#1
Which of the following is a fundamental principle of insurance?
Principle of utmost good faith
ExplanationRequires complete honesty and disclosure between insurer and insured.
#2
Which type of insurance policy typically covers damage to the policyholder's own vehicle in an accident?
Comprehensive insurance
ExplanationProvides coverage for various types of damage to the insured vehicle.
#3
In insurance, what is the purpose of 'deductibles'?
To share the risk between the insured and the insurer
ExplanationInvolves the insured paying a portion of the loss before the insurer covers the remainder.
#4
What is 'reinsurance' in the insurance industry?
Insurance purchased by insurance companies to protect themselves against large losses
ExplanationHelps primary insurers mitigate the financial risks associated with large claims.
#5
What is the primary purpose of 'exclusions' in insurance policies?
To define situations or risks that the policy will not cover
ExplanationSpecifies what types of losses or situations are not covered by the insurance policy.
#6
What is the primary purpose of 'policy limits' in insurance?
To limit the amount an insurer will pay out for covered losses
ExplanationSpecifies the maximum amount an insurer will pay for covered losses.
#7
What does 'insurable interest' mean in insurance contract law?
The insured must have a financial stake in the insured item
ExplanationEnsures that the insured has a legitimate reason to insure the item.
#8
What is the 'doctrine of proximate cause' in insurance law?
It identifies the primary cause of a loss, determining whether it's covered by insurance
ExplanationDetermines the direct cause of a loss for insurance coverage purposes.
#9
What is the 'indemnity' principle in insurance?
Insurers must compensate the insured for the exact amount of their loss
ExplanationEnsures that the insured is restored to the financial position they were in before the loss occurred.
#10
What does 'utmost good faith' require in an insurance contract?
The insurer must disclose all relevant information honestly and accurately
ExplanationDemands full and truthful disclosure from both parties to the insurance contract.
#11
What does 'policy premium' refer to in insurance?
The amount the insured pays to the insurer for coverage
ExplanationThe cost of insurance coverage for a specified period.
#12
What is 'moral hazard' in insurance?
The risk of fraudulent claims by the insured
ExplanationOccurs when the insured behaves recklessly due to being protected by insurance.
#13
What is 'subrogation' in the context of insurance?
The process of an insurer assuming the legal rights of the insured after paying a claim
ExplanationAllows the insurer to pursue recovery from third parties for losses paid to the insured.