
  → ❌ These services are not considered transacting insurance, so registration is not required unless actual insurance placement is involved.

✅ Final Answer:

If individual, for remuneration, transacts insurance solely on behalf of one insurer and a Facility Association Carrier.

The correct answer is:

✅ Income Replacement Benefit weekly limit to $1,500.00.

🔍 Explanation:

Under the O.A.P. 1 (Ontario Automobile Policy – Owner’s Policy), several optional benefits (enhancements) are available that allow insureds to increase standard Accident Benefits coverage limits. One such available enhancementis:

Increasing the Income Replacement Benefit from the standard $400/week up to $600, $800, $1,000, or $1,500/week.

❌ Why the other options are incorrect:

• Funeral Benefits maximum to $10,000
  → ❌ This is not an available standard option. The maximum funeral benefit enhancement is only up to $8,000under optional benefits.
• Caregiver Benefit available for all injuries
  → ❌ The Caregiver Benefit is only available for catastrophic impairments unless optional benefits are purchased. But even then, the option is not automatically extended to all injuries.
• Attendant Care only for non-catastrophic injuries
  → ❌ This is misleading. Attendant Care Benefits are available for both catastrophic and non-catastrophic injuries, with different limits. Optional enhancements can increase these amounts, but this statement incorrectly suggests it’s limited to non-catastrophic cases only.

✅ Final Answer:

Income Replacement Benefit weekly limit to $1,500.00.

The correct answer — the INCORRECT statement — is:

✅ It pays prescribed amounts for bodily injury in an automobile accident but only if the insured is found at fault 50% or less.

🔍 Explanation:

This statement is incorrect because Accident Benefits under the O.A.P. 1 (Ontario Automobile Policy) are provided on a no-fault basis.

• This means benefits are paid regardless of who is at fault, including:
  • Medical and rehabilitation expenses
  • Income replacement benefits
  • Attendant care
  • Funeral and death benefits

Fault is irrelevant for accessing Accident Benefits — even the at-fault driver is eligible to receive them.

✅ Review of the Correct Statements:

• “Income Replacement Benefits are not payable to an insured not authorized by law to drive an automobile…”
  ✔️ Correct. If someone is not legally allowed to drive (e.g., unlicensed or suspended), they may be disqualifiedfrom certain benefits like income replacement.
• “It provides injured persons with scheduled benefits for specified kinds of loss as a result of an automobile accident.”
  ✔️ Correct. Accident Benefits are outlined in the Statutory Accident Benefits Schedule (SABS) and are scheduled/fixed amounts for various types of loss.
• “It pays fixed amounts to insured persons as defined in the policy without regard to liability of the insured for the accident.”
  ✔️ Correct. This reflects the no-fault nature of the benefits.

✅ Final Answer:

It pays prescribed amounts for bodily injury in an automobile accident but only if the insured is found at fault 50% or less.

The correct answer is:

✅ Co-insurance Clause.

🔍 Explanation:

The co-insurance clause directly affects the amount paid out in the event of an insured loss. It requires the insured to carry a minimum amount of insurance, usually a percentage (e.g., 80%, 90%) of the property’s value. If the insured amount is less than required, any claim payout is reduced proportionally — this is known as the co-insurance penalty.

❌ Why the other options are incorrect:

• Subrogation Clause
  → ❌ This gives the insurer the right to recover money from third parties after paying the insured. It does notaffect the amount of the claim settlement.
• Named Perils Rider
  → ❌ This determines what perils are covered, but not how much is paid once coverage is confirmed.
• Subscription policy with four insurers
  → ❌ This refers to a policy where multiple insurers share the risk, but the total settlement amount (to the insured) remains the same — each insurer just pays their portion. It doesn’t affect the overall amount of the settlement.

✅ Final Answer:

Co-insurance Clause.

The correct answer is:

✅ The payment of any referral fee or finder’s fee to any person whose occupation is not described in Ontario Regulation 991, Section 15.

🔍 Explanation:

Under Section 15(1) of Ontario Regulation 991 (under the RIB Act), several specific actions are defined as “misconduct”, including:

• Failing to comply with the Code of Conduct
• Providing false or misleading information to RIBO
• Misrepresentation of the terms or benefits of a policy
• Unethical or deceptive practices in dealing with clients or insurers

However, while referral fees are regulated, the mere payment of a referral fee to someone not listed in Section 15 is not explicitly defined as “misconduct” under the regulation — unless the circumstances involve misrepresentation, conflict of interest, or a breach of disclosure rules.

➡️ Therefore, this statement is not a defined misconduct under Section 15(1), making it the correct choice.

✅ The other options are ALL defined as misconduct:

• Failing to carry on business in a manner consistent with the Code of Conduct
  → ✅ Misconduct.
• Using illustrations or materials that misrepresent policies
  → ✅ Misconduct.
• Providing false or misleading information to RIBO
  → ✅ Misconduct.

✅ Final Answer:

The payment of any referral fee or finder’s fee to any person whose occupation is not described in Ontario Regulation 991, Section 15.

The correct answer is:

✅ Issue O.A.P. 1 Owner’s Policy suitably endorsed.

🔍 Explanation:

Even though your insured does not own the vehicle outright (it is leased), the proper coverage is still provided through the:

O.A.P. 1 – Owner’s Policy,
with appropriate endorsements, such as:

• OPCF 5 – Permission to Rent or Lease (Long Term), which protects the leasing company’s interest as owner.
• The leasing company would be listed on the policy as a lessor (owner) and loss payee.

The insured (lessee) is responsible for arranging the policy, naming themselves as the insured and the leasing company as the owner/loss payee.

❌ Why the other options are incorrect:

• O.A.F. 2 – Driver’s Form
  → ❌ Used when someone drives a vehicle they do not own, and there is no need for physical damage coverage(e.g., driving someone else’s car occasionally). Not applicable to leased vehicles where full coverage is required.
• O.A.P. 6 – Non-Owned Automobile Policy
  → ❌ Used by businesses for employees who use their own cars for work purposes — not for leasing situations.
• “Advise the insured that the leasing company must arrange coverage…”
  → ❌ Incorrect. It’s typically the lessee’s responsibility to arrange insurance and list the leasing company appropriately.

✅ Final Answer:

Issue O.A.P. 1 Owner’s Policy suitably endorsed.

The correct answer is:

✅ It specifies the amount in excess of which an insurer will pay a loss

Explanation:

A deductible in an insurance policy is the initial amount of a loss that the insured must cover out of pocket before the insurer will begin to pay. It represents the threshold (in dollars) above which the insurer will begin to compensate for a covered loss.

• ❌ “It does not apply if the policy covers only fire and extended coverage perils” — Incorrect. Most fire and extended coverage policies still have deductibles.
• ❌ “It applies only to the contents loss if both building and contents are insured on the policy” — Incorrect. Deductibles typically apply separately to building and contents, depending on the structure of the policy.
• ❌ “It applies separately to each item that is lost or damaged” — Incorrect. Deductibles usually apply per occurrence, not per item.

Thus, the most accurate description of a deductible is:

It specifies the amount in excess of which an insurer will pay a loss.

The correct answer is:

✅ It is a pooling arrangement, subscribed to by all automobile insurers qualified for “residual market segment” of the “Plan of Operation”, who share the experience on risks written and serviced by a few insurers, called servicing carriers.

🔍 Explanation:

The Facility Association is:

• A residual market mechanism created by the insurance industry,
• Designed to provide automobile insurance to drivers who cannot obtain coverage in the regular market due to high risk,
• Operated as a pooling arrangement, where all automobile insurers licensed in a province must participate and share in the profits or losses,
• The policies are issued and serviced by a few insurers called servicing carriers, but the underwriting results (losses/profits) are shared among all participating insurers according to market share.

❌ Why the other options are incorrect:

• “Servicing carriers which write the risks placed by brokers for their own account”
  → ❌ In the Facility Association, servicing carriers do not keep the risk for their own account — they are reimbursed and losses are pooled.
• “Pool risks on behalf of the Provincial Government”
  → ❌ The Facility Association is industry-run, not a government program (though it’s regulated).
• “Charge higher premiums as a means of averaging losses”
  → ❌ Premiums are set based on actuarial calculations, not to average losses. The pooling of losses is what allows the system to function, not overpricing.

✅ Final Answer:

It is a pooling arrangement, subscribed to by all automobile insurers qualified for “residual market segment” of the “Plan of Operation”, who share the experience on risks written and serviced by a few insurers, called servicing carriers.

The correct answer is:

✅ Gasoline.

🔍 Explanation:

In insurance terminology:

• A peril is the actual cause of loss. Examples include:
  • Fire 🔥
  • Windstorm 🌬️
  • Burglary 🚨
• An exposure (or hazard) is something that increases the likelihood or severity of a peril — it is not the cause of loss itself.

✅ Why “Gasoline” is NOT a peril:

• Gasoline is not a cause of loss by itself — it is a hazard or exposure.
• It increases the risk of certain perils (like fire or explosion), but it is not the peril itself.

❌ Why the others are perils:

• Fire – 🔥 Clearly a peril, as it directly causes loss/damage.
• Windstorm – 🌪️ A classic insured peril under most property policies.
• Burglary – 🦹‍♂️ A peril (cause of loss) under theft insurance coverage.

