Topic 22 Flashcards
An insurer indicates that because of local subsidence, an insurance policy on a property offered as security to a lender would have exclusions or an increased premium. Which course of action is the lender MOST likely to follow?
A. Proceed with the loan on the basis of the policy exclusion.
B. Leave it to the borrower to decide what to do.
C. Withdraw the offer of a loan.
D. Pay the additional premium on behalf of the borrower.
C. Withdraw the offer of a loan.
Which type of insurance is ALWAYS insisted upon by a lender in a mortgage situation?
A. Property insurance
B. Contents cover
C. Endowment policy
D. Mortgage protection assurance
A. Property insurance
Which one of the following can a lender NOT do in relation to buildings insurance as a condition of a mortgage?
A. Insist on buildings cover being taken out.
B. Insure the property themselves if the borrower fails to do so and add the cost to the loan.
C. Insist on the use of their own insurance.
D. Specify the type of cover which is acceptable.
C. Insist on the use of their own insurance.
If a borrower is buying a leasehold flat and the lease specifies the use of an insurer whose buildings cover policy the lender considers inadequate, what step could the lender take?
A. Include the other insurer on their panel.
B. Require the borrower to insure the property twice.
C. Insist that the terms of the lease be changed.
D. Withdraw the mortgage offer.
D. Withdraw the mortgage offer.
A lender would NOT permit a borrower to effect a policy with a subsidence exclusion to cover a mortgaged property because:
A. the lender’s security could be impaired.
B. the borrower could be left with a large bill.
C. the Association of British Insurers advise against it.
D. it is prohibited by law.
A. the lender’s security could be impaired.
Molly and Fred have chosen to protect their capital repayment mortgage with a joint level term assurance policy rather than with the usual decreasing term policy. What advantage will this give?
A. An option to convert the policy to an endowment at a later date.
B. A terminal bonus payable on first death or maturity.
C. A reduced premium during the initial term of the policy.
D. A surplus to the surviving borrower on first death.
D. A surplus to the surviving borrower on first death.
What is usually the MAXIMUM benefit payment period for accident, sickness and unemployment (ASU) policies?
A. 1 year
B. 2 years
C. 5 years
D. 7 years
B. 2 years
Which of the following is normally regarded as a standard peril in the majority of buildings insurance policies?
A. Accidental damage
B. Third party liability
C. Riot or civil commotion
D. Civil war or insurrection
C. Riot or civil commotion
Which of the following describes the principle of averaging?
A. A way of reducing the incidence of multiple claims.
B. A method of ensuring that a claimant’s financial position is the same before and after an insurance claim.
C. A procedure for reducing the settlement figure payable to a policyholder who is under-insured.
D. A means of ensuring that policyholders are not over-insured.
C. A procedure for reducing the settlement figure payable to a policyholder who is under-insured.
Most buildings insurance policies automatically provide cover for:
A. corrosion to a heating system.
B. subsidence and landslip.
C. theft while the property is unoccupied.
D. trees falling on fences and hedges.
B. subsidence and landslip.
The index linking of property insurance policies helps to ensure that:
A. The level of insurance cover continues to be adequate.
B. Payment of insurance premiums does not lapse.
C. Any increases in premiums are kept to a minimum.
D. The standard of cover provided remains satisfactory.
A. The level of insurance cover continues to be adequate.
Which one of the following is NOT something that a lender can insist on in relation to property insurance for a mortgaged property?
A. To determine how the proceeds of a claim will be spent.
B. To choose the insurance company that the borrower will use.
C. To have its interest in the property mentioned on the policy.
D. To specify minimum requirements for the cover that the policy provides.
B. To choose the insurance company that the borrower will use.
Which of the following would NOT be regarded as a standard peril in respect of the cover provided by most building insurance policies?
A. Theft
B. Malicious damage and vandalism
C. Riot and civil commotion
D. Civil war or insurrection
D. Civil war or insurrection
Peter is considering taking out a convertible term assurance policy to protect his mortgage in the event of his death. Why might this be the case?
A. He wants to increase the death benefit on the policy when he moves house in three years’ time.
B. Should he marry in the future he wants to be able to add his wife to the policy.
C. He is currently in poor health, and wants to increase the cover on the plan when he recovers.
D. He wishes to keep premiums to a minimum at present and add an investment element to the policy at a later date.
D. He wishes to keep premiums to a minimum at present and add an investment element to the policy at a later date.
A lender discovers that a borrower has allowed the property insurance on his mortgaged property to lapse. What steps will the lender normally take when that happens?
A. Call in the mortgage as the terms and conditions have been breached.
B. Switch cover to the lender’s block policy scheme and pay the premium out of reserves.
C. Pay the premium and charge it to the mortgage account.
D. Allow the borrower a short period, typically three months, to re-instate the cover.
C. Pay the premium and charge it to the mortgage account.
