Chaoter 3 Flashcards by Charlotte Cummins

What is the duty of good faith in motor insurance contracts?

A) To ensure that both parties perform under the contract
B) To provide honest information and disclose all relevant facts
C) To minimize the premium charged by the insurer
D) To avoid any form of risk

B) To provide honest information and disclose all relevant facts

How well did you know this?

Not at all

Perfectly

Under the Consumer Insurance (Disclosure and Representations) Act 2012, what happens if a proposer makes an innocent misrepresentation?

A) The insurer can cancel the policy
B) The proposer must pay a fine
C) No remedy is available for the insurer
D) The insurer can only reduce the payout

C) No remedy is available for the insurer

How well did you know this?

Not at all

Perfectly

Sarah leases a car for her business and purchases motor insurance. She needs the car for work purposes and is concerned about the financial impact if the car is damaged or lost. Does Sarah have insurable interest in the vehicle?

A) No, because she doesn’t own the car
B) Yes, because she leases the car and needs it for business purposes
C) No, only the legal owner can have insurable interest
D) Yes, because she is the primary driver of the vehicle

B) Yes, because she leases the car and needs it for business purposes

How well did you know this?

Not at all

Perfectly

John has an insurance policy on his car that covers damage and third-party liability. He has an accident, and the damages to the other driver’s vehicle are significant. John has no personal financial interest in the other driver’s vehicle, but he is required to pay for the damages. Does John have insurable interest in the accident claim?

A) Yes, because John is legally liable for the damages
B) No, because he doesn’t own the other driver’s vehicle
C) Yes, because he needs to protect his personal wealth
D) No, because only property owners can have insurable interest

A) Yes, because John is legally liable for the damages

How well did you know this?

Not at all

Perfectly

Emma’s car was damaged, and she needs a replacement while it’s being repaired. Her car is leased, and the lease agreement requires her to have full insurance. Does Emma have insurable interest in the car for insurance purposes?

A) No, because she doesn’t own the car
B) Yes, because she needs a replacement car and has a financial stake in the lease
C) No, because leased vehicles don’t qualify for insurance
D) Yes, because she is the legal registered keeper of the car

B) Yes, because she needs a replacement car and has a financial stake in the lease

How well did you know this?

Not at all

Perfectly

A motor insurance policy covers damage to a vehicle and third-party liability, following the principles of indemnity and subrogation. If the insured party is compensated for damages to their vehicle, what does subrogation allow the insurer to do?

A) Make an additional payment to the insured party
B) Recover the cost of the claim from a third party responsible for the damage
C) Increase the insured party’s premium for the following year
D) Pay for repairs on behalf of the insured party without any claim against a third party

B) Recover the cost of the claim from a third party responsible for the damage

How well did you know this?

Not at all

Perfectly

A motor insurance company designs a policy that includes benefits such as a replacement car and accommodation for the insured during vehicle repairs. This is in line with which of the following?

A) Consumer Rights Act 2015 requirements
B) Minimum RTA liability cover
C) The insurer’s reinsurance arrangement
D) The Financial Conduct Authority’s vulnerable customer guidelines

A) Consumer Rights Act 2015 requirements

How well did you know this?

Not at all

Perfectly

John is looking for an affordable motor insurance policy. He opts for a policy that only covers fire and theft, rather than comprehensive coverage. What is the main reason this policy is cheaper?

A) It includes fewer exclusions
B) It offers broader third-party cover
C) It provides more extensive benefits
D) It provides a more limited scope of coverage

D) It provides a more limited scope of coverage

How well did you know this?

Not at all

Perfectly

An insurer offers a motor policy that only complies with the minimum RTA cover requirements, and the policyholder’s cover is restricted for underwriting reasons. What is the insurer ensuring in this case?

A) The customer receives only the benefits they paid for
B) The policy meets the needs of a vulnerable customer
C) The policy complies with the reinsurance arrangements
D) The insurer offers a customized product for the customer

A) The customer receives only the benefits they paid for

How well did you know this?

Not at all

Perfectly

Which of the following is NOT a responsibility of insurers under the FCA’s 2021 guidance on vulnerable customers?

A) Providing a level of care tailored to vulnerable customers
B) Ensuring vulnerable customers are treated the same as all customers
C) Offering entirely customized insurance products for vulnerable customers
D) Providing the same outcomes for vulnerable customers as other customers

C) Offering entirely customized insurance products for vulnerable customers

How well did you know this?

Not at all

Perfectly

A bank is offering a motor insurance policy with unclear terms and conditions, leading to customer confusion. Which part of the FCA’s Consumer Duty is the bank violating?

A) The Consumer Principle
B) The Cross-Cutting Rules
C) The rule about avoiding foreseeable harm to customers
D) The rule about enabling customers to pursue financial objectives

A) The Consumer Principle

How well did you know this?

