Registered Insurance Brokers of Ontario (RIBO) Practice Exam

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What is the primary function of Statutory Conditions in an insurance policy?

To dictate premium pricing
To outline legal obligations of both parties
To provide additional coverage options
To specify settlement procedures

The correct answer is: To outline legal obligations of both parties

The primary function of Statutory Conditions in an insurance policy is to outline the legal obligations of both parties involved in the insurance contract. These conditions are established by law and serve to ensure that both the insurer and the insured understand their rights and duties. For instance, they often cover aspects such as notifications of loss, the duty to cooperate with the insurer, and the obligations related to the payment of premiums. Statutory Conditions help maintain a fair balance in the relationship between the insurer and the insured, providing a framework that governs their interactions and ensuring compliance with relevant legislation. By clearly outlining these obligations, they enhance the clarity and enforceability of the insurance agreement. In contrast, the option related to dictating premium pricing is not accurate as premium pricing is determined by the insurer's underwriting criteria and market conditions rather than statutory conditions. Providing additional coverage options pertains to the customization of a policy, while specifying settlement procedures relates more to claims handling rather than the foundational obligations defined in the Statutory Conditions.