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CIC Personal Lines study materials
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CIC Personal Lines practice questions

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Question 1Personal Lines

Under a standard Canadian home insurance policy, which coverage responds when a visitor slips on your icy walkway and sues you for their injuries?

  1. Contents (personal property)
  2. Guaranteed replacement cost on the dwelling
  3. Personal liability Correct answer.
  4. Additional living expenses

Explanation

Personal liability coverage responds to third-party bodily injury or property damage claims arising from the insured premises or the insured's personal activities, and it also funds the legal defense. It is the section of the homeowner's policy designed for lawsuits brought by others, not for damage to the policyholder's own property.

Question 2Personal Lines

In Canadian auto insurance, which coverage pays for damage to your own vehicle caused by a collision with a guardrail, regardless of fault?

  1. Third-party liability
  2. Collision Correct answer.
  3. Accident benefits
  4. Uninsured automobile

Explanation

Collision coverage is the optional physical damage coverage that pays to repair or replace the insured vehicle after impact with another object or a rollover. Third-party liability, accident benefits, and uninsured automobile coverage respond to other loss types, not to the policyholder's own vehicle damage.

Question 3Personal Lines

A tenant rents an apartment and wants coverage for their furniture and electronics. Which policy form is designed for this situation?

  1. Homeowner's comprehensive form
  2. Commercial general liability
  3. Tenant's package policy Correct answer.
  4. Condominium unit owner's form

Explanation

A tenant's package policy (often called a contents or renter's policy) insures the tenant's personal property and provides personal liability without insuring the building, which belongs to the landlord. The condominium form is for owners of a unit, and the homeowner's form covers a building the insured owns.

Question 4Personal Lines

What is the primary purpose of the deductible on a home insurance policy?

  1. To make the insured retain a stated portion of each covered loss Correct answer.
  2. To limit the insurer's maximum payout on the dwelling
  3. To reduce the premium by excluding certain perils
  4. To satisfy provincial licensing requirements

Explanation

The deductible is the amount the insured absorbs on each covered claim before the insurer pays, which keeps small claims out of the system and reduces premium. It is not a policy limit and it does not change which perils are insured.

Question 5Personal Lines

Which peril is typically excluded under a standard homeowner's policy unless it is specifically added by endorsement?

  1. Sewer backup Correct answer.
  2. Windstorm
  3. Lightning
  4. Vandalism

Explanation

Sewer backup is a common exclusion in standard homeowner's forms because of its frequency and severity, and it is usually restored by purchasing a sewer backup endorsement with its own limit. Windstorm, lightning, and vandalism are named or all-risk perils in the standard forms.

Question 6Personal Lines

In Ontario, which auto insurance coverage pays for medical expenses and income replacement for the insured and passengers after an accident, regardless of fault?

  1. Accident benefits Correct answer.
  2. Comprehensive
  3. Direct compensation - property damage
  4. Collision

Explanation

Accident benefits (statutory accident benefits) are a mandatory no-fault coverage that pays medical, rehabilitation, and income replacement benefits to injured occupants regardless of who caused the accident. Collision and comprehensive are physical damage coverages, and direct compensation - property damage addresses vehicle damage.

Question 7Personal Lines

Which document in a home insurance policy sets out the insured's duties after a loss, such as promptly notifying the insurer and submitting a proof of loss?

  1. The statutory conditions Correct answer.
  2. The declarations page
  3. The certificate of insurance
  4. The application form

Explanation

The statutory conditions are the legally mandated policy provisions that include the insured's duties after loss, such as giving notice, protecting property from further damage, and providing a proof of loss. The declarations page summarizes the risk and limits but does not contain the full claims duties.

Question 8Personal Lines

A homeowner's policy shows Coverage A at $300,000 and a deductible of $1,000. A covered fire causes $50,000 in damage to the dwelling. Ignoring any coinsurance or bylaw issues, how much does the insurer pay?

  1. $51,000
  2. $49,000 Correct answer.
  3. $300,000
  4. $50,000

Explanation

The insurer pays the covered loss less the deductible, so $50,000 minus $1,000 equals $49,000. Coverage A is a limit on the maximum payable, not the amount paid for each claim, and the deductible is never added to the loss.