Not at all

Perfectly

A customer has bought a motor insurance policy that does not meet their needs and feels they were misled by the promotional material. What outcome is the FCA’s Consumer Duty aiming to prevent in this scenario?

A) The firm failing to act in good faith
B) The customer being harmed by poor customer service
C) The customer purchasing products that are not appropriate for them
D) The firm increasing prices without justification

C) The customer purchasing products that are not appropriate for them

How well did you know this?

Not at all

Perfectly

The FCA’s Consumer Duty requires firms to improve the quality of which of the following to ensure better customer outcomes?

A) Complaint handling and management information
B) Product prices and customer profiles
C) Advertising methods and social media engagement
D) Sales commissions and market expansion

A) Complaint handling and management information

How well did you know this?

Not at all

Perfectly

A motor insurer introduces a new policy with clear, easily understandable terms, fair value, and no hidden charges. Which part of the Consumer Duty is the insurer fulfilling?

A) Ensuring the policy represents good value
B) Providing better customer service
C) Avoiding foreseeable harm to customers
D) Ensuring clear communications

A) Ensuring the policy represents good value

How well did you know this?

Not at all

Perfectly

Which part of a motor policy cannot deviate from the minimum requirements set by law?

A) The third-party liability section
B) The personal accident coverage
C) The theft cover
D) The fire damage coverage

A) The third-party liability section

How well did you know this?

Not at all

Perfectly

What is the main coverage provided by an RTA-only policy?

A) Comprehensive vehicle damage and theft coverage

B) Unlimited indemnity for legal liability to third parties for injury or death

C) Liability for non-road use of the vehicle
D) Legal costs for personal injury claims from the insured

B) Unlimited indemnity for legal liability to third parties for injury or death

How well did you know this?

Not at all

Perfectly

What is the maximum coverage for third-party property damage under an RTA-only policy?

A) £1 million
B) £1.2 million
C) £1.5 million
D) £2 million

B) £1.2 million

How well did you know this?

Not at all

Perfectly

Which of the following is not covered by an RTA-only policy?

A) Emergency medical treatment
B) Legal costs for defending an action
C) Third-party bodily injury
D) Damage to the insured vehicle

D) Damage to the insured vehicle

How well did you know this?

Not at all

Perfectly

hat is the typical coverage limit for third-party property damage under a third-party only policy for private cars?

A) £1.2 million
B) £5 million
C) £20 million
D) £50 million

C) £20 million

How well did you know this?

Not at all

Perfectly

Does third party only cover for passengers ?

Yes

How well did you know this?

Not at all

Perfectly

What additional coverage is included in a third-party, fire, and theft policy that is not in a standard third-party only policy?

A) Comprehensive damage to the vehicle
B) Theft or attempted theft and fire-related incidents
C) Liability for damages caused by the insured vehicle
D) Legal defense for criminal charges

B) Theft or attempted theft and fire-related incidents

How well did you know this?

Not at all

Perfectly

If a parked car is damaged by falling debris from a house damaged by an explosion, which of the following would apply under a third-party, fire, and theft policy?

A) The damage would be covered if the explosion was due to poor maintenance of the house.
B) The damage would be covered because the proximate cause is an explosion, which is a covered peril.
C) The damage would not be covered because the proximate cause was a collapsed wall due to poor maintenance.
D) The damage would only be covered if the explosion caused a fire.

B) The damage would be covered because the proximate cause is an explosion, which is a covered peril.

How well did you know this?

Not at all

Perfectly

What does the “schedule” in a motor car policy typically include?

A) A detailed description of the insurer’s obligations
B) The policyholder’s details, insured vehicle details, cover, excess, and applicable endorsements
C) The full policy wording, including all exclusions and conditions
D) A complete list of all possible claims scenarios

B) The policyholder’s details, insured vehicle details, cover, excess, and applicable endorsements

How well did you know this?

Not at all

Perfectly

If a policyholder does not notify the insurer of incorrect information on their Statement of Facts, what could happen?

A) The policyholder would be entitled to a full refund of the premium paid.
B) The insurer may invalidate the coverage.
C) The insurer will adjust the policy terms without informing the policyholder.
D) The insurer will offer a new policy with revised terms.

B) The insurer may invalidate the coverage.

How well did you know this?

Not at all

Perfectly

What is an endorsement in the context of a motor car insurance policy? A) An optional benefit that can be added to the policy at any time. B) A mid-term change to the policy, which is referenced in the schedule. C) A summary of the general exclusions that apply to the policy. D) The standard coverage included in a comprehensive policy.

B) A mid-term change to the policy, which is referenced in the schedule.

What does the "recital clause" in a motor car policy do? A) Specifies the exclusions that apply to the policy. B) Outlines the scope and purpose of the policy. C) Describes the legal liabilities of the insurer. D) Lists all the personal benefits included in the policy.

B) Outlines the scope and purpose of the policy.

What does the recital clause of a motor insurance policy typically explain? A) The specific exclusions under the policy. B) The rights of third parties to enforce the contract. C) The nature of the contract, the parties involved, and the applicable law. D) The process for making a claim under the policy.

