Basic Insurance Concepts & Principles - exampdfs 02

Question 1 of 50

1

Which of the following clauses is useful for insuring antiques?

Select one of the following:

Reinstatement Clause
"New for Old " Clause
Limit of Liability Clause
Agreed Value Clause

Explanation

Question 2 of 50

1

Which of the following is most often included in a Householder's Insurance policy?

Select one of the following:

"New for Old" Clause
Agreed Value Clause
Deductible Clause
Franchise Clause

Explanation

Question 3 of 50

1

What of the following is defined as "the right of one person (the insurer) to take over the rights of another (the insured)"?

Select one of the following:

Subrogation
Sublet
Right of Lien
Assignment

Explanation

Question 4 of 50

1

Which of the following is used to make sure that an insured person does not get more than an indemnity by claiming for the same loss or damage from both the insurance policy and another source or sources?

Select one of the following:

Subrogation
Sublet
Right of Lien
Assignment

Explanation

Question 5 of 50

1

Under common law, the insurer must ________ the insured before they can exercise subrogation rights.

Select one of the following:

insure
inform
indemnify
None of the others

Explanation

Question 6 of 50

1

With regards to subrogation, if there is any surplus after the insurers have recovered their money, the ________ is entitles to keep it.

Select one of the following:

insurer
insured
split equality amongst the insurer and the insured
None of the others

Explanation

Question 7 of 50

1

Subrogation is applicable only to:

Select one of the following:

Contracts of Indemnity
Motor Insurance
Reinsurance
Marine Cargo Insurance

Explanation

Question 8 of 50

1

Which of the following situations is also known as ex-gratia payment?

Select one of the following:

A payment made by an insurer outside the terms of the policy
The premiums an insurer pays to a reinsurer
The premiums forfeited by the insurer due to fraud by the insured
The payment a third party (in the case of subrogation) is obligated to pay

Explanation

Question 9 of 50

1

Subrogation rights most frequently arise in:

Select one of the following:

tort
Contract
reinsurance
All of the others

Explanation

Question 10 of 50

1

Waiver of subrogation rights most frequently arise in:

Select one of the following:

Reinsurance
Life insurance
Motor insurance
All of ther others

Explanation

Question 11 of 50

1

In common law, which requirement must be satisfied before contribution arises?

Select one of the following:

two or more policies of indemnity must exist
the policies must cover a common interest
the policies must be liable for the loss
All of the others

Explanation

Question 12 of 50

1

Which of the following clauses when added to a policy will cause the policy not to contribute if there is another insurance in force?

Select one of the following:

Non-Contribution Clause
Cancel-out Clause
Common Interest Clause
Basis of Contribution Clause

Explanation

Question 13 of 50

1

Which of the following is NOT a category of peril?

Select one of the following:

Insured Peril
Pecuniary Peril
Unnamed Peril
Exluded Peril

Explanation

Question 14 of 50

1

Which of the following is TRUE regarding a Fire Insurance policy which excludes damage from explosion?

Select one of the following:

A falling tree branch lands on some electrical circuitry and causes an electrical fault, which in turns starts a fire. The fire damage is covered.
The fire reaches a gas cylinder and causes an explosion. The resulting damage is not covered.
The falling tree branch damages part of the property. The resulting damage is not covered.
All of the others.

Explanation

Question 15 of 50

1

Suppose a Householder's Insurance policy covers a direct physical loss to a property resulting from fire or lightning. A fire occurred in a bedroom of a house. Fireman sprayed the other rooms to keep the fire from spreading. The water causes damage to the furniture, antiques, etc. In such a case:

Select one of the following:

the entire loss is covered, including the water damage
the entire loss is covered, excluding the water damage
nothing is covered
None of the others

Explanation

Question 16 of 50

1

Duties of an Agent to the Principal include all the following except:

Select one of the following:

Obey the principal's instruction under all circumstances
Act in good faith towards the principal
Account for money received on behalf of the principal
Exercise proper care and skill

Explanation

Question 17 of 50

1

An agent should not delegate his duties except where the delegation:

Select one of the following:

is expressly consented by the principal
is to be implied from the circumstances of the case
relates to some purely administrative act for which no special skill or discretion is required
All of the others

Explanation

Question 18 of 50

1

Agents must act within the scope of their authority which can be classified into all of the following except:

Select one of the following:

actual authority
implied authority
temporary authority
apparent authority

Explanation

Question 19 of 50

1

Which of the following authorities is exercised when an insurance agent collects the premium from the insured?