Question 9Personal Lines

What does the coinsurance clause in a commercial property policy require of the insured?

  1. That the insured maintain a minimum deductible tied to the property value
  2. That the insured share all claim payments equally with the insurer
  3. That the insured carry insurance to at least a stated percentage of the property's value to avoid a penalty on partial losses Correct answer.
  4. That the insurer pay only the depreciated value of any loss

Explanation

A coinsurance clause sets a minimum limit, usually a percentage of the property's value, and if the insured carries less, a partial loss is settled in the same proportion that the carried limit bears to the required amount. It is not a shared-payment arrangement on every claim.

Question 10Personal Lines

A homeowner with a guaranteed replacement cost endorsement suffers a total loss. What does the endorsement generally provide?

  1. Payment of actual cash value after depreciation is applied
  2. Coverage limited to the original purchase price of the home
  3. Payment of the policy limit only, with no allowance for rebuilding cost increases
  4. Replacement of the dwelling without deduction for depreciation, up to an insurer-set ceiling above the policy limit Correct answer.

Explanation

Guaranteed replacement cost pays to rebuild the dwelling as it was, without deducting depreciation, and typically allows payment above the Coverage A limit subject to an insurer-set maximum. It is not the same as a fixed policy limit or actual cash value settlement.

Question 11Personal Lines

Which statement best describes the difference between a peril and a hazard in personal lines underwriting?

  1. A peril is a type of endorsement, while a hazard is a type of deductible
  2. A peril is a condition that increases the chance of loss, while a hazard is the cause of loss
  3. A peril is the cause of loss, while a hazard is a condition that increases the chance of loss Correct answer.
  4. A peril is a policy exclusion, while a hazard is a policy limit

Explanation

A peril is the event that causes the loss, such as fire or windstorm, while a hazard is a condition that increases the likelihood or severity of that loss, such as a woodstove or an unfenced pool. Keeping the two distinct is essential when assessing risk and recommending endorsements.

Question 12Personal Lines

An insured rents out their basement apartment to a tenant. How does a standard homeowner's policy generally treat this exposure?

  1. It restricts or excludes coverage for the rental portion and may require a separate policy or endorsement Correct answer.
  2. It converts the policy into a commercial general liability policy
  3. It provides full coverage as long as the tenant pays rent
  4. It automatically extends all contents coverage to the tenant's belongings

Explanation

Standard homeowner's forms are built for owner-occupied dwellings and restrict or exclude coverage when the home is rented to others, so a separate policy or endorsement is usually needed. Contents coverage never extends to a tenant's own property.

Question 13Personal Lines

Under the standard homeowner's form, what is the purpose of the additional living expenses coverage?

  1. To pay the extra cost of maintaining a normal standard of living while the home is uninhabitable after a covered loss Correct answer.
  2. To pay for permanent improvements made during reconstruction
  3. To cover the insured's ordinary living costs regardless of any loss
  4. To pay the mortgage if the insured loses their job

Explanation

Additional living expenses reimburses the increase in living costs, such as temporary accommodation and extra meals, while the dwelling is being repaired after a covered loss. It does not pay ordinary living costs that would have been incurred anyway and is subject to a time or dollar limit.

Question 14Personal Lines

A driver lends their car to a friend who causes an at-fault accident. Which statement reflects how Canadian auto policies typically respond?

  1. The claim is paid only under the owner's comprehensive coverage
  2. The friend's own auto policy is the only one that can respond
  3. The owner's policy generally responds because coverage follows the vehicle, subject to the policy terms Correct answer.
  4. No coverage applies because the owner was not driving

Explanation

Auto liability coverage generally follows the vehicle, so the owner's policy typically responds when a permitted driver operates the car, subject to the policy terms and any excluded drivers. The driver's own policy may also be relevant, but the owner's coverage is not void merely because someone else was driving.

Question 15Personal Lines

What does the direct compensation - property damage (DCPD) coverage in Ontario do?