C) The nature of the contract, the parties involved, and the applicable law.

How does the Contracts (Rights of Third Parties) Act 1999 typically apply in a motor insurance policy? A) It gives third parties the right to enforce the contract unless excluded by the recital clause. B) It guarantees third parties a payment in case of an accident. C) It allows the policyholder to cancel the policy if a third party is involved in an accident. D) It applies to claims related to fire or theft damage.

A) It gives third parties the right to enforce the contract unless excluded by the recital clause.

Sarah has just taken out a car insurance policy with ABC Insurers. The policy clearly defines certain terms in the wording. For example, when the term “You” is used, it refers to Sarah as the policyholder, and “Your car” refers to the specific vehicle Sarah has insured. Question: Which of the following correctly defines the term "We" in Sarah's insurance policy? A) The car being insured under Sarah’s policy. B) Sarah, the policyholder. C) The insurance company providing the coverage. D) The agent managing the policy on behalf of Sarah.

C) The insurance company providing the coverage

What do operative clauses in an insurance policy specify? A) The total premium amount. B) What is and is not covered under the policy. C) The names of the policyholders. D) The renewal terms of the policy.

B) What is and is not covered under the policy.

What is typically stated in an operative clause regarding the territorial limits? A) The specific make of the insured vehicle. B) The duration and territorial limits of the policy. C) The driver's personal information. D) The list of approved repair shops.

B) The duration and territorial limits of the policy.

Which regions are most commonly covered by standard policies under the territorial limits clause? A) The United States and Canada. B) The British Isles, including the United Kingdom, Channel Islands, and Isle of Man. C) Africa and the Middle East. D) Only the United Kingdom.

B) The British Isles, including the United Kingdom, Channel Islands, and Isle of Man.

What is typically true regarding ‘driving other cars’ coverage in most insurance policies? A) It covers driving any car in any country worldwide. B) It is usually limited to the British Isles, unless otherwise specified. C) It only covers cars registered in the United States. D) It extends coverage only for cars registered in the policyholder's name.

B) It is usually limited to the British Isles, unless otherwise specified.

John’s insurance policy includes liability for third-party damage and injury. He is driving his own car, and another vehicle causes a collision, injuring the passenger in John's car. Question: Which of the following would be covered by John's insurance policy? A) Damage to John's car caused by the accident. B) The passenger’s injury caused by the accident. C) Damage to the other driver’s car caused by the accident. D) Fines imposed on John for the accident.

B) The passenger’s injury caused by the accident.

Sarah has a policy that covers “driving other cars” (DOC) for third-party liability. She’s borrowing her friend's car to drive to work. Question: Which of the following conditions must be true for Sarah to be covered under the DOC extension? A) The car must be registered in Sarah’s name. B) Sarah must have the owner's permission to drive the car. C) The car must be insured under Sarah's name. D) Sarah’s policy must specifically cover other motorcycles.

B) Sarah must have the owner's permission to drive the car.

Tom’s car insurance policy covers third-party liability, including when his car is being driven by other drivers with permission. Tom allows his colleague, who holds a valid license, to drive his car. Question: Who is covered under Tom’s policy for third-party liability? A) Only Tom. B) Tom’s colleague, provided they have a valid driver’s license. C) Only people who are named in the certificate of insurance. D) Tom’s colleague, even without permission.

B) Tom’s colleague, provided they have a valid driver’s license.

An employee of the insured is injured while driving the insured vehicle during work hours. The injury is not related to a Road Traffic Act requirement. Which of the following is true? a) The injury is covered under the motor policy. b) The injury is covered under the employer’s liability policy. c) The injury is covered under the third-party section of the motor policy. d) The injury is excluded regardless of the Road Traffic Act.

b) The injury is covered under the employer’s liability policy.

A policyholder has two motor insurance policies covering the same third-party liability. What happens according to the policy? a) Both insurers will share the liability equally. b) Only one policy will cover the liability, and the other will be void. c) Both insurers will cover 100% of the liability. d) The liability is shared based on the policyholder’s preference.

b) Only one policy will cover the liability, and the other will be void.

The insured vehicle is involved in a road accident, causing damage to the insured's vehicle. What is the situation according to the policy? a) The policy will cover damage to the insured vehicle. b) The policy will not cover any damage to the insured vehicle. c) The policy will only cover damage if it is a third-party vehicle. d) The policy will cover the damage if the insured vehicle is still under repair.

b) The policy will not cover any damage to the insured vehicle.

The insured vehicle is involved in an accident at an airport, in an area where aircraft land. Which of the following applies? a) The policy will cover the third-party liability if the accident is on a public road. b) The policy will cover the liability as long as the accident is caused by the insured vehicle’s driver. c) The policy excludes liability for accidents in "airside" areas, unless required by the Road Traffic Act. d) The policy will cover the liability for all accidents, regardless of location.

c) The policy excludes liability for accidents in "airside" areas, unless required by the Road Traffic Act.