✅ Final Answer:

Gasoline.

The correct answer is:

✅ It is the person to whom the property is leased.

🔍 Explanation:

A lessee is the tenant — the person who:

• Leases (rents) the property from another (the lessor),
• Has the right to use or occupy the property under the terms of a lease agreement,
• Pays rent to the lessor (the owner or manager of the property).

❌ Why the other options are incorrect:

• “It is the person from whom the property is leased.”
  → ❌ This describes the lessor, not the lessee.
• “It is the person to whom the rent is paid.”
  → ❌ Again, this is the lessor.
• “It is the person designated to look after the property…”
  → ❌ This would describe a property manager or caretaker, not a lessee.

✅ Final Answer:

It is the person to whom the property is leased.

✅ Correct Answer: $75,000.00

🔍 Explanation:

This is a proportional interest insurance claim scenario.

Three owners share a $200,000 house with different financial interests:

• A owns $100,000 (50%)
• B owns $60,000 (30%)
• C owns $40,000 (20%)

The home is insured for $150,000 and is totally destroyed by fire, which is a covered peril.

Since there’s no mention of specific insurable interests declared in the policy, the insurance payout is distributed based on each person’s financial interest in the property.

🔢 Step-by-Step Calculation:

1. Total value of building = $200,000
2. Insurance payout = $150,000 (total insurance on the property)

Now calculate A’s share:

A’s proportion=100,000200,000=0.50A’s payout=0.50×150,000=75,000

✅ Final Answer: $75,000.00

The correct answer is:

Detached private structures on the insured premises.

Explanation:

A Homeowners Comprehensive Policy (typically referred to as a “Comprehensive Form” or “All-Risk” policy) provides automatic coverage for certain categories of property, including:

• Coverage B – Detached Private Structures: This includes things like garages, sheds, gazebos, and pool houses located on the same premises as the insured dwelling.

Why the other options are incorrect:

• Personal belongings in a storage warehouse: These are not automatically covered for all perils. Coverage is usually restricted, often to named perils only, and may be limited in amount unless specially endorsed.
• Insured’s tools used in a business: Business property (especially tools used for income) is generally excluded or has very limited coverage under a standard homeowners policy unless a rider or endorsement is added.
• Owned recreational vehicles: These are not automatically covered under the homeowners policy. Some types (like riding lawn mowers or small garden tractors) may be covered while used on the premises, but ATVs, snowmobiles, dirt bikes, etc. generally require separate insurance.

✅ Correct answer: Detached private structures on the insured premises.

The correct answer is:

✅ Costs of investigation fees and defense of claims made against the insured for compensatory damage, even if groundless.

🔍 Explanation:

The Liability Section of a Homeowners Comprehensive Policy provides:

• Coverage for legal liability for bodily injury or property damage unintentionally caused to others.
• Defense costs and investigation fees, even if the claim is groundless, false, or fraudulent.
• This means the insurer will defend the insured in court and cover the costs of legal representation and investigation, whether or not the insured is ultimately found liable.

This is a standard feature of personal liability insurance — it’s designed to protect policyholders from the high cost of legal defense, even in cases where the claim has no merit.

❌ Why the other options are incorrect:

• “Liability of the insured assumed under contract with another individual…”
  → ❌ Most policies exclude contractual liability, unless it’s for certain specified contracts (like leases under specific conditions).
• “Liability of insured to pay a fine under a municipal by-law.”
  → ❌ Fines and penalties are never covered under liability policies.
• “Liability for damage by burglary to a summer cabin your insured rents…”
  → ❌ Damage caused by criminal acts of others (like burglars), even if the insured was negligent in security, would typically not fall under personal liability unless directly caused by the insured’s actions.

✅ Final Answer:

Costs of investigation fees and defense of claims made against the insured for compensatory damage, even if groundless.

The correct answer is:

✅ A condition of this coverage is that replacement must be with materials of similar kind and quality.

Explanation:

Replacement Cost insurance pays to replace damaged property without deduction for depreciation, but it typically requires that the replacement be done with materials of similar kind and quality to the original.

Why the other options are incorrect:

• ❌ “A professional appraisal is required…”
  → Not always. While appraisals may be requested, insurers don’t universally require them before offering replacement cost coverage.
• ❌ “Most insurers do not require an insured to replace…”
  → False. Many policies require actual replacement within a certain time frame to receive replacement cost benefits; otherwise, they pay ACV.
• ❌ “Only commercial properties can be insured for their Replacement Cost.”
  → False. Residential properties and personal property can also be insured on a replacement cost basis.

✅ Correct Answer:

A condition of this coverage is that replacement must be with materials of similar kind and quality.

The correct answer is:

✅ It is theft by forcible entry into or exit from the premises.

🔍 Explanation:

In the insurance industry, “burglary” is specifically defined as:

Theft or attempted theft involving visible signs of forcible entry into or exit from the insured premises.

This definition is narrower than general theft or robbery and is used to determine coverage under burglary-specific endorsements or policies.

Why the other options are incorrect:

• ❌ “It is theft by an employee.”
  → That’s considered employee dishonesty or fidelity loss, not burglary.
• ❌ “It is theft with violence or threat of violence.”
  → That defines robbery, not burglary.
• ❌ “It is illegal entry to insured’s premises by any means.”
  → Too broad. Burglary requires visible forcible entry or exit, not just illegal entry.

✅ Final Answer:

It is theft by forcible entry into or exit from the premises.

The correct answer is:

✅ Show the daughter as the owner and principal driver on the application form.

🔍 Explanation:

In automobile insurance, the person who owns and primarily drives the vehicle must be accurately declared on the application. Since the daughter bought the car, she is both:

• The legal owner of the vehicle
• The principal driver (she will be the main one operating the car)

Therefore, she must be listed as both the registered owner and principal driver to:

• Ensure the insurance is valid
• Prevent potential issues with claims denial due to misrepresentation or “fronting”

❌ Why the other options are incorrect:

• “Show the daughter as an occasional driver on the application form.”
  → ❌ Incorrect. She owns the car and is the main user — not occasional.
• “Suggest the car be registered by Mrs Jones and placed with a different insurer declaring Mrs Jones as the principal driver.”
  → ❌ This is called fronting and is a form of insurance misrepresentation. It is unethical and could void coverage.
• “Show Mr Jones as the principal driver on the application form.”
  → ❌ Same issue — if he is not the primary user, listing him is misrepresentation.

✅ Final Answer:

Show the daughter as the owner and principal driver on the application form.

The correct answer is:

✅ Add the change form “Permission to Carry Paying Passengers”.

🔍 Explanation:

Under the Ontario Automobile Policy (O.A.P. 1), using a personal vehicle to carry paying passengers (even for minimal compensation, like 15 cents per km) may be considered “carrying paying passengers for compensation”, which is excluded unless properly endorsed.

In this case, your insured is:

• Regularly transporting senior citizens
• Receiving compensation (even if it only covers costs)

This qualifies as carrying paying passengers, and to remain compliant and insured, you must:

Add the endorsement “Permission to Carry Paying Passengers.”

This change modifies the exclusion in the standard policy and allows coverage to remain in force while carrying paying passengers.

❌ Why the other options are incorrect:

• “Advise that the standard policy automatically covers the situation and no charge is necessary.”
  → ❌ Incorrect. Standard auto policies exclude carrying paying passengers unless endorsed.
• “Add Passenger Hazard endorsement at no extra premium.”
  → ❌ This term is not standard in Ontario auto insurance and doesn’t apply to private passenger vehicle use.
• “Reclassify the risk as business use and re-rate the policy.”
  → ❌ Business use might apply in some cases, but this activity specifically requires the “paying passengers” permission, not just a use class change.

✅ Final Answer:

Add the change form “Permission to Carry Paying Passengers”.

The incorrect statement is:

❌ “The accident may occur anywhere in Canada and at least one other automobile involved is insured under a motor vehicle liability policy.”

✅ Correct Answer: That statement is INCORRECT.

🔍 Explanation:

Section 6 – Direct Compensation–Property Damage (DCPD) under the O.A.P. 1 (Ontario Automobile Policy) applies only under specific conditions:

1. The accident must occur in Ontario.
2. At least one other automobile must be involved.
3. The other vehicle must be insured by a company licensed in Ontario or one that has filed with FSRA (Financial Services Regulatory Authority of Ontario) to provide DCPD.

❌ Why the chosen answer is incorrect:

“The accident may occur anywhere in Canada…“

• False. DCPD coverage only applies to accidents that occur in Ontario.
• If the accident happens outside Ontario, DCPD does not apply, and collision or other relevant coverage would be required.

✅ The following statements are correct:

• It covers damage to the automobile, certain unattached trailers, their equipment and contents… → ✅ True.
• The policy on the other vehicle must be issued by an Ontario licensed insurer… → ✅ True.
• The insured would be covered, partially under O.A.P. 1 if partially at fault… → ✅ True.

✅ Final Answer:

“The accident may occur anywhere in Canada and at least one other automobile involved is insured under a motor vehicle liability policy.” – This is the INCORRECT statement.