  1. It pays for theft of the insured vehicle
  2. It pays for damage to the other driver's vehicle when the insured is at fault
  3. It pays to repair the insured vehicle when another insured driver is at fault, without the insured having to pursue the other driver Correct answer.
  4. It pays for injuries caused by an uninsured driver

Explanation

DCPD allows the insured to collect vehicle damage directly from their own insurer when another insured driver is at fault and the accident occurs in Ontario, avoiding the need to sue the other driver. It does not cover injuries, the other party's vehicle, or theft.

Question 16Personal Lines

Which factor would most likely lead an auto insurer to surcharge or decline a new applicant?

  1. The applicant completed a recognized driver training course
  2. The applicant has multiple at-fault accidents in the past three years Correct answer.
  3. The applicant drives a vehicle with winter tires
  4. The applicant has held a licence for 15 years

Explanation

Multiple at-fault accidents indicate a higher expected claims frequency and are a standard rating factor that can produce a surcharge or a declination. Long licensure, winter tires, and driver training generally reduce risk and may earn discounts.

Question 17Personal Lines

A condominium unit owner's policy typically includes loss assessment coverage. What does that coverage address?

  1. The corporation's liability for injuries in the common areas
  2. Damage to the unit owner's personal property caused by the corporation's negligence
  3. The owner's share of a special assessment levied by the condominium corporation after a covered loss to common elements Correct answer.
  4. The monthly condominium maintenance fees

Explanation

Loss assessment coverage responds when the condominium corporation levies a special assessment against owners, often to cover a deductible or an uninsured common-element loss. It does not pay routine monthly fees or insure the corporation's own liability.

Question 18Personal Lines

Which statement correctly describes how most Canadian auto policies handle a claim when the insured is injured by an unidentified hit-and-run driver?

  1. The claim is handled under the direct compensation - property damage coverage
  2. The uninsured automobile coverage may respond, subject to the policy's conditions and limits Correct answer.
  3. No coverage applies because the other driver cannot be identified
  4. The claim must be paid under collision coverage

Explanation

Uninsured automobile coverage typically extends to unidentified hit-and-run drivers, subject to conditions such as prompt reporting and any deductible or limit. Collision covers vehicle damage, and DCPD applies only to property damage involving another identified insured driver.

Question 19Personal Lines

What is the effect of a policy's 'vacancy' condition on a homeowner's claim?

  1. Coverage is unaffected as long as the premium is paid
  2. Coverage for certain perils such as vandalism is suspended when the dwelling has been vacant beyond the stated period Correct answer.
  3. The deductible is reduced while the home is vacant
  4. The policy automatically converts to a tenant's policy

Explanation

Standard homeowner's forms suspend or restrict coverage, particularly for perils such as vandalism and glass breakage, when the dwelling has been vacant beyond the number of days stated in the policy. The condition reflects the sharply higher risk that an unoccupied building presents.

Question 20Personal Lines

An insured's home is damaged by a covered fire, and the insurer and insured disagree on the amount of the loss. Which policy provision is designed to resolve the dispute over the amount without litigation?

  1. The salvage clause
  2. The appraisal provision Correct answer.
  3. The subrogation clause
  4. The waiver of premium clause

Explanation

The appraisal provision allows either party to demand an appraisal when they disagree on the amount of a loss, with each side selecting an appraiser and an umpire resolving any difference. Subrogation and salvage address recovery of value after payment, not the quantification of a disputed loss.

Question 21Personal Lines

Which of the following best describes the purpose of subrogation in a property claim?

  1. To allow the insurer to recover the amount it paid from the party responsible for the loss Correct answer.
  2. To cancel the policy after a claim is paid
  3. To allow the insured to collect twice for the same loss
  4. To transfer the insured's deductible to the insurer

Explanation

Subrogation gives the insurer the right, after paying a claim, to pursue the party legally responsible for the loss and recover the amount paid. It supports the principle of indemnity by preventing double recovery and by placing the cost on the responsible party.

Question 22Personal Lines

A homeowner's policy has a $2,000 deductible and includes a sewer backup endorsement with a $10,000 limit. A covered sewer backup causes $12,000 in damage. What does the insurer typically pay?