A policyholder is responsible for a pollution incident caused by a vehicle spill. The spill is gradual over time. What is the situation? a) The policy will cover the gradual pollution under the third-party section. b) The policy excludes liability for gradual pollution or contamination. c) The policy covers only accidental and unexpected pollution. d) The policy covers gradual pollution if it happens over 24 hours.

b) The policy excludes liability for gradual pollution or contamination.

The insured vehicle is used by the policyholder in a terrorist act, and third-party damage occurs. What happens? a) The policy will cover the damage caused in the terrorist act, as it’s an accident. b) The policy excludes liability for damage caused by acts of terrorism. c) The policy will cover the damage if it’s proven that the act was unintentional. d) The policy will cover the damage under the Uninsured Motorist Agreement.

b) The policy excludes liability for damage caused by acts of terrorism.

A third-party claims for property damage exceeding £20,000,000 caused by the insured vehicle. Which of the following applies? a) The policy will cover the entire amount of the claim. b) The policy will only cover up to £5,000,000 of the claim. c) The policy will cover up to £20,000,000 for property damage. d) The policy will cover up to £1,000,000, as required by law.

c) The policy will cover up to £20,000,000 for property damage.

Your insured car is stolen, and the loss occurs under the terms of a comprehensive motor policy. Which of the following is covered? a) Only accidental damage to the car is covered. b) Loss or damage due to theft is covered. c) Only fire damage is covered. d) Theft is only covered under third-party fire and theft policies.

b) Loss or damage due to theft is covered.

You own a car that is insured under a comprehensive policy. If the car is damaged by a storm, which of the following is true? a) The damage is excluded unless specifically listed as a peril. b) The damage is covered under the comprehensive policy unless specifically excluded. c) The damage is covered only if the storm results in fire damage. d) The storm damage is covered only under third-party policies.

b) The damage is covered under the comprehensive policy unless specifically excluded.

Your vehicle’s keys or keyless entry device is lost or stolen. Which of the following is covered under the policy? a) The policy excludes coverage for keys and entry devices. b) Only the physical vehicle is covered, not accessories like keys. c) The loss or damage to keys or entry devices is included within the definition of "vehicle." d) The policy covers the cost of replacing keys if they are stolen but not if lost.

c) The loss or damage to keys or entry devices is included within the definition of "vehicle."

If your car is damaged and the repair costs exceed the car's market value, what happens according to the policy? a) The insurer will automatically replace the car with a new one. b) The insurer may consider the car as a total loss and offer a settlement, keeping the salvage. c) The insurer will cover the repair costs regardless of the market value. d) The insurer will only repair the vehicle if it is deemed repairable.

b) The insurer may consider the car as a total loss and offer a settlement, keeping the salvage.

Your car is damaged, and the repairs cost more than the car's market value. The insurer offers a "cash in lieu of repair" settlement. What is the likely outcome? a) The insurer will cover all the repair costs with no limit. b) The insurer allows the policyholder to retain the salvage and repair the vehicle using second-hand parts. c) The insurer will refuse to cover the repairs and will pay the market value only. d) The insurer will replace the car with a new one, regardless of the repair cost.

b) The insurer allows the policyholder to retain the salvage and repair the vehicle using second-hand parts.

You are provided with a temporary car from the insurer while your own car is being repaired after an accident. What type of cover does this temporary vehicle have? a) The temporary vehicle is covered under third-party, fire, and theft. b) The temporary vehicle is not covered under any circumstances. c) The temporary vehicle is only covered if the policyholder has comprehensive cover. d) The temporary vehicle has third-party cover only.

a) The temporary vehicle is covered under third-party, fire, and theft.

Your vehicle is less than a year old and is stolen. The insurer offers to replace it with a new car of the same make and model. What condition must be met for this replacement? a) The car must have a maximum mileage of 10,000 miles. b) The policyholder must agree to the replacement. c) The insurer will replace the car with any available model. d) The insurer will only replace the car if the vehicle is less than 3 months old.

b) The policyholder must agree to the replacement.

Your car’s windscreen is damaged, and you make a claim for repair. Which of the following statements is true? a) A claim for windscreen repair does not affect your no-claims discount. b) Windshield damage claims always reduce the no-claims discount. c) Only if the windshield is replaced will the no-claims discount be affected. d) All damage to windows or glass will reduce the no-claims discount.

a) A claim for windscreen repair does not affect your no-claims discount.

Your car is being repaired after an accident, and the insurer uses a recycled part for the repair. Which of the following is true? a) Recycled parts are only used if the vehicle is a total loss. b) The insurer must use only new parts for repairs. c) Recycled parts are allowed if they are recommended by the manufacturer and come with a warranty. d) The insurer can only use recycled parts if the policyholder agrees to it beforehand.

c) Recycled parts are allowed if they are recommended by the manufacturer and come with a warranty.