The correct answer is:

✅ Replacement cost coverage applicable to both the building and personal property insured under the policy is basic coverage in all such policies.

🔍 Explanation:

This statement is NOT true, making it the correct choice for this question.

Here’s why:

• Replacement Cost Coverage for buildings is typically included as part of basic coverage under most Homeowners Comprehensive policies.
• However, Replacement Cost Coverage for contents (personal property) is not automatically included. It must usually be added by endorsement (optional coverage).

Therefore, it is incorrect to say that both building and personal property are automatically covered on a replacement cost basis under all such policies.

✅ The other statements are TRUE:

• “Replacement cost coverage for contents must be endorsed on to the policy.”
  ✅ True – This is typically an optional add-on.
• “Payment will be made without deduction for depreciation.”
  ✅ True – That’s the definition of Replacement Cost (vs. Actual Cash Value).
• “Replacement must be made with property of similar quality.”
  ✅ True – To qualify for replacement cost, the insured must replace the property with similar kind and quality.

✅ Final Answer:

Replacement cost coverage applicable to both the building and personal property insured under the policy is basic coverage in all such policies.

The correct answer is:

✅ It covers accidental damage to the insured’s automobile, provided the uninsured owner or driver of the other automobile is identified.

🔍 Explanation:

Uninsured Automobile Coverage, which is automatically included in the O.A.P. 1 (Ontario Automobile Policy), protects the insured when involved in an accident caused by an uninsured or unknown (in some cases) driver.

This coverage provides:

• Bodily injury benefits to the insured and eligible dependents
• Damage to the insured’s automobile, but only if:
  • The uninsured vehicle or driver is identified
  • The insured is not at fault (or only partially at fault)

So, in a collision where the other driver is uninsured and is identified, damage to the insured’s vehicle can be coveredunder this section.

❌ Why the other options are incorrect:

• “It is only available by endorsement to O.A.P. 1 Owner’s Policy.”
  → ❌ Incorrect. This coverage is automatically included, not optional.
• “It only covers bodily injury, but never third party property damage.”
  → ❌ Incorrect. It can cover damage to the insured’s own vehicle, if conditions are met.
• “It covers third parties who sustain bodily injury and the insured has breached a Statutory Condition.”
  → ❌ False. If the insured breaches a Statutory Condition, coverage may be denied. Also, Uninsured Auto Coverage is for the insured and their household, not unrelated third parties.

✅ Final Answer:

It covers accidental damage to the insured’s automobile, provided the uninsured owner or driver of the other automobile is identified.

The correct answer is:

✅ Travel health plan restrictions for sporting injury vary from insurer to insurer.

🔍 Explanation:

Travel health insurance policies often include exclusions or limitations for hazardous activities, such as:

• Hang gliding
• Parachuting
• Scuba diving
• Mountain climbing
• Racing sports

However, the extent of the exclusions varies by insurer. Some insurers:

• Exclude hazardous activities entirely
• Offer optional riders to include coverage for such activities
• Provide coverage only for non-competitive or supervised versions

Why the other options are incorrect:

• ❌ “He is not insured whilst hang gliding, but is insured the rest of the time on the trip”
  → Not universally true. Some policies may exclude the entire claim if a hazardous activity caused an incident—even if it didn’t happen during the activity.
• ❌ “Hazardous activities void the entire policy…”
  → Overly broad and incorrect. Exclusions apply to specific situations, not typically the entire policy, unless misrepresentation occurs.
• ❌ “Whatever travel health insurance he takes, he is covered in all circumstances.”
  → False. All policies have exclusions and limitations.

✅ Correct Answer:

Travel health plan restrictions for sporting injury vary from insurer to insurer.

The correct answer is:

✅ Fire insurance policy.

🔍 Explanation:

In Canada, Statutory Conditions are mandatory provisions that must be included — by law — in all fire insurance policies and any policies that include fire coverage, such as:

• Homeowners policies
• Commercial property policies
• Tenant or condo insurance policies (if fire coverage is included)

These conditions are set out in provincial insurance acts, such as Ontario’s Insurance Act, and govern key responsibilities of both the insurer and the insured, including:

• Misrepresentation
• Termination of insurance
• Requirements after a loss
• Fraud
• Appraisal

❌ Why the other options are incorrect:

• Liability insurance policy
  → ❌ Statutory Conditions do not apply. Liability policies have their own policy conditions but not Statutory Conditions by law.
• Burglary insurance policy
  → ❌ This is a form of property insurance, but unless it includes fire coverage, it is not subject to Statutory Conditions.
• Marine insurance policy
  → ❌ Governed separately under marine law, not provincial statutory fire conditions.

✅ Final Answer:

Fire insurance policy.

C) The homeowners policy must be replaced by a Condominium Unit Owners Policy, which gives certain extra coverages she needs as a unit owner.

Rationale:

When your client moves from a detached home to a condominium, her insurance needs change significantly:

• A Homeowners Policy is designed for standalone dwellings where the owner is responsible for the entire building.
• In a condominium, the Condominium Corporation’s Master Policy usually covers the building’s exterior and common areas.
• The unit owner is responsible for their contents, any improvements and betterments, loss assessment, and personal liability—which are all covered under a Condominium Unit Owners Policy (commonly called a Condo Policy).

Why the other options are incorrect:

• A) Keeping the homeowners policy is not appropriate—it must be replaced.
• B) A Tenant’s Policy is for someone who rents, not owns, a unit.
• D) Special rates may apply, but a homeowners policy cannot be transferred for use in a condo; it does not provide the right kind of coverage.

✅ Correct answer: C

The correct answer is:

✅ within 14 days.

Explanation:

Under the Ontario Automobile Policy (O.A.P. 1 – Owner’s Policy), a newly acquired automobile is automatically covered for the same coverages as an existing insured vehicle, provided that:

• The insurer is notified within 14 days of acquiring the new vehicle.

This automatic coverage applies only if the insured already has a policy in place on another vehicle.

Why the other options are incorrect:

• ❌ “As soon as practicable” – Not specific enough; the OAP 1 clearly states 14 days.
• ❌ 7 days / 21 days – These timeframes are either too short or too long; only 14 days is correct.

✅ Correct Answer:

within 14 days.

The correct answer is:

✅ It may decrease the amount to be paid by the insurer.

🔍 Explanation:

A Co-insurance Clause in a property insurance policy requires the insured to carry a minimum amount of insurance (usually a percentage, such as 80%, 90%, or 100%) relative to the replacement cost or actual value of the property.

If the insured fails to meet this requirement, a penalty is applied at the time of a partial loss. This results in the insurer paying less than the full amount of the loss — meaning:

💡 The insured becomes a co-insurer for the shortfall.

❌ Why the other options are incorrect:

• “It may increase the amount to be paid by the insurer”
  → ❌ No — the clause limits, not increases, what the insurer pays if the requirement is not met.
• “It may affect the third party in a liability claim”
  → ❌ Co-insurance does not apply to liability policies; it’s relevant to property insurance only.
• “It may affect the insured’s personal liability coverages”
  → ❌ Again, co-insurance is not related to liability coverages like personal liability or legal defense.

✅ Final Answer:

It may decrease the amount to be paid by the insurer.

The correct answer is:

✅ Comprehensive.

🔍 Explanation:

In this scenario:

• Your insured’s vehicle is damaged by another vehicle,
• But the other driver is not identifiable (e.g., hit-and-run in a parking lot).

Because the at-fault party is unknown, this disqualifies the claim from being processed under Direct Compensation – Property Damage (DCPD), which requires that the at-fault driver be identifiable and insured in Ontario.

Instead, the loss is treated like a vandalism-type event or “hit-and-run by an unknown party”, and is therefore covered under:

✅ Comprehensive coverage — which applies to non-collision losses, including:

• Vandalism
• Theft
• Fire
• Glass breakage
• Hit-and-run where the third party cannot be identified

❌ Why the other options are incorrect:

• OPCF-44R Family Protection
  → ❌ This endorsement applies to bodily injury claims where the at-fault motorist is underinsured or uninsured. It does not apply to property damage.
• There would be no coverage
  → ❌ Incorrect — the Comprehensive section provides coverage.
• Direct Compensation – Property Damage
  → ❌ Requires that the at-fault vehicle be identified and insured in Ontario. Not applicable here.

✅ Final Answer:

Comprehensive.

The correct answer is:

• By providing a policy or certificate of coverage to the member of the public for whom he/she acts within 21 days after the placing of the insurance.

Explanation:

According to the Regulations under the RIB Act (Registered Insurance Brokers Act) in Ontario:

A broker must provide evidence of insurance (either the policy itself or a certificate of insurance) to the client within 21 days after placing the insurance.

This ensures that the client receives timely and formal confirmation that the requested coverage is in place.

Why the other options are incorrect:

• 30 days is too long and not compliant with the regulations.
• A receipt is not sufficient evidence of coverage.
• 5 days after receiving from the insurer doesn’t ensure timely communication—brokers must act within a set time from placing the insurance, not from when they receive documents.

✅ Correct answer: Last option — within 21 days after placing the insurance.

The correct answer — the NOT correct procedure — is:

✅ The individual changing employment must report the change to RIBO when next renewing the registration.

