Module 5 Flashcards
Most insurance policies are contracts of…
A. Subrogation
B. Good faith
C. Indemnity
C. Indemnity
Which types of policies cannot be contracts of indemnity?
A. Motor, Home and Pet
B. Life assurance, Personal accident and Sickness
C. Travel, Gadget and Pet
B. Life assurance, Personal accident and Sickness
For which of these classes of insurance would you expect a payment of money to be made in settlement of a claim in all cases?
A. Motor
B. Liability
C. Fire
B. Liability
A fire at Millie and Michael’s cottage damages a carpet that is insured under their home contents policy on a new for old basis.
The carpet was bought four years ago for £500 and it will cost £750 to replace with a new carpet. The old carpet was about half way through its useful life.
Based on the information given in the case study above, how much would you expect the insurer to pay to settle this claim?
A. £250
B. £375
C. £500
D. £750
D. £750 - With ‘new for old’ cover, no deduction is made for wear and tear
Michael buys a vintage car which he insures on an agreed value basis for £30,000. Several years after he buys the car it is damaged in an accident and the cost of repairs is assessed at £15,000. By this time, the bottom has fallen out of the vintage car market and the car’s value is only £12,000.
Would you expect the insurer to settle the claim by paying:
A. The cost of repairs
B. The car’s market value of £12,000
C. The car’s agreed value of £30,000
A. The cost of repairs
These policies are commonly used for works of art and classic cars and avoid any dispute about the (possibly subjective) value of the item at the time of a loss.
In the case of a partial loss, the policy will probably state the basis of settlement as being the cost of repairs. Alternatively the policy may say that partial losses will be settled on a proportionate basis.
What type of policy is this?
A. New for old
B. Agreed value
C. First Loss
B. Agreed value
If the insured believes that a total loss, or even a very substantial loss, under the policy seems impossible, a reduced policy limit is agreed, linked to what the insured believes to be the largest likely loss that will arise from a single incident.
This type of cover is commonly used for theft insurance (e.g. in a large warehouse) where it is unlikely that all of the stock will be stolen at once.
Where insurers agree to this basis of cover, only very modest premium discounts are given, compared with ‘full value’ policies.
A. New for old
B. Agreed value
C. First Loss
C. First Loss
An explosion in an underground gas pipe causes a fire which damages Michael’s delicatessen. His policy covers fire damage, but specifically excludes damage caused by explosion. If the explosion had not occurred, the fire would not have started.
Would you expect this loss to be covered by Michael’s fire policy?
A. Yes
B. No
B. No
A storm blows a tree over. The tree falls onto Millie and Michael’s house, crushing the water tank in the loft and causing water from the tank to flood through the house. The water causes a storage heater in the downstairs living room to short circuit, causing a fire which destroys the room.
What would you say was the proximate cause of the damage to Millie and Michael’s living room?
A. Storm
B. Flood
C. Fire
A. Storm
Millie insures the glass display window in her studio against damage by any cause except fire. A fire breaks out in a neighbour’s property and a mob gathers. The mob decide to riot and in doing so break the window of Millie’s shop.
What would you class as the proximate cause of the damage to the window?
A. The fire
B. The riot
B. The riot
The loss will be covered if the the proximate cause was…
A. An excepted or excluded peril
B. An uninsured or unnamed peril
C. An Insured or named peril
C. An Insured or named peril
Thieves break into Michael’s delicatessen and steal a large amount of his stock. On leaving they set fire to the shop. The fire brigade attend and put out the fire, but in doing so they cause water damage to some of the remaining stock. Michael’s standard fire policy covers the building and its stock against fire, lightning and explosion.
What would you expect the policy to cover?
A. Nothing because the proximate cause was theft which is an uninsured peril
B. The fire damage only
C. The fire damage and the subsequent water damage
C. The fire damage and the subsequent water damage