What does the personal accident cover provide for the policyholder or their spouse/civil partner? A) £1,000 for any injury sustained in an accident B) £2,500 for death, permanent loss of sight, or loss of limbs C) Free medical treatment after an accident D) Full reimbursement for all accident-related expenses

B) £2,500 for death, permanent loss of sight, or loss of limbs

Which of the following would NOT be covered under the personal accident benefits? A) Accidental injury resulting in permanent loss of sight B) Death due to a car crash where the policyholder was under 18 C) Loss of a limb from an accident involving any motor car D) Injury from getting into or out of the insured car

B) Death due to a car crash where the policyholder was under 18

If the policyholder or their spouse/civil partner is covered under more than one motor policy for the same accident, how will the insurer handle the claim? A) The insurer will pay under all policies B) The insurer will pay under the policy that provides the highest payout C) The insurer will pay under only one policy D) The insurer will split the payout equally across all policies

C) The insurer will pay under only one policy

Which of the following situations would NOT be excluded under the personal accident cover? A) The policyholder suffers an injury while not wearing a seatbelt B) The policyholder is involved in an accident while under the influence of drugs C) The policyholder’s spouse is injured while getting into a car D) The policyholder suffers an injury resulting from a suicide attempt

C) The policyholder’s spouse is injured while getting into a car

What is the maximum amount the insurer will pay for personal accident benefits in a single period of insurance? A) £1,000 B) £2,500 C) £5,000 D) £10,000

C) £5,000

What is the maximum amount the policy will pay for personal belongings in the car that are lost or damaged? A) £50 B) £100 C) £150 D) £200

B) £100

How much will the insurer contribute towards the replacement of a child seat if your car is involved in an accident, fire, or theft? A) £50 B) £75 C) £100 D) £150

C) £100

How much will the insurer contribute towards the replacement of a child seat if your car is involved in an accident, fire, or theft? A) £50 B) £75 C) £100 D) £150

C) £100

Which of the following is NOT covered under personal effects in the car? A) Coats B) Spectacles C) Money D) CDs

C) Money

What items are excluded from personal effects cover under the policy? A) Personal clothing and electronics B) Goods, samples, or equipment connected to a business or trade C) Personal items like mobile phones D) Accidental damage to car radios

B) Goods, samples, or equipment connected to a business or trade

Under which of the following conditions will personal belongings in the car not be covered for theft or loss? A) If the ignition key is left in the car B) If the car is locked, but not with a security system C) If the car is attended but parked in a public place D) If all windows are shut but not locked

A) If the ignition key is left in the car

Which of the following is considered a personal effect under the policy? A) Car radio permanently fitted to the vehicle B) Child seat permanently fixed to the vehicle C) Mobile phone in the vehicle D) Satellite navigation system permanently installed

C) Mobile phone in the vehicle

effects cover usually exclude? A) Motor caravans B) Electric vehicles C) Sports cars D) Hybrid vehicles

A) Motor caravans

What is the maximum amount the policy will pay for medical expenses for each person being carried in the car? A) £100 B) £150 C) £200 D) £250

D) £250

What types of medical expenses are typically covered under this section? A) Cosmetic surgery B) Prescription charges, specialist consultant’s charges, and dental fees C) Non-medical related costs like transport D) Only hospital stays

B) Prescription charges, specialist consultant’s charges, and dental fees

Is the medical expenses cover dependent on who is at fault for the accident? A) Yes, only if the driver is at fault B) Yes, only if the passenger is at fault C) No, it is payable irrespective of fault D) No, only if the passenger is not at fault

C) No, it is payable irrespective of fault

What type of claims is typically rare under the medical expenses cover? A) Claims for lost wages B) Claims for medical treatment provided by NHS hospitals C) Claims for accidents involving uninsured drivers D) Claims for property damage

C) Claims for accidents involving uninsured drivers

What is a typical exclusion under the medical expenses cover? A) Surgery expenses B) Physiotherapy treatment (unless offered as an optional extra) C) Prescription medications D) General medical consultation fees

B) Physiotherapy treatment (unless offered as an optional extra)

In the event of an accident, who is eligible to claim medical expenses under this cover? A) Only the driver B) Only the passengers C) Both the driver and passengers D) Only those with private health insurance

C) Both the driver and passengers

Your policy provides the compulsory minimum cover for driving in which of the following countries? A) Only EU countries B) Any country worldwide C) Any EU country and non-EU countries that comply with EU Motor Insurance Directives D) Only the UK and Crown Dependencies

C) Any EU country and non-EU countries that comply with EU Motor Insurance Directives

A policyholder wants to drive their car in Turkey with full UK cover. What must they do? A) They cannot extend their cover to Turkey. B) Pay an additional premium and obtain a confirmatory endorsement or Green Card. C) Nothing—Turkey is automatically covered under all UK motor policies. D) Inform the insurer but no payment is needed.