🔍 Explanation:

According to RIBO By-law No. 20, any change in employment must be reported to RIBO promptly to maintain accurate and up-to-date registration records.

✅ The correct procedures are:

• The individual broker must notify RIBO within 10 days of the employment change.
• The brokerage the broker is leaving must notify RIBO that the individual is no longer employed there.
• The brokerage the broker is joining must also notify RIBO of the new employment.

❌ It is NOT acceptable to wait until the next registration renewal to report the change — that would be a violation of RIBO requirements.

✅ Final Answer:

The individual changing employment must report the change to RIBO when next renewing the registration.

The correct answer is:

✅ You will add “OPCF-32 Use of Recreational Vehicles by Unlicensed Operators” which provides coverage for unlicensed operators when operating a snowmobile off a public highway.

🔍 Explanation:

The O.A.P. 1 (Ontario Automobile Policy) does not automatically provide coverage for unlicensed operators, including minors like a 14-year-old. However, snowmobiles and other off-road vehicles are often used off public highways, where licensing laws may differ.

To ensure proper coverage for unlicensed operation of a recreational vehicle like a snowmobile, you must add:

OPCF 32 — Use of Recreational Vehicles by Unlicensed Operators

This endorsement:

• Extends coverage to unlicensed operators, such as minors
• Applies only when operated off public highways
• Is commonly used when young individuals will be using snowmobiles, ATVs, dirt bikes, etc. on private property or trails

❌ Why the other options are incorrect:

• “The son is fully covered as long as he has taken an approved operator’s course.”
  → ❌ Not true. Completion of a course may be legally required, but insurance coverage still requires the OPCF 32 endorsement for unlicensed drivers.
• “You will add OPCF 44R – Family Protection Coverage…”
  → ❌ OPCF 44R protects against underinsured third parties — it does not address unlicensed operators or change driver eligibility.
• “There is no coverage while the son is driving the snowmobile as he is too young to have a driving license.”
  → ❌ True by default, but this ignores the solution — adding OPCF 32 can legally extend coverage.

✅ Final Answer:

You will add “OPCF-32 Use of Recreational Vehicles by Unlicensed Operators” which provides coverage for unlicensed operators when operating a snowmobile off a public highway.

The correct answer is:
✅ Liability coverage includes Legal Liability for unintentional damage by fire, explosion, water and smoke damage to principal residence premises.

🔍 Explanation:

Let’s examine each option:

✅ Correct Statement:

• “Liability coverage includes Legal Liability for unintentional damage by fire, explosion, water and smoke damage to principal residence premises.”
  • This is true.
  • The Tenants Comprehensive Policy includes Legal Liability coverage for damage caused unintentionally by the tenant to the rented premises, including fire, explosion, water damage, and smoke damage.
  • This is a key reason landlords require tenants to have liability insurance.

❌ Incorrect Statements:

• “Watercraft not otherwise described or limited are covered up to $5,000.”
  • Incorrect. Watercraft coverage is limited under tenant policies and generally requires specific scheduling or endorsement, especially for higher-value or motorized watercraft.
• “Jewellery and furs are covered only when scheduled.”
  • Incorrect. These items are covered under Personal Property but subject to specific sub-limits unless scheduled. Scheduling increases limits, but it’s not required to get basic coverage.
• “Tenant’s improvements are not insured.”
  • Incorrect. Tenant’s improvements (also known as betterments) are covered, often up to a specified limit (e.g., 10% of personal property).

✅ Final Answer:

Liability coverage includes Legal Liability for unintentional damage by fire, explosion, water and smoke damage to principal residence premises.

The correct answer is:

✅ Contractor’s Protective Liability Insurance.

🔍 Explanation:

Contractor’s Protective Liability Insurance is designed to protect individuals (like homeowners or general contractors) who hire subcontractors to perform work on a project — such as building a new home. It provides coverage for:

• Bodily injury or property damage liability
• Arising from the acts or omissions of subcontractors
• That the insured could be held liable for, even if they are not directly performing the work.

❌ Why the other options are incorrect:

• Blanket Contractual Liability Insurance
  → ❌ Covers liability assumed under certain contracts but does not specifically protect against subcontractors’ actions during construction.
• Employers Liability Insurance
  → ❌ Designed to cover employers against claims from employees (e.g., work-related injuries) — not applicable here if no direct employees are involved.
• Personal Injury Insurance
  → ❌ Generally refers to coverage for non-physical injuries (libel, slander, etc.) under liability insurance — not related to construction work or subcontractors.

✅ Final Answer:

Contractor’s Protective Liability Insurance.

The correct answer is:

Persons who sustain permanent serious injury defined in the Statutory Accident Benefits Schedule are entitled to sue for damages.

✅ Explanation:

Under Section 267.5 of the Ontario Insurance Act (and reflected in case law):

• An injured person (including drivers, passengers, or pedestrians) cannot sue for non-pecuniary damages like pain and suffering unless they have suffered a permanent serious injury—which includes:
  • Permanent serious disfigurement, or
  • Permanent serious impairment of an important physical, mental, or psychological function. (crblaw.ca)

This is commonly known as the “threshold test” and is a prerequisite to launching a tort claim seeking damages beyond Accident Benefits under the Statutory Accident Benefits Schedule (SABS).

Why the other statements are incorrect:

• “Only victims collecting collateral benefits are entitled to sue.”
  → False. The key criterion is the severity of injury—not whether they collect other benefits.
• “No claimants are eligible to sue for loss of future income.”
  → False. If the injured person meets the threshold, they can sue for future income loss (and other damages), beyond Accident Benefits.
• “Pain and suffering claimants may sue regardless of the severity of their injuries.”
  → False. They must meet the threshold for permanent serious injury to access pain and suffering damages.

✅ Summary:

Only individuals who suffer permanent serious injuries, as defined by regulation, are legally permitted to pursue additional compensation through the courts.

The correct answer is:

✅ The ownership of the building.

🔍 Explanation:

When determining the Actual Cash Value (ACV) of a building, insurers typically consider:

1. Replacement Cost – The cost to rebuild using materials of like kind and quality.
2. Depreciation – Based on:
   • Age
   • Condition of the building
   • Normal life expectancy
3. Condition immediately before the loss – To determine accurate depreciation.

However:

• Ownership (i.e., who owns the building) is not a factor in determining its value. The value is based on the physical characteristics and condition of the property, not the identity of the owner.

✅ Final Answer:

The ownership of the building.

The provision NOT outlined in the RIBO Code of Conduct (Ontario Regulation 991, Section 14) is:

• To maintain a Trust Account for all trust money received.

✅ Explanation:

• Maintaining a trust account for client funds is a requirement under other legal frameworks (such as the RIBO regulations on handling client money), but it is not included in the Section 14 Code of Conduct itself.
• The Code does require that members:
  • Be competent in performing services
  • Be candid and honest when advising clients
  • Not charge or accept any fee unless fully disclosed in advance

📝 Final Answer:

To maintain a Trust Account for all trust money received is not a provision included in Section 14 of the RIBO Code of Conduct.

The correct answer is:
✅ O.A.P. 6 Non-Owned Automobile Form

🔍 Explanation:

Let’s break down the options:

✅ O.A.P. 6 Non-Owned Automobile Policy:

• Specifically designed to provide Third Party Liability protection to businesses (like employers) when employees use their own vehicles (non-owned by the company) for work-related purposes.
• Example: A salesperson driving their personal car to meet a client.

❌ Incorrect Options:

• O.A.P. 1 Owner’s Policy:
  • Covers owned vehicles. Not suitable for non-owned vehicles used by employees.
• O.A.P. 2 Driver’s Form:
  • Covers an individual driver, not an employer or business, and is for when the individual does not own a vehicle.
• Commercial General Liability (CGL) Policy:
  • Covers liability for bodily injury or property damage arising out of business operations, but does not include automobile liability—that must be insured under auto policies like O.A.P. 6.

✅ Final Answer:

O.A.P. 6 Non-Owned Automobile Form

The correct answer is:
✅ $1,700.00

🔍 Breakdown of the Claim:

✅ Explanation:

Under a Condominium Unit Owners Comprehensive Policy, the following are typically covered:

• Improvements and betterments (e.g., cabinets, wallpaper).
• Appliances (e.g., stove) owned by the unit owner.
• Smoke and fire damage are insured perils.
• The deductible applies to the total amount of the claim, not per item.

❌ Why the other options are incorrect:

• “$750 for the stove only, less $300 deductible”
  → Incorrect: Stove is covered, but so are cabinets and wallpaper.
• “$750 for the stove and $250 for the wallpaper, less $300 deductible”
  → Incorrect: Omits cabinet damage.
• “$2,000.00”
  → Incorrect: Fails to apply the $300 deductible.

✅ Final Answer:

$1,700.00

The correct answer is:

✅ The broker submitting the risk does not have an office in the municipality where the risk is situated.

Explanation:

• Insurers commonly reject risks because:
  • The risk is too hazardous (high chance of loss).
  • They do not write that class of business.
  • The risk is sub-standard and the applicant refuses to improve it.
• However, the location of the broker’s office is generally not a valid reason for an insurer to reject a risk. Brokers can submit risks from anywhere, and insurers decide based on the risk characteristics, not broker location.

