Question 1

If an insurer invokes the cancellation clause to cancel a policy mid-year due to a change in the risk, how much of the premium, if anything, is normally returned to the policyholder?

Options :

A : The full year-s premium less a fixed nominal charge.

B : The full year-s premium.

C : None of the premium.

D : A pro rata amount.

Answer: A

Question 2

A policyholder achieves peace of mind when insuring his car by

Options :

A : eliminating the risk of loss.

B : reducing the chance of a loss occurring.

C : preventing the chance of a loss occurring.

D : transferring the risk to the insurer.

Answer: D

Question 3

Reinsurance is usually purchased by the

Options :

A : intermediary.

B : insurer.

C : regulator.

D : insured.

Answer: B

Question 4

Joel buys a house in a flood plain, but it has NOT flooded for 10 years. In purchasing insurance, Joel is managing what element of risk?

Options :

A : Uncertainty.

B : Statutory requirements.

C : Frequency.

D : Certainty.

Answer: A

Question 5

If an insured signs an agreement with a hold harmless clause, this may prevent the insurer from

Options :

A : disclosing details to a third party.

B : reinsuring the risk.

C : pursuing subrogation rights.

D : increasing the premium.

Answer: C

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