B) Pay an additional premium and obtain a confirmatory endorsement or Green Card.

Under most policies, which condition must be met for foreign use cover to remain valid? A) The policyholder must own a second home abroad. B) The policyholder must have a Green Card. C) The policyholder’s main residence must be in the UK, Channel Islands, or Isle of Man. D) The vehicle must have been previously driven in the destination country.

C) The policyholder’s main residence must be in the UK, Channel Islands, or Isle of Man.

In which of these situations is a Green Card required? A) Driving from the UK to France in 2024 B) Driving in Germany under an EU-compliant UK insurance policy C) Driving in Morocco with full UK cover D) Driving in Spain after Brexit

C) Driving in Morocco with full UK cover

How long does a policy typically cover a car in transit between insured countries? A) 24 hours B) 48 hours C) 65 hours D) 90 hours

C) 65 hours

A policyholder’s car is stolen abroad and cannot be returned to the UK. What expense will the insurer cover? A) The cost of purchasing a new car abroad B) The customs duty charged due to the vehicle not returning C) The cost of a rental car for an unlimited period D) The cost of legal fees only

B) The customs duty charged due to the vehicle not returning

While transporting a car by sea, some cargo is jettisoned to stabilize the ship. What will the insurer cover? A) The cost of recovering lost cargo B) The policyholder’s general average contribution and salvage charges C) Only damage to the insured car if it was jettisoned D) The full cost of all cargo lost on the ship

B) The policyholder’s general average contribution and salvage charges

Definition of Car Sharing Q: Under a standard private motor insurance policy, when is a car-sharing arrangement NOT considered "hire or reward"? A) When the driver makes a profit from passenger contributions B) When the car can carry up to 10 passengers C) When the driver only shares fuel costs and does not make a profit D) When passengers are carried as part of a business

C) When the driver only shares fuel costs and does not make a profit

A driver wants to participate in a car-sharing scheme under their private insurance policy. What is the maximum number of passengers their car can legally be adapted to carry? A) 6 B) 8 C) 9 D) 10

B) 8

When does a car-sharing arrangement become classified as "hire or reward" under UK motor insurance rules? A) When passengers contribute only to fuel costs B) When the driver advertises regular journeys for a profit C) When the car carries fewer than 8 passengers D) When car-sharing is done for social purposes only

B) When the driver advertises regular journeys for a profit

If a policyholder is unsure whether their car-sharing arrangement is covered under their insurance policy, what should they do? A) Assume it is covered as long as they don’t make a profit B) Contact their insurer immediately for clarification C) Check online forums for advice D) Avoid car-sharing altogether

B) Contact their insurer immediately for clarification

A policyholder decides to lay up their car for a period of 30 days. What part of the policy remains active if they choose to suspend cover? A) Third-party liability B) Accidental damage cover C) Fire and theft cover (if applicable) D) Breakdown cover

C) Fire and theft cover (if applicable)

Under what conditions can a policyholder receive a refund when suspending their cover? A) The vehicle must be laid up for at least 28 continuous days B) The vehicle must be laid up due to accident damage covered by a claim C) The policyholder must renew their policy to receive a refund D) The vehicle must remain taxed and insured during the laid-up period

A) The vehicle must be laid up for at least 28 continuous days

If a policyholder suspends their insurance cover (except for fire and theft), what must they do to comply with UK law? A) Apply for a Green Card B) Submit a SORN (Statutory Off-Road Notification) C) Notify the DVLA that the vehicle is still in use D) Park the vehicle on a public road to maintain compliance

B) Submit a SORN (Statutory Off-Road Notification)

Why did the demand for laid-up cover increase during the COVID-19 pandemic? A) Many people started working from home and stopped using their cars B) Insurers offered automatic refunds for unused vehicles C) The government made insurance optional for unused vehicles D) Road traffic laws were temporarily suspended

A) Many people started working from home and stopped using their cars

Eligibility for NCD Q: Under what condition is a policyholder eligible for a no claim discount (NCD)? A) The policyholder must not have made a claim during the policy period B) The policy must be active for at least six months C) The policyholder must transfer their NCD to another person D) The policy must be for at least three months

A) The policyholder must not have made a claim during the policy period

What happens to the no claim discount if a policyholder transfers their insurance policy to someone else? A) The NCD is automatically transferred to the new policyholder B) The NCD stays with the original policyholder and does not transfer C) The insurer decides whether to transfer the NCD on a case-by-case basis D) The new policyholder gets a reduced NCD based on the remaining policy period

B) The NCD stays with the original policyholder and does not transfer

A policyholder has a six-month insurance policy with no claims. Are they entitled to an NCD when they renew? A) Yes, because they had no claims B) No, because NCD only applies to policies of 12 months or more C) Yes, but only if they purchase a third-party policy D) No, because NCD only applies to new policies, not renewals