Final Answer:

The broker submitting the risk does not have an office in the municipality where the risk is situated.

The correct answer is:

D) Not covered.

Explanation:

Under the basic “Seasonal Dwelling Fire & Extended Coverage” form, theft or burglary is typically not covered unless specifically added by endorsement.

• These basic policies are designed to cover fire and named perils only, such as windstorm, hail, explosion, riot, etc.
• Theft, burglary, and vandalism are not included by default, especially for seasonal or unoccupied dwellings, due to the higher risk of undetected losses.
• Even in more comprehensive policies, coverage for theft may require visible signs of forcible entry, and some insurers exclude theft entirely from seasonal or secondary residences without special coverage.

Summary of Options:

• Covered subject to policy deductible → ❌ Incorrect (theft is not a covered peril under basic form).
• Covered only if forcible signs of entry are visible → ❌ Only applies if theft is already covered, which it is not under the basic form.
• Covered up to $500 only for building damage → ❌ Incorrect — the question is about contents, and no such standard limit exists under the basic form.
• Not covered → ✅ Correct, because theft is not covered under the basic Seasonal Dwelling Fire & Extended Coverage policy.

✅ Correct Answer: D) Not covered.

The correct answer is:

✅ From the Insurance Company.

🔍 Explanation:

A broker’s authority to bind insurance coverage comes from the insurance company they are contracted or authorized to represent.

• This authority is usually granted through a brokerage agreement or contract of appointment between the brokerage and the insurer.
• The agreement outlines what kinds of policies the broker can bind, the limits of binding authority, and the procedures to follow.

❌ Why the other options are incorrect:

• From the Insurance Act
  → ❌ The Insurance Act governs insurance practices and laws but does not grant binding authority to individual brokers.
• From the Registered Insurance Brokers of Ontario (RIBO)
  → ❌ RIBO licenses and regulates brokers in Ontario but does not authorize binding coverage.
• From the Financial Services Regulatory Authority of Ontario (FSRA)
  → ❌ FSRA regulates insurance companies in Ontario, not the broker’s binding authority.

✅ Final Answer:

From the Insurance Company.

The correct answer is:

✅ Yes, coverage under the Voluntary Property Damage section would apply.

🔍 Explanation:

Under a Tenants Comprehensive Policy, Voluntary Property Damage (typically Coverage G) provides coverage for unintentional direct damage caused by the insured to property of others, even without a lawsuit or legal liability.

In this scenario:

• The insured accidentally burned a small hole in a friend’s rug.
• There is no intent, and the damage is to property not owned by the insured.

➡️ Therefore, this kind of accidental damage to others’ property is exactly what Voluntary Property Damage is designed to cover.

Also:

• This coverage usually does not require the other person to sue.
• No deductible typically applies under this section (unlike for own property claims).

❌ Why the other options are incorrect:

• “No, the friend must claim under his/her own policy…”
  → ❌ Incorrect. The insured’s liability policy can respond under Voluntary Property Damage.
• “No, not unless the friend sues the insured…”
  → ❌ Wrong. Voluntary coverage is designed to avoid legal action and provides goodwill payments.
• “Yes, the Voluntary Property Damage section covers the damage subject to the policy deductible.”
  → ❌ Incorrect. No deductible usually applies under Voluntary Property Damage coverage.

✅ Final Answer:

Yes, coverage under the Voluntary Property Damage section would apply.

The correct answer is:

✅ The insurer would pay the loss but would be unable to subrogate.

🔍 Explanation:

When an insured signs a waiver of liability (also known as a hold harmless agreement) in favor of the landlord, they are contractually giving up the right to sue the landlord for losses — even if the landlord is later found liable (e.g., for causing the fire).

Since the insurer’s right of subrogation is based on the insured’s legal right to recover damages, this waiver removes that right, and therefore the insurer:

• Still pays the loss to the insured (since coverage is not voided),
• But cannot subrogate against the landlord, because the insured waived recovery rights in the lease agreement before the loss occurred.

❌ Why the other options are incorrect:

• “The insured has violated his/her policy by waiving the insurer’s right of recovery.”
  → ❌ Not necessarily. Most policies allow such waivers as long as they are signed before a loss occurs. This is common in residential leases and does not breach the policy.
• “The insurer would pay only 50% of the loss.”
  → ❌ There’s no basis for partial payment in this scenario.
• “The insurer would pay the loss and subrogate since the insured had not waived its rights.”
  → ❌ Incorrect. The insured did waive their rights by signing the waiver, which blocks the insurer’s ability to subrogate.

✅ Final Answer:

The insurer would pay the loss but would be unable to subrogate.

The correct answer is:

✅ By an O.A.P. 1 Owner’s Policy to cover Third Party Liability and Accident Benefits, and an Inland Marine Floater for direct damage to the machine.

🔍 Explanation:

Insuring a snowmobile properly involves addressing two key types of exposure:

1. Third Party Liability & Accident Benefits:
   These are mandatory coverages for motorized vehicles like snowmobiles operated off private property and on public land/trails in Ontario.
   ✅ This is provided by the O.A.P. 1 (Ontario Automobile Policy – Owner’s Form).
2. Physical Damage (loss, theft, etc.):
   This is not automatically covered under the O.A.P. 1 and should be insured under a separate policy or rider, often an Inland Marine Floater (sometimes called a Snowmobile Floater) to insure the snowmobile against direct physical loss or damage.

❌ Why the other options are incorrect:

• “By an endorsement to a Homeowners or Tenants Policy…”
  → ❌ Homeowners or tenants insurance does not cover third-party liability for motorized vehicles like snowmobiles when used off the premises.
• “By an O.A.P. 1 Owner’s Policy to cover all the exposures…”
  → ❌ O.A.P. 1 does not automatically cover direct physical damage to the snowmobile.
• “By a Snowmobile Floater to cover all the exposures…”
  → ❌ A snowmobile floater may cover physical damage but not liability or accident benefits, which are statutorily required under the O.A.P. 1.

✅ Final Answer:

By an O.A.P. 1 Owner’s Policy to cover Third Party Liability and Accident Benefits, and an Inland Marine Floater for direct damage to the machine.

The correct answer is:
✅ Increase the coverage amount on Improvements and Betterments to include the cost of these renovations.

🔍 Explanation:

Under a Condominium Unit Owners Comprehensive Policy, improvements and betterments—such as a new kitchen—are the responsibility of the unit owner, not the condominium corporation.

• The Condo Corporation’s Master Policy typically covers only the original standard unit as built by the developer.
• Any upgrades or renovations (e.g., new kitchen cabinets, countertops, flooring, appliances built into cabinetry) are considered improvements and betterments, and the unit owner must insure these under their own policy.

❌ Why the other options are incorrect:

• “Find out the cost of the kitchen renovations and increase the limit of insurance on Personal Property.”
  → Improvements to the structure (like cabinets and counters) are not personal property.
• “Nothing special is needed. The improvements will be considered part of the building and are therefore covered by the Condominium Corporation’s insurance.”
  → False. The condo corporation generally does not cover owner improvements.
• “The renovations are covered automatically as part of the Unit under Coverage A.1 and therefore no action will be necessary.”
  → Not automatically. The policyholder must declare and insure the upgraded value under the Improvements & Betterments section.

✅ Final Answer:

Increase the coverage amount on Improvements and Betterments to include the cost of these renovations.

The correct answer is:

✅ A loss, not otherwise excluded, to an insured outboard motor while being used by the insured in Florida.

🔍 Explanation:

The “Watercraft, Outboard Motor, Trailer, and Miscellaneous Equipment” rider attached to a Homeowners policy extends coverage for physical loss or damage to specifically scheduled watercraft and related equipment. This endorsement typically includes:

• Broader coverage, sometimes on an “all risks” basis (subject to exclusions)
• Geographic flexibility, meaning it can cover losses outside Canada, such as in Florida, unless otherwise excluded
• Coverage while the vessel is in use, transport, or storage — as long as not used for commercial purposes

In the scenario, the outboard motor is:

• Scheduled
• Used by the insured
• In Florida
• With the loss not otherwise excluded

✅ Therefore, this situation is covered under the rider.

❌ Why the other options are incorrect:

• “A scheduled boat and motor vessel used to carry cottagers from the marina to their island property for compensation.”
  → ❌ Excluded. Commercial use (carrying for compensation) is not covered under standard personal-use watercraft endorsements.
• “Damage to the hull of the watercraft caused by ice resulting from failure to drain the compartments…”
  → ❌ Excluded. This is considered neglect or improper winterization, which is typically an excluded peril.
• “Damage caused by beavers using the watercraft as a winter home…”
  → ❌ Excluded. Damage from vermin or animals (like beavers or raccoons) is usually excluded under most personal property and watercraft policies.

✅ Final Answer:

A loss, not otherwise excluded, to an insured outboard motor while being used by the insured in Florida.

The correct answer is:

✅ The one who lends the money and the Insurer of the property.

🔍 Explanation:

The Standard Mortgage Clause (also called the Mortgagee Clause) is a provision in a property insurance policy that protects the interests of the lender (mortgagee) — typically a bank or financial institution — who has loaned money to the property owner.