Select one of the following:

express authority
apparent authority
customary authority
implied authority

Explanation

Question 20 of 50

1

Which of the following authorities is exercised when a broker negotiates with the insurer on the insured's behalf without given authority?

Select one of the following:

express authority
apparent authority
customary authority
implied authority

Explanation

Question 21 of 50

1

Apparent authority is also known as:

Select one of the following:

Express authority
Implied authority
Usual authority
Ostensible authority

Explanation

Question 22 of 50

1

Where an agent has acted outside the scope of what is permitted in the terms of the agency agreement, and the principal accepts the acts as having been done on his behalf, this is called:

Select one of the following:

Waiver
Estoppel
Ratification
None of the others

Explanation

Question 23 of 50

1

The following are rules in relation to a valid ratification, except

Select one of the following:

The agent who performed the act must have purported to act on behalf of the principal
The principal should only ratify the affected parts of the contract
The client must have believed that he was dealing with an authorized agent of the principal
The agent must have represented himself as an agent of the principal

Explanation

Question 24 of 50

1

The voluntary relinquishment of a known legal right is known as:

Select one of the following:

Waiver
Estoppel
Retification
None of the others

Explanation

Question 25 of 50

1

Leonard has a motor insurance policy and its premium is due. He calls the insurance agent and asks for an extension of time. The insurance agent assured him that the insurer has a 10 day grace period for overdue premiums. If Leonard has an accident during the grace period, the insurer cannot deny liability, because of the law of ________, designed to prevent persons from changing their minds to the detriment of another party.

Select one of the following:

Indemnity
Estoppel
Right of Lien
Ratification

Explanation

Question 26 of 50

1

If an agent incurs liability or pays out money in the performance as an agent, he has a right to be indemnified by the principal except when:

Select one of the following:

his act is not authorized by the principal
he is in breach of his duties as an agent
he incurs money or expends money solely as a result of his own fault
All of the others

Explanation

Question 27 of 50

1

Which of the following describes the Right of Lien?

Select one of the following:

An agent may have the right to retain goods belonging to his principal if there is any money outstanding in his favour
A principal may have the right to revoke an agent's authority
An agent may have the right of renouncing the agency
An agent may have the right to act as a middle-man between the principal and a third-party

Explanation

Question 28 of 50

1

An agency may be terminated by which of the following acts?

Select one of the following:

Completion of the business or specific act
Agreement between parties to the contract
Death of either the principal or the agent
All of the others

Explanation

Question 29 of 50

1

Which of the following is NOT true with regards to the role of agent during claims?

Select one of the following:

The agent must give prompt advice to the insured of the claims requirement
The agent must be careful not to give any indication of acceptance or rejection of the claim
The agent cannot inform the insurer of any potential claims without consent from the insured
The agent must make clear to the insured that the insurer's investigation and processing of a claim is not prejudiced

Explanation

Question 30 of 50

1

Which of the following is NOT true about the description or definition of a contract?

Select one of the following:

An agreement enforceable by law
A legally binding agreement between two or more parties
An agreement involving a promise or a set of promises to perform one or more acts whereby the promise must be made by all parties of the contract
An agreement governing the obligations of the insurer and the rights of the insured.

Explanation

Question 31 of 50

1

Which of the following are elements for a contract to be valid?
1) Intention to create legal ralationship
2) Offer and acceptance
3) Consideration
4) Capacity to contract

Select one of the following:

1) and 2)
1) and 4)
1), 2), and 4)
All of them

Explanation

Question 32 of 50

1

Which of the following is NOT a characteristic of group insurance?

Select one of the following:

There is a master contract
There is an experience rating
There is no eligibility requirements
It is cost effective

Explanation

Question 33 of 50

1

The amount returned by an insurer to a group policyholder when the claims experienced of a particular group has been more favourable than anticipated is known as the:

Select one of the following:

Excess
Experience refund
Voluntary benefits
No-claim discount

Explanation

Question 34 of 50

1

Which of the following is an advantage of a voluntary group insurance compared to a compulsory one?

Select one of the following:

Ease of administration since there is no payroll deduction to monitor
Lower cost owing to less administrative work involved
Generates interest and appreciation from the participating employees in the insurance plan
Greater pooling effect or risks

Explanation

Question 35 of 50

1

Third party policies do not require insurable interest between the proposer and insured.

