Registered Insurance Brokers of Ontario (RIBO) Practice Exam

What type of loss is not covered under all perils?

1. Damage from a hit-and-run accident

2. Loss from selling the auto to a stranger whose cheque bounces

3. Theft of the vehicle

4. Accidental collision with another vehicle

The correct answer is: Loss from selling the auto to a stranger whose cheque bounces

The reasoning for recognizing that loss from selling the auto to a stranger whose cheque bounces is not covered under an all-perils policy lies in the specific terms and conditions of insurance coverage. All-perils policies generally cover damages to the insured vehicle from a wide variety of events, including theft, hit-and-run accidents, and collisions with other vehicles. However, the situation described in which the vehicle is sold but payment is not received due to a bounced cheque involves a contractual issue rather than a physical loss or damage to the vehicle itself. Insurance coverage typically does not extend to financial losses from transactions or agreements, such as selling a vehicle, as these types of losses arise from a failure to meet the terms of a sale rather than from an insurable peril. In contrast, damages resulting from an accident or theft pertain to the physical state of the vehicle and fall squarely under the protective umbrella of an all-perils insurance policy. This distinction underscores why the specific case of a bounced cheque does not align with the types of losses that are typically insured.