  1. $10,000
  2. $2,000
  3. $12,000
  4. $8,000 Correct answer.

Explanation

The endorsement caps payment at its $10,000 limit and the $2,000 deductible applies to the covered loss, so the insurer pays $10,000 minus $2,000, or $8,000. The limit and the deductible both operate, and the insured absorbs the remainder.

Question 23Personal Lines

An insured carries $200,000 of insurance on a building valued at $400,000, and the policy contains an 80% coinsurance clause. A covered partial loss of $100,000 occurs. What amount does the insurer pay, ignoring the deductible?

  1. $62,500 Correct answer.
  2. $50,000
  3. $100,000
  4. $80,000

Explanation

The required limit is 80% of $400,000, or $320,000, and the insured carries only $200,000, so the claim is paid in the ratio 200,000/320,000, which equals 0.625. Applying that ratio to the $100,000 loss gives $62,500.

Question 24Personal Lines

An insured's home is destroyed by a fire, and the insurer pays the claim. The insurer then discovers that the fire was deliberately set by the insured's adult tenant. Which principle most directly supports the insurer's right to recover from the tenant?

  1. The principle of utmost good faith
  2. The principle of proximate cause
  3. The principle of contribution among insurers
  4. The principle of indemnity enforced through subrogation Correct answer.

Explanation

After paying the loss, the insurer steps into the insured's legal position and may pursue the responsible party under subrogation, which serves the indemnity principle by placing the cost on the wrongdoer. Utmost good faith governs disclosure, proximate cause links a loss to a peril, and contribution allocates a loss among multiple insurers.

Question 25Personal Lines

A homeowner operates a licensed home-based catering business from the kitchen. A customer becomes ill and sues. How does a standard homeowner's policy generally respond?

  1. It pays under the medical payments coverage without regard to fault
  2. It excludes or restricts liability arising from business activities, so a commercial policy or business endorsement is needed Correct answer.
  3. It pays under the voluntary property damage coverage
  4. It defends and pays the claim because the injury occurred at the home

Explanation

Standard homeowner's forms exclude liability arising out of business pursuits, so a home-based business exposure requires a commercial general liability policy or a specific business endorsement. The location of the injury does not override the business-pursuit exclusion.

Question 26Personal Lines

In a Canadian personal auto policy, what does the liability section primarily protect the insured against?

  1. Damage to the insured vehicle caused by a collision
  2. Theft of personal belongings from inside the vehicle
  3. Injury to the insured driver caused by an uninsured motorist
  4. Claims made by third parties for bodily injury or property damage the insured is legally responsible for Correct answer.

Explanation

Third-party liability coverage responds when the insured is legally liable for injury or damage caused to others through use of the automobile, and it also funds the insured's legal defence. Physical damage to the insured's own vehicle is handled under separate collision and comprehensive coverages.

Question 27Personal Lines

A homeowner's policyholder accidentally backs their riding mower into a neighbour's fence. Which coverage section of the homeowner's policy would typically respond to the neighbour's claim?

  1. Coverage A - Dwelling
  2. Coverage D - Loss of Use
  3. Coverage E - Personal Liability Correct answer.
  4. Coverage C - Personal Property

Explanation

Personal liability coverage responds when the insured is legally liable for bodily injury or property damage caused to a third party, including damage to a neighbour's property. The dwelling and personal property coverages insure the insured's own property, not the neighbour's fence.

Question 28Personal Lines

What is the role of the deductible in a personal property insurance claim?

  1. It is the maximum amount the insurer will ever pay on the policy
  2. It is the amount of each covered loss the insured must bear before the insurer pays Correct answer.
  3. It is a percentage the insurer adds to the premium for high-risk risks
  4. It is a refundable deposit the insured pays to activate coverage

Explanation

The deductible is the portion of each covered loss retained by the insured; the insurer pays the amount of the loss above that figure, up to the policy limit. Choosing a higher deductible lowers the premium because the insured absorbs more of each small loss.

Question 29Personal Lines

In a standard homeowner's policy, which coverage protects the insured's furniture, clothing and electronics against covered perils, both at home and while temporarily elsewhere?

