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Basic Insurance Concepts & Principles - exampdfs 01

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Basic Insurance Concepts & Principles - exampdfs 01

Question 1 of 50

1

The Insurance market comprises:
1) buyers
2) sellers
3) intermediaries

Select one of the following:

  • 1, 2

  • 1, 3

  • 2, 3

  • 1, 2, 3

Explanation

Question 2 of 50

1

An example of a Seller in an insurance market is/are:

Select one of the following:

  • Life Insurance Association

  • Insurance companies

  • Insurance agents

  • Insurance brokers

Explanation

Question 3 of 50

1

Which of the following is not classified as Commercial General Insurance?

Select one of the following:

  • Professional Indemnity Insurance

  • Marine Cargo Insurance

  • Personal Liability Insurance

  • Work Injury Compensation Insurance

Explanation

Question 4 of 50

1

Microinsurance 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.

Select one of the following:

  • True
  • False

Explanation

Question 5 of 50

1

It is mandatory for Takaful insurance to be compliant with Shariah and the Islamic law.

Select one of the following:

  • True
  • False

Explanation

Question 6 of 50

1

Which of the following is an example of pure risk?

Select one of the following:

  • Being robbed

  • Running a business

  • Earthquake

  • Driving a car

Explanation

Question 7 of 50

1

Which of the following is NOT an example of fundamental risk?

Select one of the following:

  • War

  • Flood

  • Driving a car

  • Unemployment

Explanation

Question 8 of 50

1

Which of the following is NOT a category of any type of insurance contract?

Select one of the following:

  • Contract of Insurability

  • Contract of Indemnity

  • Valued contract

  • Benefit contract

Explanation

Question 9 of 50

1

Which of the following is NOT commonly insured under a valued contract?

Select one of the following:

  • Marine insurance

  • Antique insurance

  • Jewelry Insurance

  • Personal Accident Insurance

Explanation

Question 10 of 50

1

Which of the following is commonly classified as a contract of indemnity?

Select one of the following:

  • Marine insurance

  • Endowment insurance

  • Fire Insurance

  • Personal Accident Insurance

Explanation

Question 11 of 50

1

Which of the following is commonly classified as a benefit contract?

Select one of the following:

  • Marine insurance

  • Antique insurance

  • Fire Insurance

  • Personal Accident Insurance

Explanation

Question 12 of 50

1

Which of the following types of loss is NOT insurable?

Select one of the following:

  • Loss that is accidental

  • Loss that is definite

  • Loss that creates a burden

  • Loss that happens to a large number of insureds at the same time

Explanation

Question 13 of 50

1

What is a peril?

Select one of the following:

  • An event or occurrence which causes a loss, an injury or damage

  • An event or occurrence that creates or increases the risk of loss

  • An event or occurrence whereby people, through their careless or irresponsible action creates or increases the risk of loss

  • All of the others

Explanation

Question 14 of 50

1

In insurance, which of the following is NOT a type of hazard?

Select one of the following:

  • Moral hazard

  • Physical hazard

  • Accidental hazard

  • None of the others

Explanation

Question 15 of 50

1

A 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.

Select one of the following:

  • True
  • False

Explanation

Question 16 of 50

1

Which of the following is NOT a method of risk control?

Select one of the following:

  • Avoidance

  • Confine

  • Retention

  • Transfer

Explanation

Question 17 of 50

1

Which 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:

Select one of the following:

  • Active retention

  • Passive retention

  • Self retention

  • Insurance retention

Explanation

Question 18 of 50

1

Which of the following clauses are usually used in a contract so that one party will assume legal liability on behalf of another party?

Select one of the following:

  • Assumption clause

  • Zero-liability clause

  • Zero-responsibility clause

  • Hold-harmless clause

Explanation

Question 19 of 50

1

Which 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?

Select one of the following:

  • Risk transfer

  • Risk pooling

  • Non-insurance transfer

  • Non-insurance pooling

Explanation

Question 20 of 50

1

Non-insurance transfer methods are usually used in which type of contacts?

Select one of the following:

  • Building construction

  • Personal Accident Insurance

  • Motor Vehicle Insurance

  • None of the others

Explanation

Question 21 of 50

1

Which of the following are benefits of insurance?

Select one of the following:

  • Enhance provision of credit facilities

  • Stimulates business enterprise

  • Encourages investments

  • All of the others

Explanation

Question 22 of 50

1

What is insurable interest?

Select one of the following:

  • The legal right to insure

  • The amount of compensation

  • The real reason for the loss

  • The insured

Explanation

Question 23 of 50

1

What is subrogation?

Select one of the following:

  • The legal right to insure

  • The legal right to recovery

  • The real reason for the loss

  • The amount of compensation

Explanation

Question 24 of 50

1

Which of the following is NOT TRUE about 'common law'?

Select one of the following:

  • It is sometimes called 'unwritten law'

  • It consists of generally accepted rules and requirements that a civilized society will consider automatic

  • It can be modified or abolished by statute law

  • It cannot be modified by the mutual agreement of parties to a contract

Explanation

Question 25 of 50

1

Which of the following is NOT essential to insurable interest?

Select one of the following:

  • There must be some property, rights, interest or potential liability capable of being insured

  • The property, rights, interest or potential liability must be the subject matter of the insurance

  • The insured must not stand in a relationship, recognized by law, with the subject matter of the insurance

  • The proposer must benefit from the continued existence of the subject matter of the contract or be prejudiced by its loss

Explanation

Question 26 of 50

1

Which of the following types of insurance contracts do not need proof of existence of insurable interest at the time that the policy is issued?