Select one of the following:

True
False

Explanation

Question 36 of 50

1

What is a Cover Note?

Select one of the following:

A document highlighting any additional coverage added to the policy
A temporary cover before an insurance policy is issued
The cover page of an insuranc policy
A note from the insurer to the insured

Explanation

Question 37 of 50

1

Certificate of Insurance are normally used in all the following except:

Select one of the following:

Life insurance
Work injury compensation
Motor insurance
Marine insurance

Explanation

Question 38 of 50

1

The following is true of a cover note except:

Select one of the following:

It is valid only for a certain period
It is subject to the usual terms and conditions of the insurance policy for that class of business
It is subject to any further special clauses (if applicable)
It is subject to the insurance policy being in force and issued

Explanation

Question 39 of 50

1

The certificate of insurance for motor insurance must be kept by the ______ at all times.

Select one of the following:

Traffic Police
Government
Motorist
Insurer

Explanation

Question 40 of 50

1

In marine insurance, insureds have regular shipments of cargo and it is sometimes inconvenient for the insurer to issue an insurance policy giving the details of all the classes for each and every shipment. What sort of Master policy is issued to solve this problem?

Select one of the following:

Broad cover
Miscellaneous cover
Open cover
All cover

Explanation

Question 41 of 50

1

What is the 'contra proferetum' rule?

Select one of the following:

The policy must be issued within the fixed period of time as promised by the insurer
It is a rule in marine insurance that the policy must cover broad definitions of the quality of the vessels, basis of valuation and limits, together with a rating structure
The responsibility of the insured to make sufficient copies of a Certificate of Insurance for display at all business premises
The person drawing up a legal document is responsible for any defects in it and cannot profit from such defects

Explanation

Question 42 of 50

1

What is the Preamble Clause?

Select one of the following:

This clause sets out in details, precisely what the policy is insuring
This clause states the parties to the contract
This clause states that it is the insured's responsibility to establish that a loss falls within the policy contract
This clause sets of the exlucsions or exceptions in a policy document

Explanation

Question 43 of 50

1

Which type of warranties do not appear in the policy but are understood to automatically apply in the contract of insurance?

Select one of the following:

Express Warranties
Implied Warranties
Both Express Warranties and Implied Warranties
None of the others

Explanation

Question 44 of 50

1

The statement "In witness whereof, this Policy has been signed by and on behalf of the Company", is known is:

Select one of the following:

Attestation clause
Express Warranty
Implied Warranty
Endorsement

Explanation

Question 45 of 50

1

Conditions precedent to liability are conditions which must be fulfilled:

Select one of the following:

before the contract can become valid
if the contract is to continue once it becomes binding
before the insured is legally entitled to recover under the contract
All of the others

Explanation

Question 46 of 50

1

An insured has a policy with Insurer X for $75,000 and Insurer Y for $25,000. A loss arises to the sum of S$40,000, under the Independent Liability method of calculation, how much should Insurer X pay for?

Select one of the following:

$10,000
$15,385
$24,615
$30,000

Explanation

Question 47 of 50

1

An insured has a policy with Insurer X for $75,000 and Insurer Y for $25,000. A loss arises to the sum of S$40,000, under the Respective Sums Insured, how much should Insurer Y pay for?

Select one of the following:

$10,000
$15,385
$24,615
$30,000

Explanation

Question 48 of 50

1

An agreement whereby one or more reinsurers automatically accept all reinsurance which falls within pre-detemined limits is known as:

Select one of the following:

Facultative reinsurance
Treaty reinsurance
proportional reinsurance
Non-proportional reinsurance

Explanation

Question 49 of 50

1

An insurer insures a risk on a sum insured of $10M and his retention on his risk is $2M. It reinsures the risk under a Facultative Excess of Loss cover of $8M in excess of $2M. If the loss is $5M, what is payable by the reinsurer?

Select one of the following:

Nothing
$2M
$3M
$5M

Explanation

Question 50 of 50

1

An insurer insures a risk on a sum insured of $10M and his retention on this risk is $2M. It reinsures the risk under a Facultative Excess of Loss cover of $8M in excess of $2M. If the loss is $1M, what is payable by the insurer?

Select one of the following:

Nothing
$1M
$3M
$6M

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