B) No, because NCD only applies to policies of 12 months or more

What typically happens to a policyholder’s NCD if they make a claim during the policy period? A) The NCD is completely removed B) The NCD remains unchanged, regardless of claims C) The NCD may be reduced based on the insurer’s step-back scale D) The NCD is only affected if multiple claims are made

C) The NCD may be reduced based on the insurer’s step-back scale

Additional Benefits in Comprehensive Policies Q: Which of the following is a common additional benefit in a comprehensive motor policy? A) Increased medical expenses cover B) Automatic premium refund after an accident C) Guaranteed full NCD protection after any claim D) Unlimited physiotherapy treatment

A) Increased medical expenses cover

A policyholder is injured in an accident covered by their insurance. They are unable to work due to their injuries. How long might they receive weekly payments under the personal accident section? A) Up to 12 weeks B) Up to 26 weeks C) Up to 52 weeks D) For the duration of their recovery

B) Up to 26 weeks

When might a policyholder receive coverage for overnight accommodation under their motor policy? A) If they are stranded after their vehicle breaks down (without an accident) B) If their vehicle is disabled in an accident covered by the policy C) If they are involved in an accident outside of the UK D) If they are unable to drive due to a medical condition

B) If their vehicle is disabled in an accident covered by the policy

Under what condition might tools be covered under a motor insurance policy? A) If they belong to a friend who left them in the insured vehicle B) If they are personal items not used for business C) If the vehicle is insured for business use and the tools are part of a valid claim D) If they are stolen from an open-backed vehicle with no secure storage

C) If the vehicle is insured for business use and the tools are part of a valid claim

Which situation would not be covered under business-use tool insurance? A) A tradesperson's tools stolen after forcible entry to their locked van B) Tools damaged in an accident that is covered under the policy C) Theft of tools from an open-backed vehicle without secure storage D) Tools stolen while stored in a locked tool chest attached to the chassis

C) Theft of tools from an open-backed vehicle without secure storage

A policyholder’s car is written off in an accident. Their comprehensive insurance covers £12,000, but they still owe £15,000 on their car loan. What type of GAP insurance covers the £3,000 shortfall? A) Return to Invoice GAP B) Replacement Vehicle GAP C) Financial Shortfall GAP D) Negative Equity GAP

C) Financial Shortfall GAP

Which of the following is true about Return to Invoice (RTI) GAP insurance? A) It covers the difference between the insurance payout and the original invoice price. B) It only applies if the vehicle was bought using a finance agreement. C) It only covers the outstanding balance on a car loan. D) It is the same as replacement vehicle GAP insurance.

A) It covers the difference between the insurance payout and the original invoice price.

Q: When does an insurance policy remain valid if the insured vehicle is in the hands of an unauthorised driver? A) If the policyholder does not know the driver is unauthorised B) If the car is with a repair garage or car parking service C) If the unauthorised driver is a family member D) If the car is stolen by an unknown person

B) If the car is with a repair garage or car parking service

A driver uses their car to go home for lunch (SD&P use) but also drops off an employee for business (excluded purpose). What happens? A) The policy is still valid because personal use was part of the journey B) The policy is invalid because business use was the primary purpose C) The insurer will partially pay for the claim D) The policyholder must prove they were unaware of the business use

B) The policy is invalid because business use was the primary purpose (Seddon v Binions, 1978)

A driver tells a passenger they will be compensated for injury, regardless of fault. If an accident occurs, when will the policy pay out? A) Always, because the driver made a verbal agreement B) Only if the driver is legally liable C) Never, because the insurer does not cover passenger injuries D) Only if the driver has additional contractual liability insurance

B) Only if the driver is legally liable

A policyholder exaggerates damage to their car when making a claim. What can the insurer do? A) Reject the fraudulent claim but honour valid past claims B) Reject all past and future claims under the policy C) Only reduce the payout for the current claim D) Do nothing unless fraud is proven in court

A) Reject the fraudulent claim but honour valid past claims

When does an insurer have the right to void a policy from inception? A) If the insured fails to renew the policy on time. B) If the insured provides false information when buying the policy. C) If the insured delays in notifying a claim. D) If the insured refuses to allow the insurer to inspect the vehicle.

B) If the insured provides false information when buying the policy (CIDRA)

A policyholder is involved in an accident but does not plan to claim. What must they do? A) Nothing, since they are not making a claim. B) Only report if a third party was injured. C) Report the accident immediately to the insurer. D) Wait until they receive a legal notice before reporting.

C) Report the accident immediately to the insurer.

After an accident, the policyholder apologises and accepts blame. What might happen? A) The insurer may refuse the claim if this admission prejudices them. B) The insurer must still pay because it is a third-party claim. C) The insurer can increase the policyholder’s excess as a penalty. D) The insured can withdraw their statement later with no consequences.

A) The insurer may refuse the claim if this admission prejudices them.

