IIC Updated C11 Exam Questions and Answers by layth

Net income is calculated by subtractingexpensesfromrevenues:

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

For this retailer:

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

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

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

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

Intermediaries—such as brokers and agents—play an essential role in helping consumers navigate insurance products. One of their primary functions is toidentify the client’s needs, assess exposures, and recommend suitable insurance solutions. This includes advising on appropriate limits, optional coverages, deductibles, and risk management considerations. This consultative role is fundamental to the value they provide.

Option A is incorrect because brokers representmultiple insurersbutnot all insurers; agents often represent only one. Option B is incorrect—intermediaries do not have unlimited liability; their liability relates to negligence or errors in service. Option D is incorrect—reinsurance arrangements are made between insurers and reinsurers, not individual clients. Therefore, the correct reason a policyholder uses an intermediary isC.

A stock insurance company operates with the same capital structure as other conventional for-profit corporations. Ownership is represented by shares of stock, held by shareholders who supply capital and expect a return on investment. Profits are distributed as dividends or reinvested into the company. This structure aligns closely with traditional corporate financial frameworks in Canadian commerce.

Option B, a captive company, is owned by a parent business to insure its own risks—not structured like a general capital corporation. Option C, a co-operative company, is owned by its policyholders or members, not shareholders. Option D (factory mutual company) refers to a mutual insurer owned by its policyholders and requiring high loss-prevention standards.

Thus, the only insurer type that mirrors the capital structure of typical Canadian corporate enterprises is the stock company, making A correct.

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

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

Step-by-step:

Replacement cost of loss: $500,000

Less salvage value retained by insured: $4,000

Subtotal: $496,000

Less deductible: $1,000

Net settlement: $495,000

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