  1. Coverage C - Personal Property Correct answer.
  2. Coverage B - Other Structures
  3. Coverage A - Dwelling
  4. Coverage D - Loss of Use

Explanation

Coverage C insures personal property such as furniture, clothing and electronics, and it generally follows the insured's property worldwide, subject to stated limits. It is distinct from the building coverages, which insure the structure itself.

Question 30Personal Lines

An auto insured holds a policy with a $500 collision deductible and a $300 comprehensive deductible. A deer strikes the vehicle, causing $2,000 in damage. How is the claim generally settled?

  1. The insurer pays $1,700 under comprehensive Correct answer.
  2. The insurer pays $1,500 under comprehensive
  3. The insurer pays $2,000 with no deductible applied
  4. The insurer pays $1,500 under collision

Explanation

A collision with an animal is treated as a comprehensive (all perils) claim rather than a collision claim, so the comprehensive deductible of $300 applies. The insurer therefore pays $2,000 less the $300 deductible, or $1,700.

Question 31Personal Lines

Which statement best describes the purpose of the 'salvage' provision in a property policy?

  1. It requires the insured to sell undamaged property to reduce the claim
  2. It transfers ownership of the property to the mortgagee
  3. It allows the insurer to take possession of damaged property after paying a total loss, so the insurer can recover some value Correct answer.
  4. It obliges the insured to rebuild on the same site after a loss

Explanation

When an insurer pays a loss, the salvage provision lets it take the damaged property and dispose of it to recover part of the payout, which helps keep premiums lower. The insured cannot keep the damaged goods and also collect the full loss payment.

Question 32Personal Lines

A tenant rents an apartment and wants coverage for their own furniture and for liability if a guest is injured in the unit. Which policy form is designed for this need?

  1. A condominium unit owner's form
  2. A standard homeowner's form
  3. A tenant's package policy (contents broad form) Correct answer.
  4. A commercial general liability policy

Explanation

A tenant's package policy insures the renter's personal property and personal liability, and it typically includes limited improvements and betterments coverage. The building itself is the landlord's responsibility, so a tenant does not need dwelling coverage.

Question 33Personal Lines

In personal lines underwriting, what is the purpose of a loss run or claims history check on a new applicant?

  1. To confirm the applicant's credit score for billing purposes
  2. To verify that the applicant has paid all prior premiums
  3. To assess the applicant's prior claim frequency and severity as an indicator of future risk Correct answer.
  4. To determine whether the applicant has other insurance policies

Explanation

Claims history reveals how often and how severely an applicant has claimed, which is a strong predictor of future loss experience. Underwriters use this pattern to decide on acceptance, rating tiers or deductibles.

Question 34Personal Lines

A policyholder's basement is flooded after a heavy rainstorm and water enters through a window well. Under an unendorsed standard homeowner's policy, how is this loss generally treated?

  1. Covered under Coverage A as water damage
  2. Excluded, because damage from surface water is typically excluded Correct answer.
  3. Covered only if the insured has flood insurance from a government program
  4. Covered under Coverage C as a sudden loss

Explanation

Standard homeowner's forms exclude loss caused by surface water, including water that enters through a window well during a storm, unless flood or water backup coverage is added. Insureds in flood-prone areas typically need a separate flood policy or endorsement.

Question 35Personal Lines

What does the 'additional living expenses' coverage in a homeowner's policy typically pay for after a covered loss makes the home uninhabitable?

  1. Reasonable increases in living costs, such as temporary accommodation and meals, above normal expenses Correct answer.
  2. Permanent repairs to the home so the family can return
  3. The full mortgage payments on the damaged home for the entire policy term
  4. The insured's lost wages during the repair period

Explanation

Additional living expenses cover the extra cost of maintaining a normal standard of living while the home is being repaired, such as hotel bills and restaurant meals above usual costs. It does not cover the ordinary expenses the family would have incurred anyway.

Question 36Personal Lines

An insured with a homeowner's policy has a $1,000 deductible and Coverage A of $250,000. A kitchen fire causes $30,000 in damage. The insured also incurred $4,000 in additional living expenses. How much will the insurer typically pay in total, assuming no other limits apply?