When can an insurer reject a claim due to an unroadworthy vehicle? A) If the car was in an accident caused by a known defect. B) If the insured forgot to get an MOT but had no accidents. C) If the car was parked and hit by another driver. D) If the policyholder failed to wash the car regularly.

A) If the car was in an accident caused by a known defect.

When might an insurer inspect a vehicle after an accident? A) To check if the insured followed service schedules. B) To assess damage and confirm pre-accident condition. C) To see if the insured has a valid driving licence. D) To make sure the insured has paid road tax.

B) To assess damage and confirm pre-accident condition.

When Can an Insurer Exercise Subrogation Rights? Q: Under common law, when does an insurer’s subrogation right arise? A) When the policyholder notifies a claim. B) When the policyholder admits liability. C) When the insurer has paid a claim. D) As soon as an accident occurs.

C) When the insurer has paid a claim.

How does condition 6 modify the common law position? A) It allows the insurer to exercise subrogation before paying the claim. B) It allows the insured to control the settlement. C) It prevents the insurer from taking legal action. D) It removes the need for the insured to provide assistance.

A) It allows the insurer to exercise subrogation before paying the claim.

What must the insured do under the policy’s subrogation clause? A) Handle the recovery process themselves. B) Allow the insurer to take over the claim and assist when needed. C) Refuse to help the insurer if they don’t want to claim. D) Negotiate a separate settlement with the third party.

B) Allow the insurer to take over the claim and assist when needed.

B15C Contribution Think Back Think back to chapter 10, section G, of M05 for more on operation of contribution conditions. You can find this on RevisionMate 7a.If a claim is made under this policy and there is another policy that covers the claim, we will pay only our share of the claim. This condition does not apply to Part 3 (Personal Accident) of this policy. This contribution condition (or rateable proportion clause) restates the common law position that, where more than one policy is in force the liability of the insurer is limited to their proportion of the loss. It would, for example, apply if a loss is covered under both a household policy and the personal belongings section of a comprehensive motor policy, but special rules apply in that circumstance by virtue of the market Personal Effects Contribution Agreement. Personal Effects Insurance Contribution Agreement on page 8/3, for more information on this agreement. Chapter 3 Motor policies – the scope of cover 3/31 Like subrogation, contribution is a corollary of indemnity and consequently, neither applies to the benefits under the personal accident section of the policy. This means that the injured person can claim in full under all similar policies and can also claim compensation against the responsible third party for injuries as well. 7b.This provision shall not place us under any obligation to accept liability under Part 1 of this policy which we would otherwise be able to exclude under the exceptions to Part 1. The wording makes it clear that this clause does not detract from the exclusion under the third party section which excludes all liability under that section if other insurance is in force (see 10. under Part 1 in Third party section on page 3/8). You will recall the latter invariably features in all policies, resulting in mutual exclusivity and the liability being shared by both insurers. If that exclusion were deemed to be waived by the contribution condition it would leave the insurer facing the whole of the liability under the third party section.

C) Each insurer pays a proportionate share of the loss.

A policyholder is injured in a crash. They have two motor policies with personal accident cover. How is the claim settled? A) The policyholder can claim in full under both policies. B) The claim is split between both insurers. C) The policyholder only claims from one insurer. D) The insurers cancel both policies.

A) The policyholder can claim in full under both policies.

If another policy covers third-party liability, what does condition 7b state? A) The insurer must share liability equally. B) The insurer can refuse liability if an exclusion applies. C) The insurer must pay the claim in full. D) The insured is not covered by any policy.

B) The insurer can refuse liability if an exclusion applies.

In a motor insurance claim, when would arbitration be used? A) To resolve disputes about the insurer's liability. B) To settle disagreements over the amount to be paid for a claim. C) To establish the cause of the accident. D) To determine the legal responsibility for the claim.

B) To settle disagreements over the amount to be paid for a claim.

Before a policyholder can take legal action against the insurer for a claim dispute, what must happen first? A) The insurer must agree to pay the claim. B) The dispute must be settled by an independent arbitrator. C) The claim must be reassessed by a court. D) The policyholder must pay the full amount and wait for reimbursement.

B) The dispute must be settled by an independent arbitrator.

When does the duty of disclosure end in an insurance contract? A) When a claim is made. B) After the policy is renewed. C) When the policy is formed and no changes are made. D) When the policyholder changes the vehicle.

C) When the policy is formed and no changes are made.

Which of the following is NOT covered under Class 1 motor insurance use? A) Business use by the policyholder’s spouse. B) Racing or performance tests. C) Social, domestic, and pleasure use. D) Business use by the policyholder.

B) Racing or performance tests.

What is a key difference between Class 2 and Class 3 motor insurance? A) Class 2 includes commercial traveling while Class 3 excludes it. B) Class 3 includes commercial traveling while Class 2 excludes it. C) Class 2 allows racing; Class 3 excludes it. D) Class 3 allows competitions; Class 2 does not.

B) Class 3 includes commercial traveling while Class 2 excludes it.