Basic Insurance Concepts & Principles - exampdfs 02

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Basic Insurance Concepts & Principles - exampdfs 02
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Question 1

Question
Which of the following clauses is useful for insuring antiques?
Answer
  • Reinstatement Clause
  • "New for Old " Clause
  • Limit of Liability Clause
  • Agreed Value Clause

Question 2

Question
Which of the following is most often included in a Householder's Insurance policy?
Answer
  • "New for Old" Clause
  • Agreed Value Clause
  • Deductible Clause
  • Franchise Clause

Question 3

Question
What of the following is defined as "the right of one person (the insurer) to take over the rights of another (the insured)"?
Answer
  • Subrogation
  • Sublet
  • Right of Lien
  • Assignment

Question 4

Question
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?
Answer
  • Subrogation
  • Sublet
  • Right of Lien
  • Assignment

Question 5

Question
Under common law, the insurer must ________ the insured before they can exercise subrogation rights.
Answer
  • insure
  • inform
  • indemnify
  • None of the others

Question 6

Question
With regards to subrogation, if there is any surplus after the insurers have recovered their money, the ________ is entitles to keep it.
Answer
  • insurer
  • insured
  • split equality amongst the insurer and the insured
  • None of the others

Question 7

Question
Subrogation is applicable only to:
Answer
  • Contracts of Indemnity
  • Motor Insurance
  • Reinsurance
  • Marine Cargo Insurance

Question 8

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

Question 9

Question
Subrogation rights most frequently arise in:
Answer
  • tort
  • Contract
  • reinsurance
  • All of the others

Question 10

Question
Waiver of subrogation rights most frequently arise in:
Answer
  • Reinsurance
  • Life insurance
  • Motor insurance
  • All of ther others

Question 11

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

Question 12

Question
Which of the following clauses when added to a policy will cause the policy not to contribute if there is another insurance in force?
Answer
  • Non-Contribution Clause
  • Cancel-out Clause
  • Common Interest Clause
  • Basis of Contribution Clause

Question 13

Question
Which of the following is NOT a category of peril?
Answer
  • Insured Peril
  • Pecuniary Peril
  • Unnamed Peril
  • Exluded Peril

Question 14

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

Question 15

Question
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:
Answer
  • 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

Question 16

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

Question 17

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

Question 18

Question
Agents must act within the scope of their authority which can be classified into all of the following except:
Answer
  • actual authority
  • implied authority
  • temporary authority
  • apparent authority

Question 19

Question
Which of the following authorities is exercised when an insurance agent collects the premium from the insured?
Answer
  • express authority
  • apparent authority
  • customary authority
  • implied authority

Question 20

Question
Which of the following authorities is exercised when a broker negotiates with the insurer on the insured's behalf without given authority?
Answer
  • express authority
  • apparent authority
  • customary authority
  • implied authority

Question 21

Question
Apparent authority is also known as:
Answer
  • Express authority
  • Implied authority
  • Usual authority
  • Ostensible authority

Question 22

Question
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:
Answer
  • Waiver
  • Estoppel
  • Ratification
  • None of the others

Question 23

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

Question 24

Question
The voluntary relinquishment of a known legal right is known as:
Answer
  • Waiver
  • Estoppel
  • Retification
  • None of the others

Question 25

Question
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.
Answer
  • Indemnity
  • Estoppel
  • Right of Lien
  • Ratification

Question 26

Question
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:
Answer
  • 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

Question 27

Question
Which of the following describes the Right of Lien?
Answer
  • 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

Question 28

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

Question 29

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

Question 30

Question
Which of the following is NOT true about the description or definition of a contract?
Answer
  • 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.

Question 31

Question
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
Answer
  • 1) and 2)
  • 1) and 4)
  • 1), 2), and 4)
  • All of them

Question 32

Question
Which of the following is NOT a characteristic of group insurance?
Answer
  • There is a master contract
  • There is an experience rating
  • There is no eligibility requirements
  • It is cost effective

Question 33

Question
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:
Answer
  • Excess
  • Experience refund
  • Voluntary benefits
  • No-claim discount

Question 34

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

Question 35

Question
Third party policies do not require insurable interest between the proposer and insured.
Answer
  • True
  • False

Question 36

Question
What is a Cover Note?
Answer
  • 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

Question 37

Question
Certificate of Insurance are normally used in all the following except:
Answer
  • Life insurance
  • Work injury compensation
  • Motor insurance
  • Marine insurance

Question 38

Question
The following is true of a cover note except:
Answer
  • 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

Question 39

Question
The certificate of insurance for motor insurance must be kept by the ______ at all times.
Answer
  • Traffic Police
  • Government
  • Motorist
  • Insurer

Question 40

Question
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?
Answer
  • Broad cover
  • Miscellaneous cover
  • Open cover
  • All cover

Question 41

Question
What is the 'contra proferetum' rule?
Answer
  • 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

Question 42

Question
What is the Preamble Clause?
Answer
  • 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

Question 43

Question
Which type of warranties do not appear in the policy but are understood to automatically apply in the contract of insurance?
Answer
  • Express Warranties
  • Implied Warranties
  • Both Express Warranties and Implied Warranties
  • None of the others

Question 44

Question
The statement "In witness whereof, this Policy has been signed by and on behalf of the Company", is known is:
Answer
  • Attestation clause
  • Express Warranty
  • Implied Warranty
  • Endorsement

Question 45

Question
Conditions precedent to liability are conditions which must be fulfilled:
Answer
  • 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

Question 46

Question
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?
Answer
  • $10,000
  • $15,385
  • $24,615
  • $30,000

Question 47

Question
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?
Answer
  • $10,000
  • $15,385
  • $24,615
  • $30,000

Question 48

Question
An agreement whereby one or more reinsurers automatically accept all reinsurance which falls within pre-detemined limits is known as:
Answer
  • Facultative reinsurance
  • Treaty reinsurance
  • proportional reinsurance
  • Non-proportional reinsurance

Question 49

Question
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?
Answer
  • Nothing
  • $2M
  • $3M
  • $5M

Question 50

Question
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?
Answer
  • Nothing
  • $1M
  • $3M
  • $6M
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