This clause:

• Ensures the mortgagee (lender) is paid even if the claim by the insured is denied, provided the mortgagee complies with the terms of the clause.
• Treats the mortgagee as a separate insured party with its own rights under the policy.
• Helps the insurer enforce its rights by laying out responsibilities for both the mortgagee and the insurer in loss settlement.

Why the other options are incorrect:

• ❌ “The one who borrows the money” – That’s the mortgagor (property owner/insured), not who is protected by the clause.
• ❌ “The Insured” – While the insured is covered by the policy, the Standard Mortgage Clause specifically protects the mortgagee (lender).
• ❌ “The Insurer of the property” – The insurer issues the policy; it is not protected by this clause.

✅ Final Answer:

The one who lends the money and the Insurer of the property.

The correct answer is:

✅ A) ten percent of the amount of insurance on the dwelling building

🔍 Explanation:

Under the Homeowners Comprehensive Policy, coverage for Detached Private Structures (like a garage, shed, or gazebo) is typically included automatically — unless specifically excluded or limited.

The standard limit is usually:

10% of the amount of insurance on the dwelling building (Coverage A)

This 10% limit applies in total, regardless of how many structures there are. It is not divided by number of structures, and no proportional calculations are required unless additional coverage is specifically endorsed.

So if the dwelling is insured for $400,000, the detached private structures are automatically covered for up to $40,000 total, unless otherwise endorsed or scheduled separately.

❌ Why the other options are incorrect:

• B) The proportion of ten percent…
  → ❌ Overly complicated and not how standard coverage is applied.
• C) The actual cash value of the destroyed structure…
  → ❌ ACV may be used to settle the claim, but the limit of coverage is still determined as 10% of dwelling insurance, not the ACV of the structure alone.
• D) ten percent…divided by the number of structures
  → ❌ Incorrect. The 10% is a total limit, not split per structure by default.

✅ Final Answer:

A) ten percent of the amount of insurance on the dwelling building

The correct answer is:

✅ It protects the insurer from having to pay for a total loss when only part of a pair or set is lost or damaged.

🔍 Explanation:

The “Pair and Set” clause in a Property Insurance policy is designed to prevent the insurer from having to pay for the entire value of a pair or set when only one part is damaged or lost.

Instead, the insurer pays:

• The difference in value of the remaining item(s),
• Or the actual loss or damage to the affected item — not the full set value.

📌 Example:

If you have a pair of antique earrings worth $2,000 and one is lost, the insurer will not pay $2,000. Instead, it will cover the value of the lost earring only, or the depreciated value of the remaining one.

❌ Why the other options are incorrect:

• “It obliges the insurer to pay a total loss…”
  → False. The clause does the opposite — it limits the payout.
• “It limits the liability to 25%…”
  → Incorrect. There is no standard fixed percentage; it’s based on valuation, not a preset limit.
• “It warrants that earrings of precious stones…”
  → Irrelevant. This refers to a jewelry setting condition, not the Pair and Set clause.

✅ Final Answer:

It protects the insurer from having to pay for a total loss when only part of a pair or set is lost or damaged.

The correct answer is:

An insured peril occurring.

Explanation:

Business Interruption Insurance (also called Business Income Insurance) provides coverage for loss of income when a business is unable to operate due to direct physical loss or damage caused by an insured peril (such as fire, windstorm, etc.) under the property policy.

What it typically covers:

• Loss of profits
• Ongoing expenses (e.g., rent, utilities, payroll)
• Sometimes includes extra expenses incurred to reduce the impact of the interruption

Why the other options are incorrect:

• Employees going on strike: This is not an insured peril and is excluded under Business Interruption Insurance.
• Landlord declaring bankruptcy: Unless it leads to a direct insured loss (like fire caused by neglect), bankruptcy itself is not a covered peril.
• Death or disability of key personnel: This is covered by Key Person Insurance, not Business Interruption Insurance.

✅ Correct answer: An insured peril occurring.

The correct answer is:

✅ It is the replacement cost at the time of loss less depreciation.

Explanation:

Actual Cash Value (ACV) is a common method of valuing insured property at the time of loss. It is defined as:

Replacement Cost (what it would cost to replace the item today)
− Depreciation (based on age, condition, and useful life)

Why the other options are incorrect:

• ❌ “The cost to repair or replace the damaged property” – That describes Replacement Cost, not ACV.
• ❌ “The current market value” – Market value is what an item could sell for, which is not the same as ACVand is not used in standard property insurance.
• ❌ “The original cost less depreciation” – This ignores current replacement cost, which is necessary in ACV calculations.

✅ Correct Answer:

It is the replacement cost at the time of loss less depreciation.

The correct answer is:

✅ It specifies the amount in excess of which an insurer will pay a loss

Explanation:

A deductible in an insurance policy is the initial amount of a loss that the insured must cover out of pocket before the insurer will begin to pay. It represents the threshold (in dollars) above which the insurer will begin to compensate for a covered loss.

• ❌ “It does not apply if the policy covers only fire and extended coverage perils” — Incorrect. Most fire and extended coverage policies still have deductibles.
• ❌ “It applies only to the contents loss if both building and contents are insured on the policy” — Incorrect. Deductibles typically apply separately to building and contents, depending on the structure of the policy.
• ❌ “It applies separately to each item that is lost or damaged” — Incorrect. Deductibles usually apply per occurrence, not per item.

Thus, the most accurate description of a deductible is:

It specifies the amount in excess of which an insurer will pay a loss.

The correct answer is:

✅ It states that the subject matter is valued at and insured for a stated amount, which will be paid in the event of a total loss.

🔍 Explanation:

A valued policy is one where the insurer and insured agree in advance on the value of the insured property, and this agreed amount is:

• Paid in full in the event of a total loss, regardless of the actual market or replacement value at the time of loss.
• This differs from indemnity policies, where the payout is based on the actual cash value or replacement cost at the time of loss.

❌ Why the other options are incorrect:

• Replacement irrespective of the sum insured
  → ❌ This describes replacement cost coverage, not a valued policy.
• Cannot be altered except for inflation adjustments
  → ❌ Policy alteration rules do not define a valued policy.
• Pays actual cash value regardless of cause
  → ❌ That describes actual cash value policies, not valued policies.

✅ Final Answer:

It states that the subject matter is valued at and insured for a stated amount, which will be paid in the event of a total loss.

The correct answer — the INCORRECT statement — is:

✅ Your insured will not be entitled to sue the other driver for his/her injuries.

🔍 Explanation:

This statement is incorrect because your insured can sue the other driver.

Under Ontario’s Insurance Act and Statutory Accident Benefits Schedule (SABS):

• A person may sue for pain and suffering if they suffer a permanent serious disfigurement or permanent serious impairment of an important physical, mental, or psychological function.
• Since your insured has a permanent serious disfigurement, they meet the threshold and are entitled to sue the at-fault driver for non-pecuniary damages (e.g., pain and suffering), economic loss, and other damages not covered by Accident Benefits.

✅ Review of the Other (Correct) Statements:

• “The other driver will be entitled to sue your insured for economic loss.”
  ✔️ True. Even without serious injuries, a driver may sue for economic loss beyond what Accident Benefits provide, such as income loss over the policy limits (e.g., over $400/week).
• “Each driver will collect 50% of the damage to his/her own vehicle under his/her own policy.”
  ✔️ True. Under Direct Compensation – Property Damage (DCPD) with no collision coverage, partial payment applies based on fault. Since both are equally at fault, each receives 50% of the vehicle damage, even if they don’t have optional collision.
• “Each driver will be paid medical expenses and loss of income benefits under his/her own policy.”
  ✔️ True. These are no-fault Accident Benefits and are paid regardless of who caused the accident.

❌ INCORRECT Statement:

“Your insured will not be entitled to sue the other driver for his/her injuries.”
→ False, because your insured has a permanent serious disfigurement and does meet the threshold to sue.

✅ Final Answer:

Your insured will not be entitled to sue the other driver for his/her injuries.

The correct answer is:

✅ The insurer can void the contract at its option.

Explanation:

Under insurance law, if the insured makes a misrepresentation at the time of application — particularly one that is material to the risk — the insurer has the right to void the contract ab initio (from the beginning). This means the contract is treated as though it never existed.

• A material misrepresentation is one that would have influenced the insurer’s decision to accept the risk or determine the premium and conditions.

This right is granted under provincial insurance statutes such as the Ontario Insurance Act and is also a general principle of contract law in Canada.

Why the other options are incorrect:

• ❌ “Cancel the policy and retain the full premium as a penalty” – Insurers must generally return the unearned premium unless there was fraud or the policy is void ab initio.
• ❌ “Refuse to renew the policy” – While that could happen, it’s not the primary or immediate recourse for a misrepresentation at the time of application.
• ❌ “Cannot do anything…” – False. A material misrepresentation gives the insurer legal grounds to act.

✅ Correct Answer:

The insurer can void the contract at its option.

The correct answer is:

✅ Business interruption insurance.