Select one of the following:

  • Non-life and non-marine contracts

  • Life insurance

  • Marine insurance

  • None of the others

Explanation

Question 27 of 50

1

Which of the following relationships do not have an insurable interest?

Select one of the following:

  • Husband and wife

  • Employee and employer

  • Debtor and creditor

  • None of the others

Explanation

Question 28 of 50

1

The doctrine of utmost good faith imposes which of the following duties on the parties to the contract?

Select one of the following:

  • 1) A duty not to misrepresent any matter relating to the insurance

  • 2) A duty to disclose all material facts relating to the contract

  • Both 1) and 2)

  • None of the others

Explanation

Question 29 of 50

1

Which of the following can be influenced by a material fact?

Select one of the following:

  • An underwriter's decision to accept a risk

  • Premium

  • Terms and conditions of the insurance contract

  • All of the others

Explanation

Question 30 of 50

1

Facts of law do not need to be disclosed as material facts because everyone is expected to know the law.

Select one of the following:

  • True
  • False

Explanation

Question 31 of 50

1

Duty of disclosure commences at all of the following times EXCEPT the:

Select one of the following:

  • Beginning of negotiations

  • Inception of policy

  • After inception

  • None of the others

Explanation

Question 32 of 50

1

Duty of disclosure arises under:

Select one of the following:

  • 1) Common law

  • 2) The policy terms

  • Both 1) and 2)

  • None of the others

Explanation

Question 33 of 50

1

Duty of disclosure is only applicable to the:

Select one of the following:

  • Insured

  • Insurer

  • Both Insured and Insurer

  • None of the others

Explanation

Question 34 of 50

1

For a fact to be considered as a misrepresentation, it must:

Select one of the following:

  • induce the contract

  • not be made by a party to the contract

  • not cause some loss or disadvantage to the person who has relied upon it

  • All of the others

Explanation

Question 35 of 50

1

Which of the following is NOT a type of misrepresentation?

Select one of the following:

  • Fraudulent

  • Innocent

  • Material

  • Negligent

Explanation

Question 36 of 50

1

A 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:

Select one of the following:

  • misrepresentation

  • non-disclosure

  • Both misrepresentation and non-disclosure

  • None of the others

Explanation

Question 37 of 50

1

Fraudulent non-disclosure is also known as:

Select one of the following:

  • Concealment

  • Mitigation

  • Negligence

  • Subrogation

Explanation

Question 38 of 50

1

If innocent misrepresentation by the insured is present, the insurer has the right to:

Select one of the following:

  • Claim damages

  • Keep any premium paid

  • Allow the contract to stand

  • All of the others

Explanation

Question 39 of 50

1

An insurer can refuse to pay a particular claim but at the same time allow the contract to stand only if:

Select one of the following:

  • 1) The insured is guilty of fraudulent misrepresentation

  • 2) The insured is guilty of innocent misrepresentation

  • Both 1) and 2)

  • None of the others

Explanation

Question 40 of 50

1

Which of the following is a method by which an insurer can provide the insured with the necessary indemnity?

Select one of the following:

  • Repair

  • Replacement

  • Reinstatement

  • All of the others

Explanation

Question 41 of 50

1

The 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

Select one of the following:

  • 1) and 2)

  • 2), 3), 4)

  • 3) and 4)

  • All of them

Explanation

Question 42 of 50

1

When insuring machinery and equipment, which of the following is TRUE about how a second-hand market will affect the amount insured?

Select one of the following:

  • 1) 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

  • 2) 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

  • Both 1) and 2)

  • None of the others

Explanation

Question 43 of 50

1

Which of the following falls under Pecuniary Insurance?

Select one of the following:

  • Life insurance

  • Personal Accident insurance

  • Theft insurance

  • Liability insurance

Explanation

Question 44 of 50

1

Which of the following are factors that limit the amount of indemnity?

Select one of the following:

  • Average clause

  • Agreed Value clause

  • Reinstatement clause

  • "New for old" clause

Explanation

Question 45 of 50

1

Which of the following are extensions that increase the amount of indemnity?

Select one of the following:

  • Franchise

  • Average clauses

  • Agreed Value clause

  • Excess

Explanation

Question 46 of 50

1

Oriental 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?

Select one of the following:

  • $2000

  • $4000

  • $5000

  • $8000

Explanation

Question 47 of 50

1

New 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?

Select one of the following:

  • $3000

  • $6000

  • $9000

  • $11000

Explanation

Question 48 of 50

1

Which of the following is similar to an Excess but once the Excess is exceeded, the loss is payable in full?

Select one of the following:

  • Average Clause

  • Franchise

  • Limit of Liability

  • Deductible

Explanation

Question 49 of 50

1

Extensions are added to a policy, so that:

Select one of the following:

  • The insured can recover more than a strict indemnity

  • The insurer pays less than the strict indemnity

  • The premium is lower

  • The policy can be extended to cover for a longer period of time

Explanation

Question 50 of 50

1

Which of the following clauses is NOT categorized as an extension?

Select one of the following:

  • Reinstatement Clause

  • "New for Old" Clause

  • Limit of Liability Clause

  • Agreed Value Clause

Explanation

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