  1. $34,000
  2. $32,000
  3. $30,000
  4. $33,000 Correct answer.

Explanation

The insurer pays the dwelling damage of $30,000 less the $1,000 deductible, or $29,000, plus the $4,000 of additional living expenses, for a total of $33,000. The deductible is applied once to the loss, not separately to each coverage part.

Question 37Personal Lines

Which statement correctly describes how a personal umbrella liability policy interacts with underlying auto and home policies?

  1. It pays first, before the underlying policies respond
  2. It replaces the underlying policies entirely
  3. It covers only business liabilities excluded by home and auto policies
  4. It responds after the underlying policy limits are exhausted, and generally requires the insured to maintain those underlying limits Correct answer.

Explanation

An umbrella policy provides excess liability limits above the required underlying home and auto limits, and it may also drop down to cover some losses the underlying policies exclude. The insured must maintain the specified underlying limits for the umbrella to respond as intended.

Question 38Personal Lines

In Ontario, which auto coverage responds when the insured is injured by an at-fault driver and the insured has no other source of recovery, regardless of fault?

  1. Direct compensation - property damage
  2. Collision coverage
  3. Accident benefits Correct answer.
  4. Comprehensive coverage

Explanation

Accident benefits provide no-fault medical, rehabilitation and income replacement benefits to the insured and passengers regardless of who caused the accident. They operate independently of tort liability and of property damage coverages.

Question 39Personal Lines

A homeowner has a guaranteed replacement cost endorsement on a home insured for $400,000. A total loss occurs, and rebuilding the same home at current costs is $460,000. How does the endorsement generally respond?

  1. It pays nothing until the insured rebuilds and submits receipts
  2. It pays the actual cash value of the home
  3. It pays the $400,000 policy limit only
  4. It pays the full cost to rebuild, even though it exceeds the stated amount, subject to the endorsement's terms Correct answer.

Explanation

Guaranteed replacement cost endorsements waive the policy limit for rebuilding the same home on the same site, so the insurer pays the full replacement cost even if it exceeds the insured amount. The endorsement is still subject to its own conditions, such as rebuilding on the same site.

Question 40Personal Lines

What is the purpose of a mortgage clause in a homeowner's policy?

  1. It protects the mortgagee's interest in the property, including notice of cancellation and payment of loss up to its interest Correct answer.
  2. It requires the insured to pay off the mortgage before a claim is paid
  3. It increases the dwelling limit to match the mortgage balance
  4. It transfers the policy to the mortgagee after a loss

Explanation

The mortgage clause protects the lender's financial interest, giving it notice of cancellation or non-renewal and the right to receive loss payments to the extent of its interest. It does not transfer ownership of the policy or set the dwelling limit.

Question 41Personal Lines

An insured's home is burglarized, and $5,000 of jewellery is stolen. The policy has a $2,000 special limit for theft of jewellery. How does the insurer typically respond?

  1. It pays up to the $2,000 special limit for the jewellery theft Correct answer.
  2. It pays $5,000 because the loss is covered
  3. It pays the full amount only if the insured has a safe
  4. It pays nothing because jewellery is excluded entirely

Explanation

Homeowner's forms commonly impose special sub-limits on categories such as jewellery, money and securities for theft losses. The insured recovers up to that sub-limit unless additional coverage is purchased by endorsement.

Question 42Personal Lines

A homeowner insures a building for $300,000 when its replacement cost is $500,000, and the policy contains an 80% coinsurance clause. A $100,000 covered loss occurs. What will the insurer typically pay?

  1. $100,000
  2. $75,000 Correct answer.
  3. $60,000
  4. $80,000

Explanation

The insured should have carried $400,000 (80% of $500,000) but carried $300,000, so the coinsurance penalty applies. The payment is the loss multiplied by the ratio of carried insurance to required insurance: $100,000 x ($300,000 / $400,000) = $75,000.

Question 43Personal Lines

An insured's home is destroyed by fire, and the insurer pays the claim. Investigators later determine that the insured intentionally set the fire. What is the insurer's most likely position?

