Alberta General Insurance Level 1 Practice Exam

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What is the relationship between insurance companies and insureds through brokers?

  1. Broker-directed policies without insurer consent

  2. Limited liability on behalf of insurance companies

  3. Obligated to insureds through contracts created by agents/brokers

  4. No direct obligation to insureds

The correct answer is: Obligated to insureds through contracts created by agents/brokers

Insurance companies and insureds have an obligated relationship through contracts created by agents/brokers. This means that the insurance company has a direct responsibility to provide coverage as outlined in the insurance policy, while the insured is responsible for paying premiums and adhering to the terms of the contract. Options A and B are incorrect because they suggest that brokers have full control over the policies and liability for the insurance companies, which is not the case. Option D is also incorrect because insurance companies do have an obligation to the insured through the contract created by the broker.

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