Quiz
Basic Insurance Concepts & Principles - exampdfs 01
Questions in this quiz (50)
1The Insurance market comprises:
1) buyers
2) sellers
3) intermediaries- A1, 2
- B1, 3
- C2, 3
- D1, 2, 3
2An example of a Seller in an insurance market is/are:
- ALife Insurance Association
- BInsurance companies
- CInsurance agents
- DInsurance brokers
3Which of the following is not classified as Commercial General Insurance?
- AProfessional Indemnity Insurance
- BMarine Cargo Insurance
- CPersonal Liability Insurance
- DWork Injury Compensation Insurance
4Microinsurance provides a variety of different risks, including illnesses, accidental bodily injuries, death and property loss, designed for the affordability and accessibility to low-income households.
- ATrue
- BFalse
5It is mandatory for Takaful insurance to be compliant with Shariah and the Islamic law.
- ATrue
- BFalse
6Which of the following is an example of pure risk?
- ABeing robbed
- BRunning a business
- CEarthquake
- DDriving a car
7Which of the following is NOT an example of fundamental risk?
- AWar
- BFlood
- CDriving a car
- DUnemployment
8Which of the following is NOT a category of any type of insurance contract?
- AContract of Insurability
- BContract of Indemnity
- CValued contract
- DBenefit contract
9Which of the following is NOT commonly insured under a valued contract?
- AMarine insurance
- BAntique insurance
- CJewelry Insurance
- DPersonal Accident Insurance
10Which of the following is commonly classified as a contract of indemnity?
- AMarine insurance
- BEndowment insurance
- CFire Insurance
- DPersonal Accident Insurance
11Which of the following is commonly classified as a benefit contract?
- AMarine insurance
- BAntique insurance
- CFire Insurance
- DPersonal Accident Insurance
12Which of the following types of loss is NOT insurable?
- ALoss that is accidental
- BLoss that is definite
- CLoss that creates a burden
- DLoss that happens to a large number of insureds at the same time
13What is a peril?
- AAn event or occurrence which causes a loss, an injury or damage
- BAn event or occurrence that creates or increases the risk of loss
- CAn event or occurrence whereby people, through their careless or irresponsible action creates or increases the risk of loss
- DAll of the others
14In insurance, which of the following is NOT a type of hazard?
- AMoral hazard
- BPhysical hazard
- CAccidental hazard
- DNone of the others
15A moral hazard can involve a situation in which a person engineers a loss on purpose in order to make a false claim against an insurance company.
- ATrue
- BFalse
16Which of the following is NOT a method of risk control?
- AAvoidance
- BConfine
- CRetention
- DTransfer
17Which of the following is a type of risk retention whereby one is aware of a risk and intentionally retains it, or a portion of it:
- AActive retention
- BPassive retention
- CSelf retention
- DInsurance retention
18Which of the following clauses are usually used in a contract so that one party will assume legal liability on behalf of another party?
- AAssumption clause
- BZero-liability clause
- CZero-responsibility clause
- DHold-harmless clause
19Which of the following is a method to use such that a risk and its potential financial consequences can be transferred to another party without the use of insurance?
- ARisk transfer
- BRisk pooling
- CNon-insurance transfer
- DNon-insurance pooling
20Non-insurance transfer methods are usually used in which type of contacts?
- ABuilding construction
- BPersonal Accident Insurance
- CMotor Vehicle Insurance
- DNone of the others
21Which of the following are benefits of insurance?
- AEnhance provision of credit facilities
- BStimulates business enterprise
- CEncourages investments
- DAll of the others
22What is insurable interest?
- AThe legal right to insure
- BThe amount of compensation
- CThe real reason for the loss
- DThe insured
23What is subrogation?
- AThe legal right to insure
- BThe legal right to recovery
- CThe real reason for the loss
- DThe amount of compensation
24Which of the following is NOT TRUE about 'common law'?
- AIt is sometimes called 'unwritten law'
- BIt consists of generally accepted rules and requirements that a civilized society will consider automatic
- CIt can be modified or abolished by statute law
- DIt cannot be modified by the mutual agreement of parties to a contract
25Which of the following is NOT essential to insurable interest?
- AThere must be some property, rights, interest or potential liability capable of being insured
- BThe property, rights, interest or potential liability must be the subject matter of the insurance
- CThe insured must not stand in a relationship, recognized by law, with the subject matter of the insurance
- DThe proposer must benefit from the continued existence of the subject matter of the contract or be prejudiced by its loss
26Which of the following types of insurance contracts do not need proof of existence of insurable interest at the time that the policy is issued?
- ANon-life and non-marine contracts
- BLife insurance
- CMarine insurance
- DNone of the others
27Which of the following relationships do not have an insurable interest?