Explanation:

Business Interruption Insurance is specifically designed to:

• Indemnify a business for loss of income or profits
• Cover ongoing expenses (like rent, payroll, utilities)
• Apply when business operations are disrupted due to damage caused by an insured peril, such as fire, affecting:
  • Building
  • Stock
  • Equipment

This type of coverage typically works in conjunction with property insurance, which covers the physical damage, while business interruption covers the financial loss due to the downtime.

Why the other options are incorrect:

• ❌ Accident and Sickness Insurance – Covers individuals, not business income.
• ❌ Property Insurance – Covers physical assets, not income loss.
• ❌ Liability Insurance – Covers legal liability for injury or damage to others, not business income.

✅ Correct Answer:

Business interruption insurance.

The correct answer is:

✅ Under RIBO regulations, I am prohibited from paying a finder’s fee to a person who is not licensed or registered as a general insurance intermediary or who is not listed under Ontario Regulation 991, Section 15(12).

🔍 Explanation:

According to RIBO (Registered Insurance Brokers of Ontario) regulations, particularly Ontario Regulation 991, Section 15(12), a broker may only pay a referral or finder’s fee to individuals who:

• Are licensed or registered as general insurance intermediaries, or
• Belong to a specific group of professionals permitted by the regulation (e.g., mortgage brokers, real estate agents, financial planners — depending on the context and regulatory updates).

An automobile dealer does not typically fall under the permitted group unless licensed — and a spouse’s insurance premium cannot be reduced as a form of indirect compensation.

❌ Why the other options are incorrect:

• “Certainly, I can reduce the premium up to the amount of the commission.”
  → ❌ This is an improper inducement and not allowed under RIBO rules.
• “I can pay you a referral fee equal to the first year’s premium.”
  → ❌ Referral fees to unlicensed persons are not permitted.
• “I cannot pay you anything directly, but I can give your spouse a free home security system instead.”
  → ❌ This is also an inducement and still violates RIBO’s rules.

✅ Final Answer:

Under RIBO regulations, I am prohibited from paying a finder’s fee to a person who is not licensed or registered as a general insurance intermediary or who is not listed under Ontario Regulation 991, Section 15(12).

The correct answer is:

✅ Any covered assessment made by the Condominium Corporation up to $10,000 or the limit specified in the Unit Owner’s policy declarations.

🔍 Explanation:

Coverage A.2 – Loss Assessment under a Condominium Unit Owners Comprehensive Policy provides protection for the unit owner when:

• The Condominium Corporation’s master policy does not fully cover a loss, and
• The unit owner is assessed a share of the shortfall (e.g., due to underinsurance or deductibles).

This coverage typically responds to:

• Damage to common property that is insured but undercovered
• A deductible amount under the master policy that is passed on to unit owners
• Legal liability assessments against all unit owners

🧾 Typical Policy Wordings in Ontario:

• Most standard policies cap this loss assessment coverage at $10,000, unless increased by endorsement.
• The assessment must be the result of a peril insured against in the unit owner’s policy (e.g., fire, windstorm).

❌ Why the Other Options Are Incorrect:

• “Up to the limit specified on Unit Improvements and Betterments”
  → ❌ That applies to Coverage A.1, not A.2.
• “Contribution to cover the deductible”
  → ❌ Partially true, but only if it is a covered peril and within limit—so it’s not a complete description.
• “Assessment not exceeding $25,000”
  → ❌ Incorrect, as the standard policy default is $10,000, unless specifically endorsed otherwise.

✅ Final Answer:

Any covered assessment made by the Condominium Corporation up to $10,000 or the limit specified in the Unit Owner’s policy declarations.

To calculate how much the insurer would pay under a fire policy with an 80% co-insurance clause, we use the co-insurance formula:

Settlement=(Amount of Insurance CarriedAmount of Insurance Required)×Loss

Given:

• Building value = $120,000
• Insurance carried = $60,000
• Co-insurance requirement = 80%
• Loss amount = $104,000

Step 1: Calculate the required amount of insurance:

Required Insurance=80%×120,000=96,000

Step 2: Apply the co-insurance formula:

Settlement=(60,000/96,000)×104,000=0.625×104,000=65,000

✅ Correct Answer: $65,000.00

The correct answer is:

✅ Income Replacement Benefits for eligible claimants after the first week of disability.

Explanation:

Under Section 4 – Accident Benefits of the O.A.P. 1 (Ontario Automobile Policy):

• Income Replacement Benefits (IRBs) are provided to eligible claimants who are unable to work due to injuriesfrom a motor vehicle accident.
• These benefits begin after the first 7 days (i.e., starting on the 8th day of disability).
• The standard benefit pays 70% of gross income, up to a maximum of $400 per week, unless optional increases are purchased.

Why the other options are incorrect:

• ❌ “In lieu of Worker’s Compensation Benefits” – False. IRBs do not replace Worker’s Compensation. If a claimant qualifies for WSIB benefits, they are typically deducted from IRBs.
• ❌ “Provided the claimant is employed at the time of applying for insurance” – Incorrect. Employment at the time of the accident, not policy application, is what matters.
• ❌ “After the first 10 days of disability” – Incorrect. The waiting period is 7 days, not 10.

✅ Correct Answer:

Income Replacement Benefits for eligible claimants after the first week of disability.

The correct answer is:

✅ It covers only loss caused by mechanical breakdown of the freezer or accidental outside power interruption.

🔍 Explanation:

Freezer Foods Coverage (often added by endorsement to a homeowners or tenants policy) provides protection for spoilage of frozen foods due to specific causes. The standard covered perils are:

• Mechanical breakdown of the freezer unit, and
• Accidental interruption of power from an off-premises source (e.g., a hydro outage)

This coverage is limited and specific, and not part of the main “All Risks” dwelling or contents coverage unless added.

Why the other options are incorrect:

• ❌ “It is provided on an ‘All Risks’ basis.”
  → Incorrect. Freezer Foods Coverage is named perils only, not “all risks.”
• ❌ “It covers actual cash value at current market prices up to $5,000 loss deductible.”
  → Incorrect and misleading. Most policies cover the cost of replacement, but with a much smaller deductible(usually $50–$100), and the dollar limit varies depending on the insurer or endorsement.
• ❌ “It excludes loss due to interruption of Hydro service.”
  → False. Power interruption (accidental and external) is specifically one of the covered perils.

✅ Final Answer:

It covers only loss caused by mechanical breakdown of the freezer or accidental outside power interruption.

The correct answer is:
✅ Provide an application for automobile insurance to be completed and, if requested, submit it to an insurer.

🔍 Explanation:

Under the Compulsory Automobile Insurance Act (Ontario), every driver is required to carry valid automobile insurance. To support this legal requirement:

• Brokers and agents are obligated to provide reasonable assistance in helping an individual apply for automobile insurance.
• Even if you believe the applicant may not be acceptable to your insurers (e.g., due to poor driving record), you must still provide an application and, if requested, submit it to one of your insurers or to the Facility Association(which handles high-risk drivers).

❌ Why the other options are incorrect:

• “Bind coverage with one of your companies…”
  → You are not required to bind coverage if the risk is not acceptable to your insurer.
• “Do nothing. You can advise the applicant you do not wish to do business with him/her.”
  → This violates your obligations under the Act.
• “Collect the premium in full and then submit an application…”
  → Premium is not collected until an application is approved and a policy is bound.

✅ Final Answer:

Provide an application for automobile insurance to be completed and, if requested, submit it to an insurer.

The correct answer is:

✅ Yes, they are insurable if specified in a property policy.

Explanation:

Increased costs due to laws regulating zoning, demolition, repair, or construction (often called ordinance or law coverage) are not automatically covered under standard property insurance policies.

• However, they can be insured if an endorsement or specific coverage is included in the policy.
• This coverage helps pay the additional expenses required to comply with current building codes or laws after a covered loss.

Why the other options are incorrect:

• ❌ “No, they are considered uninsurable.”
  → False. They can be insured with proper endorsements.
• ❌ “They are partly covered under the 10% extension clause…”
  → False. The 10% extension typically applies to things like debris removal or property in transit, not ordinance or law coverage.
• ❌ “They are only insurable under an ‘All Risks’ property policy.”
  → False. Ordinance or law coverage can be added to many property policies, not just all risks.

✅ Correct Answer:

Yes, they are insurable if specified in a property policy.

The correct answer is:

✅ Phone the assistance provider named in the policy and comply with the other policy conditions which apply to reporting of claims.

🔍 Explanation:

Most travel health insurance policies include access to a 24/7 emergency assistance provider (often a third-party service listed on the policy documents). In the event of emergency medical treatment or hospitalization outside Canada, the first and most important step is:

📞 Contact the assistance provider immediately — they will:

• Authorize and coordinate medical care,
• Provide direct billing to hospitals when possible,
• Guide the insured through claim procedures,
• Prevent denial of coverage due to non-compliance.

Failure to notify the provider as soon as possible can lead to reduced benefits or denial of claims, especially for large or extended treatments like hospitalization.

