TheoryAlberta Insurance Level 1 Prep
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Alberta Insurance Level 1 Prep sample questions
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Regs An insurance broker represents a client who needs commercial property coverage and presents options from three different insurers. In this relationship, who does the broker primarily owe a duty of care to?
A. The client seeking coverage ✓
B. The reinsurance company backing the policy
C. The insurer offering the lowest premium
D. The Alberta Insurance Council
Correct — A. An insurance broker is an independent intermediary whose primary duty of care runs to the client. Brokers must act in the client's best interest when searching for, placing, and advising on coverage, regardless of which insurer's product they ultimately place.
Ops An insurer collects $2,000,000 in earned premiums and pays $1,400,000 in incurred claims. What is the loss ratio?
A. 140%
B. 30%
C. 50%
D. 70% ✓
Correct — D. Loss ratio = Incurred claims ÷ Earned premiums × 100 = $1,400,000 ÷ $2,000,000 = 70%. A loss ratio below 100% means the insurer pays less in claims than it collects in premiums.
Safety Which reinsurance arrangement transfers individual risks to the reinsurer on a case-by-case basis, with neither party obligated to cede or accept?
A. Surplus share reinsurance
B. Treaty reinsurance
C. Quota share reinsurance
D. Facultative reinsurance ✓
Correct — D. Facultative reinsurance is negotiated separately for each risk. The ceding insurer may choose whether to offer the risk, and the reinsurer may accept or decline. Treaty reinsurance, by contrast, commits both parties under a pre-arranged standing agreement.
Regs A homeowner fails to disclose a prior fire claim when applying for property insurance. The insurer discovers this after a new loss occurs. What is the most likely legal consequence of this non-disclosure?
A. The insurer may void the policy from inception ✓
B. The homeowner receives only 50% of the claim amount
C. The insurer must notify the Superintendent before taking action
D. The insurer must continue coverage but can increase the premium retroactively
Correct — A. Failure to disclose a material fact violates the principle of utmost good faith (uberrimae fidei). An insurer that discovers material non-disclosure is entitled to void the policy from inception, treating it as if it never existed.
Ops An insurer's loss ratio is 65% and its expense ratio is 30%. What is the combined ratio, and what does it indicate?
A. 95%; indicating an underwriting profit ✓
B. 95%; indicating an underwriting loss
C. 35%; indicating a significant underwriting deficit
D. 65%; the expense ratio is not included in the combined ratio
Correct — A. Combined ratio = Loss ratio + Expense ratio = 65% + 30% = 95%. A combined ratio below 100% indicates an underwriting profit — the insurer collected more in premiums than it paid out in claims and expenses.
Safety An independent adjuster is retained to settle a large commercial fire loss. Who does the independent adjuster represent?
A. The Alberta Insurance Council
B. The insured exclusively
C. Both the insurer and insured equally
D. The insurer that engaged their services ✓
Correct — D. An independent adjuster is a self-employed professional contracted by an insurer to investigate and settle claims on the insurer's behalf. Unlike a public adjuster (who represents the insured), an independent adjuster works for and reports to the insurer.
Regs Which type of property insurance policy covers losses from any peril unless that peril is specifically excluded in the policy wording?
A. All-risks (open perils) policy ✓
B. Catastrophe policy
C. Named perils policy
D. Specified perils policy
Correct — A. An all-risks or open perils policy provides the broadest property coverage, protecting against any cause of loss not specifically excluded. Named perils policies, by contrast, cover only perils explicitly listed.
Ops A property insurer collects $5,000,000 in written premiums and has $500,000 of unearned premiums at year-end. What are the earned premiums for the year?
A. $500,000
B. $5,500,000
C. $5,000,000
D. $4,500,000 ✓
Correct — D. Earned premiums = Written premiums − Unearned premiums = $5,000,000 − $500,000 = $4,500,000. Unearned premiums represent coverage not yet provided and are excluded from earned premium calculations.
About the Alberta Insurance Level 1 Prep test
The Alberta Insurance Level 1 Prep measures the Finance & Accounting knowledge you'll actually rely on — tested the way the real exam asks it, not with trick questions. Practising real Alberta Insurance Level 1 Prep-style questions, then sitting a full timed mock exam, is the fastest way to walk in knowing you'll pass.
You will be tested on
- The core topics and terminology you'll be tested on
- Rules, standards and best-practice procedures
- Real-world scenarios and how to respond
- Common mistakes and how to avoid them
How TheoryPractice helps you pass
- Real exam-style questions with instant, detailed explanations
- Full timed mock exams that mirror the real test format
- Flashcards & quiz modes from the same question bank
- Progress tracking so you know exactly when you're ready
Topics in this question bank
The core topics and terminology you'll be tested on
Rules, standards and best-practice procedures
Real-world scenarios and how to respond
Common mistakes and how to avoid them
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