FUNDAMENTALS OF INSU RANCE

FUNDAMENTALS OF INSU RANCE

REVISION STUDY PRACT ICE EXAM

QUESTIONS CORRECTLY

ANSWERED.

Question : The major function of insurance is:

• To reduce the cost of the losses
• To share the losses of the few among the many
• The safeguard the interest of mortgages
• To serve as a basis of existing credit system

Correct answer: b. To share the losses of the few among

the many

Question : A peril if best defined as:

• The chance of a loss
• The occurrence of a loss
• The cause of a loss
• The result of a loss

Correct answer: c. The cause of a loss

Question : Indemnify means:

• Returning the premium of the insured
• Restoring the insured's to the same financial position

as they were in immediately prior to the loss

• Paying the insured's the face amount of the policy

• Restoring the insured's to the same financial position

as they were

Correct answer: b. Restoring the insured's to the same

financial position as they were immediately prior to the loss

Question : Property insurance contracts are designed to

pay for loss or damage arising out of the happening of a specific event. Only the following statement regarding the events insured by property insurance contract is

correct:

• The event must be a future event and it must be

accidental

• The event may happen with the co-operation of the

insured

• The event may happen with the intent of the insured
• The event may occur accidentally or be caused

deliberately by the insured

Correct answer: a. The event must be must be a future

event and it must be accidental

Question : The following is the most practical way in

which to deal with risk:

• Avoidance of Risk
• Retention of Risk
• Controlling of Risk

• Transfer of Risk

Correct answer: d. Transfer of Risk

Question : In a contract of insurance, consideration

means:

• The exchange of something of value parties
• The amount the insurance can collect in event of a

claim

• The object of insurance
• The reviewing of the details of the risk to be insured

by an underwriter

Correct answer: a. The exchange of something of value

between parties

Question : Which of the following would be correct legal

name of the insured in a contact of insurance:

• The corner store
• John's Corner Store
• J.D.'s Corner Store
• The Corner Store Ltd

Correct answer: d. The Corner Store Ltd

Question : All contracts require that five elements be

present if the contract is to be enforceable by law. An insurance contract is enforceable only if it contains the

following three additional interest:

• Insurable Interest, Utmost Good Faith
• Insurable Interest, Consideration, Indemnity
• Insurable Interest, Indemnity, Utmost Good Faith
• Insurable Interest, Indemnity, Genuine Intention

Correct answer: c. Insurable Interest, Indemnity, Utmost

Good Faith

Question : If your clients do not advise the insurer of

previous losses when required to do so, they have violated an essential principle of insurance contracts.

This principle is:

• Legality of Object
• Utmost good faith
• Insurable Interest
• Indemnity

Correct answer: b. Utmost good faith

Question : To bind a risk means:

• That the broker has committed an insurer to provide a

contract of insurance on the subject matter under discussion

• Finding a company willing to give a quote on a risk
• Getting underwriting information from a client
• Automatically renewing an existing policy