- AHusband and wife
- BEmployee and employer
- CDebtor and creditor
- DNone of the others
28The doctrine of utmost good faith imposes which of the following duties on the parties to the contract?
- A1) A duty not to misrepresent any matter relating to the insurance
- B2) A duty to disclose all material facts relating to the contract
- CBoth 1) and 2)
- DNone of the others
29Which of the following can be influenced by a material fact?
- AAn underwriter's decision to accept a risk
- BPremium
- CTerms and conditions of the insurance contract
- DAll of the others
30Facts of law do not need to be disclosed as material facts because everyone is expected to know the law.
- ATrue
- BFalse
31Duty of disclosure commences at all of the following times EXCEPT the:
- ABeginning of negotiations
- BInception of policy
- CAfter inception
- DNone of the others
32Duty of disclosure arises under:
- A1) Common law
- B2) The policy terms
- CBoth 1) and 2)
- DNone of the others
33Duty of disclosure is only applicable to the:
- AInsured
- BInsurer
- CBoth Insured and Insurer
- DNone of the others
34For a fact to be considered as a misrepresentation, it must:
- Ainduce the contract
- Bnot be made by a party to the contract
- Cnot cause some loss or disadvantage to the person who has relied upon it
- DAll of the others
35Which of the following is NOT a type of misrepresentation?
- AFraudulent
- BInnocent
- CMaterial
- DNegligent
36A proposer applying for life insurance says that he is in good health when he knows that he is suffering from a serious illness is guilty of:
- Amisrepresentation
- Bnon-disclosure
- CBoth misrepresentation and non-disclosure
- DNone of the others
37Fraudulent non-disclosure is also known as:
- AConcealment
- BMitigation
- CNegligence
- DSubrogation
38If innocent misrepresentation by the insured is present, the insurer has the right to:
- AClaim damages
- BKeep any premium paid
- CAllow the contract to stand
- DAll of the others
39An insurer can refuse to pay a particular claim but at the same time allow the contract to stand only if:
- A1) The insured is guilty of fraudulent misrepresentation
- B2) The insured is guilty of innocent misrepresentation
- CBoth 1) and 2)
- DNone of the others
40Which of the following is a method by which an insurer can provide the insured with the necessary indemnity?
- ARepair
- BReplacement
- CReinstatement
- DAll of the others
41The principle of indemnity can be applied to which of the following classes of insurance?
1) Property insurance
2) Pecuniary insurance
3) Personal Accident insurance
4) Life insurance- A1) and 2)
- B2), 3), 4)
- C3) and 4)
- DAll of them
42When insuring machinery and equipment, which of the following is TRUE about how a second-hand market will affect the amount insured?
- A1) If there is a ready second-hand market, the indemnity is the cost of the second-hand item less any additional transport and installation costs
- B2) If there is no second-hand market, the indemnity is the cost of repair or replacement less an allowance for wear and tear, if applicable
- CBoth 1) and 2)
- DNone of the others
43Which of the following falls under Pecuniary Insurance?
- ALife insurance
- BPersonal Accident insurance
- CTheft insurance
- DLiability insurance
44Which of the following are factors that limit the amount of indemnity?
- AAverage clause
- BAgreed Value clause
- CReinstatement clause
- D"New for old" clause
45Which of the following are extensions that increase the amount of indemnity?
- AFranchise
- BAverage clauses
- CAgreed Value clause
- DExcess
46Oriental Trading Company had a fire in its insured shop. They claimed a loss of $5000 against its Fire Insurance policy. The loss adjuster who was instructed by the insurer was satisfied that the loss claimed was correct. However the loss adjuster reported that, in his opinion, there was at least $10,000 in stock but only $8000 in insurance cover. If the policy was NOT subject to average clause, how much should the insurer pay?
- A$2000
- B$4000
- C$5000
- D$8000
47New World Trading Company had a fire in its insured shop. They claimed a loss of $9000 against the Fire Insurance policy. The loss adjuster who was instructed by the insurer was satisfied that the loss claimed was correct. However the loss adjuster reported that, in his opinion, there was at least $30,000 in stock but only $20,000 in insurance cover. If the policy was subject to average clause, how much should the insurer pay?
- A$3000
- B$6000
- C$9000
- D$11000
48Which of the following is similar to an Excess but once the Excess is exceeded, the loss is payable in full?
- AAverage Clause
- BFranchise
- CLimit of Liability
- DDeductible
49Extensions are added to a policy, so that:
- AThe insured can recover more than a strict indemnity
- BThe insurer pays less than the strict indemnity
- CThe premium is lower
- DThe policy can be extended to cover for a longer period of time
50Which of the following clauses is NOT categorized as an extension?
- AReinstatement Clause
- B"New for Old" Clause
- CLimit of Liability Clause
- DAgreed Value Clause
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- Basic Insurance Concepts & Principles - exampdfs 01
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