Chapter Two

Question 1

Which option is not an essential of a valid contract?
a. Documentation in English. □
b. Offer. □
c. Consideration. □
d. Acceptance.

Answer 1

a. Documentation in English

Question 2

What word or phrase is the consideration for an insurance contract?
a. Premium. □
b. Insurable interest. □
c. Offer. □
d. Negotiation

Answer 2

A. PREMIUM

Question 3

How can insurable interest be best described?
a. The obligation to pay the premium. □
b. The fact that insurers want to insure the risk. □
c. The legal relationship between an insured and the subject-matter of insurance. □
d. The additional money due if a claim is paid late

Answer 3

C-The legal relationship between an insured and the subject-matter of insurance. □

Question 4

Identify an example of good faith from the following options.
a. The insured not paying the premium. □
b. The insured sharing material information with insurers. □
c. The insurers advertising their products. □
d. The broker passing messages on but not providing advice.

Answer 4

b. The insured sharing material information with insurers

Question 5

If a client answers a question on a proposal form incorrectly to try and obtain a
cheaper premium, what have they done?
a. Misrepresented the risk. □
b. Committed a non-disclosure. □
c. Acted in good faith. □
d. Failed to provide proper consideration

Answer 5

a. Misrepresented the risk. □

Question 6

What is meant by proximate cause?
a. The last thing that happened before the loss. □
b. The first thing that happened in a chain of events leading to the loss. □
c. The cause that created the most damage. □
d. The dominant and operative cause of the loss. □

Answer 6

. The dominant and operative cause of the loss.

Question 7

What is meant by indemnity?
a. Paying an agreed amount of compensation for example for loss of body parts. □
b. Pursuing a responsible third party for their share of any loss. □
c. Returning the insured to the position they were in before the loss. □
d. More than one insurer participating in a risk.

Answer 7

c. Returning the insured to the position they were in before the loss. □

Question 8

Which of these is not a method whereby insurers can claim money back from other
parties following a loss?
a. Reinsurance. □
b. Subscription. □
c. Subrogation. □
d. Contribution.

Answer 8

b. Subscription.

Question 9

An insured will often have to bear the first part of the loss themselves. Which word or
phrase is often used for this amount?
a. Deductible. □
b. Limit of indemnity. □
c. Premium. □
d. Contribution.

Answer 9

. Deductible

Question 10

The risk manager of a commercial insured is busy and has not got the time to
investigate everything that they know they should before presenting details of the risk
to insurers. If some information later emerges that should have been shared, what
might insurers suggest that the insured has done?
a. Committed fraud. □
b. Been unprofessional. □
c. Accidentally breached the duty of fair presentation. □
d. Recklessly breached the duty of fair presentation

Answer 10

D.Recklessly breached the duty of fair presentation