  1. The insurer must pay only the mortgagee's share and deny the rest
  2. The insurer must pay the claim because the fire is a covered peril
  3. The insurer may deny the claim for intentional acts and may seek to recover amounts already paid Correct answer.
  4. The insurer must pay but can cancel the policy at renewal

Explanation

Intentional acts by the insured to cause a loss are excluded, so the insurer can deny the claim and pursue recovery of any amounts paid. Fraudulent misrepresentation in the claim also breaches the policy conditions.

Question 44Personal Lines

A homeowner operates a licensed catering business from the kitchen, and a customer becomes ill and sues. How does a standard homeowner's policy generally respond?

  1. It pays up to the medical payments limit only
  2. It excludes liability arising from business activities, so the claim is generally not covered Correct answer.
  3. It defends and pays the claim because the injury occurred at the home
  4. It covers the claim because the business is licensed

Explanation

Standard homeowner's forms exclude liability arising out of business pursuits, so a claim from a catering customer is generally not covered. The insured would need a commercial general liability policy or a business endorsement to cover the exposure.

Question 45Personal Lines

An insured's vehicle is stolen and recovered three weeks later with significant damage. Which coverage generally responds to the damage, and what deductible applies?

  1. Liability coverage with no deductible
  2. Collision coverage with the collision deductible
  3. Accident benefits with no deductible
  4. Comprehensive coverage with the comprehensive deductible Correct answer.

Explanation

Theft and the resulting damage are comprehensive (all perils) losses, so the comprehensive deductible applies. Collision coverage is for impact with another object or vehicle, not theft.

Question 46Personal Lines

Under a personal auto policy, what is the effect of an insured allowing an excluded driver to operate the vehicle?

  1. The insurer may deny coverage for the loss because the policy excludes that driver Correct answer.
  2. The excluded driver's own policy always responds first
  3. Coverage is unaffected because the named insured did not drive
  4. The insurer must pay but may increase the premium at renewal

Explanation

An excluded driver endorsement removes coverage when that specific person operates the vehicle, so the insurer may deny the claim. The exclusion applies regardless of who else is insured under the policy.

Question 47Personal Lines

What is the main purpose of a personal articles floater added to a homeowner's policy?

  1. To increase the dwelling limit for renovations
  2. To insure scheduled valuables such as jewellery and art against broader perils, often without a deductible Correct answer.
  3. To extend liability coverage to business activities
  4. To replace the homeowner's policy entirely

Explanation

A personal articles floater schedules specific valuables and insures them for broader perils, often on a worldwide basis and without a deductible, above the special limits in the base policy. It supplements rather than replaces the homeowner's policy.

Question 48Personal Lines

Which statement best describes the role of the insurer's right of subrogation after paying a property claim?

  1. The insured must repay the insurer for the claim
  2. The insured loses the right to any further claim
  3. The insurer may cancel the policy without notice
  4. The insurer may pursue the party responsible for the loss to recover the amount it paid Correct answer.

Explanation

Subrogation lets the insurer step into the insured's shoes and pursue the at-fault party to recover what it paid, which helps control premiums. The insured must not do anything that impairs that right, such as releasing the responsible party.

Question 49Personal Lines

A homeowner's policy includes a $500 deductible and a sewer backup endorsement with a $10,000 limit. A covered sewer backup causes $12,000 in damage. How much will the insurer typically pay?

  1. $9,500 Correct answer.
  2. $11,500
  3. $10,000
  4. $12,000

Explanation

The endorsement caps the sewer backup loss at $10,000, and the deductible is then applied, so the insurer pays $9,500. The limit applies to the loss before the deductible is subtracted.

Question 50Personal Lines

Which document in a home insurance policy sets out the insured's duties after a loss, such as promptly notifying the insurer and protecting property from further damage?

  1. The application form
  2. The declarations page
  3. The statutory conditions Correct answer.
  4. The insuring agreements

Explanation

The statutory conditions set out the obligations of both parties, including the insured's duty to give prompt notice, protect the property and provide proof of loss. The declarations page summarizes the policy, and the insuring agreements describe what is covered.