❌ Why the other options are incorrect:

• “Send a fax/email to the broker who issued the policy…”
  → ❌ Brokers are not equipped to handle medical emergencies or claim coordination. This step does not fulfill policy requirements.
• “Request the hospital or attending physician to call your family physician in Canada…”
  → ❌ Unnecessary and not helpful in most cases. The insurer’s assistance provider is the required contact.
• “Take no immediate action but retain all receipts…”
  → ❌ This could seriously jeopardize the claim. Many policies require prior authorization for treatment or hospitalization unless it’s an emergency.

✅ Final Answer:

Phone the assistance provider named in the policy and comply with the other policy conditions which apply to reporting of claims.

The correct answer is:

✅ There may be no coverage or limitations of coverage for the condition of sickness for which he was hospitalized.

🔍 Explanation:

Most travel health insurance policies contain pre-existing condition exclusions or limitations. These provisions are especially important for someone who:

• Has just been discharged from hospital
• Is recovering from a serious illness
• Is planning an extended trip while convalescing

Travel insurers often require that any pre-existing condition be stable (e.g., no change in treatment, dosage, or symptoms) for a certain period — commonly 90 to 180 days before the trip — in order for it to be covered.

➡️ If the condition has not been stable, or the person is still recovering, coverage for related complications may be denied.

❌ Why the other options are incorrect:

• “He will not be covered for any sporting activities.”
  → ❌ Not necessarily true. Many travel policies do cover basic sporting activities, but exclude hazardous or extreme sports (e.g., scuba diving, skydiving).
• “There is no coverage for any sickness he may have during the trip.”
  → ❌ Too broad. Most travel insurance covers new, unforeseen illnesses, just not pre-existing ones under certain conditions.
• “Coverage on himself and his wife is for accidents only while traveling.”
  → ❌ Incorrect. Travel medical insurance generally covers both accidents and sudden illnesses, unless it’s a limited or restricted policy.

✅ Final Answer:

There may be no coverage or limitations of coverage for the condition of sickness for which he was hospitalized.

The correct answer is:

✅ The insured’s home is infested with carpenter ants and the insured must move out until extermination procedures are completed.

🔍 Explanation:

“Additional Living Expense” (ALE) under a Homeowners Comprehensive policy covers necessary increases in living expenses when a covered insured peril makes the residence unfit to live in. It helps the insured maintain their normal standard of living while repairs are made or until they relocate.

❌ Why the other options would be covered:

• “The insured incurs moving expenses after his/her home is severely damaged by fire.”
  → ✅ Fire is an insured peril. Moving expenses to live elsewhere would be covered under ALE.
• “The Fire Department prohibits access to your insured’s home for one week as a result of a fire in a neighbouring home.”
  → ✅ This is also covered. ALE applies when access is prohibited due to damage to neighboring premisescaused by an insured peril like fire.
• “The insured’s son starts a grease fire in the kitchen causing smoke damage to the entire house.”
  → ✅ This is a fire-related loss, and ALE would apply if the smoke damage made the home uninhabitable.

❌ Why the correct answer is not covered:

• “Infestation by carpenter ants” is considered maintenance-related, not sudden or accidental, and not an insured peril under standard homeowners policies.
  → Therefore, Additional Living Expense coverage would NOT apply.

✅ Final Answer:

The insured’s home is infested with carpenter ants and the insured must move out until extermination procedures are completed.

The correct answer is:

✅ Yes, a pro rata refund of the unearned premium.

🔍 Explanation:

When an insurer cancels an automobile policy mid-term for reasons other than non-payment of premium, the insured is entitled to a refund of the unearned premium on a pro rata basis.

✅ Key points:

• Pro rata means the insurer returns the portion of the premium that corresponds exactly to the unused portion of the policy.
• This is fair to the insured, since the insurer is initiating the cancellation.
• If the insured were the one cancelling, then a short-rate refund (with a penalty) might apply.

❌ Why the other options are incorrect:

• “Yes, a short-rate refund of the unearned premium”
  → ❌ Short-rate refunds apply only when the insured cancels the policy, not the insurer.
• “No refund of premium will be given”
  → ❌ Incorrect. Refunds are legally required for unused coverage when the policy is cancelled early.
• “Yes, a refund of the total premium paid”
  → ❌ Incorrect. Only the unearned portion is refunded — the portion covering time the policy was in force is earned and not refundable.

✅ Final Answer:

Yes, a pro rata refund of the unearned premium.

The correct answer is:

✅ The replacement cost of the property.

🔍 Explanation:

When a co-insurance clause is included in a replacement cost policy, the insurer requires the policyholder to insure the property to a certain percentage (e.g., 80%, 90%) of its full replacement cost.

Therefore, in order to apply the co-insurance formula correctly, the full replacement cost of the property must be established.

❌ Why the other options are incorrect:

• The actual cash value of the property
  → ❌ This is used in actual cash value policies, not in replacement cost policies.
• The amount which could be obtained for the property as a sale
  → ❌ This refers to market value, which is not relevant to replacement cost or co-insurance.
• The original cost of the property
  → ❌ This may be outdated and does not reflect the current cost to replace the property, which is what’s needed for insurance purposes.

✅ Final Answer:

The replacement cost of the property.

The correct answer is:

✅ Personal Liability (Coverage E).

🔍 Explanation:

In a Tenants Comprehensive Policy, the Liability Section includes various coverages. Here’s how they apply to this scenario:

• Personal Liability (Coverage E):
  This coverage protects the insured tenant if they are legally liable for bodily injury or property damage to others.
  In this case, the tenant negligently caused a fire, resulting in smoke damage to common areas and other tenants’ apartments — for which they could be held legally liable.
  So, Coverage E applies and would respond to these damages.

❌ Why the other options are incorrect:

• Voluntary Property Damage (Coverage G):
  → This is for intentional, voluntary payments for damage to others’ property, usually when there is no legal liability. Not applicable here, as the tenant is liable.
• Not covered:
  → Incorrect. The situation involves negligence and liability, which is covered under Coverage E.
• Loss Assessment (Coverage F):
  → This applies to condo unit owners, not tenants, and deals with shared assessments from the condo corporation — not personal liability for damages caused by the insured.

✅ Final Answer:

Personal Liability (Coverage E).

The correct answer is:
✅ $2,800.00

🔍 Explanation:

Under a Homeowners Comprehensive policy, building materials intended for use on the insured premises are generally covered as Personal Property while temporarily off premises, but usually subject to a percentage limitation, commonly 10% of the Personal Property limit (which is typically around 70–80% of the dwelling limit).

However, in this case, the question focuses on how much of the off-premises loss is recoverable, and not the dwelling limit.

Let’s break it down:

• Loss amount: $3,000 worth of materials destroyed at father’s garage.
• Policy deductible: $200
• On what basis is the claim paid?
  Off-premises contents losses are typically covered up to the full loss, minus the deductible, as long as they’re within limits (such as the 10% off-premises rule), and the property was intended for use in the dwelling.

So:

$3,000 (loss)
- $200 (deductible)
= $2,800 (amount payable)

✅ Final Answer: $2,800.00

This assumes the $3,000 loss is within the limits for off-premises coverage under the policy — which, for a $220,000 policy, it likely is.

The correct answer is:

✅ for their full actual cash value if factory installed.

Explanation:

Under the Ontario Automobile Policy (O.A.P. 1 – Owner’s Policy):

• Electronic accessories or equipment (such as stereos, navigation systems, DVD players, etc.) are covered for their Actual Cash Value (ACV) — but only if they were factory installed.
• Non-factory-installed (aftermarket) equipment is not automatically covered or is covered only to a limited extent, unless specifically declared and additional premium is paid (e.g., through an endorsement like OPCF 19A).

Why the other options are incorrect:

• ❌ “For their full actual cash value” – Not entirely accurate unless they are factory installed.
• ❌ “For their full replacement cost” – Standard O.A.P. 1 policies do not provide replacement cost; they cover ACV unless endorsements are added.
• ❌ “Up to $5,000.00” – There is no fixed $5,000 limit under the standard policy for factory-installed equipment.

✅ Correct Completion of the Statement:

Electronic accessories or equipment in an automobile are covered under O.A.P. 1 Owner’s Policy for their full actual cash value if factory installed.

The correct answer is:

✅ It is a change material to the risk and the coverage could be impaired because of failure to notify the insurer.

Explanation:

When your client opens a home-based business—such as a hairdressing salon—without informing the insurer, this is considered a material change in risk under the terms of the policy.

Under most Homeowners Comprehensive policies:

• The insurer must be notified of any material change in risk.
• Operating a business in the home changes the nature of occupancy and introduces additional liability and property risks (e.g., customer foot traffic, specialized equipment, increased fire or electrical hazard).
• Failure to notify the insurer can lead to:
  • Denial of a claim
  • Voidance or cancellation of the policy

Why the other options are incorrect:

• ❌ “The policy is not affected” — False. A business being operated from home is a clear material change.
• ❌ “Coverage is automatically suspended until a hydro certificate is obtained…” — False. There’s no such automatic suspension mechanism in a standard homeowners policy.
• ❌ “Since a business is now conducted in the residence, the replacement cost settlement clause no longer applies” — False. While some property might no longer qualify for replacement cost coverage (e.g., business property), this statement is too broad and not accurate in this context.

✅ Correct Answer:

It is a change material to the risk and the coverage could be impaired because of failure to notify the insurer.