Multiple Choice Questions on Insurance

Insurance is a contract between

• The insured and the insurer

• The insured and the beneficiary

• The insurer and the agent

• The insured and the government

The primary purpose of insurance is to

• Generate profit for the insurance company

• Protect the insured against financial loss

• Provide employment opportunities

• Increase government revenue

The law of large numbers is a fundamental principle in insurance. It states that

• Insurance companies should have a large number of employees

• Insurance premiums should be based on the number of claims

• The probability of a loss can be predicted by studying a large group of people

• Insurance companies should operate in many different countries

The term 'premium' in insurance refers to

• The amount paid by the insured to the insurer

• The value of the property insured

• The amount of compensation paid by the insurer

• The cost of the insurance policy

A risk that can result in either a loss or a profit is known as

• Pure risk

• Speculative risk

• Catastrophic risk

• Insurable risk

The principle of insurable interest requires that

• The insured must have a financial stake in the property insured

• The insurer must have a financial stake in the property insured

• The insured must be related to the property insured

• The insured must be a resident of the same country as the property insured

The principle of utmost good faith means that

• The insurer must act in the best interest of the insured

• The insured must disclose all relevant information to the insurer

• The insured must pay premiums on time

• The insurer must compensate the insured for all losses

The principle of indemnity states that

• The insurer must indemnify the insured for all losses

• The insured must indemnify the insurer for all losses

• The insurer will only pay the actual value of the loss

• The insured must pay a premium based on the actual value of the property

The principle of subrogation means that

• The insurer can step into the shoes of the insured and claim from a third party

• The insured can claim from a third party

• The insurer must pay the insured for all losses

• The insured must pay a premium based on the actual value of the property

The principle of proximate cause states that

• The insurer must prove that the loss was caused by an insured peril

• The insured must prove that the loss was caused by an insured peril

• The loss must be the direct and immediate result of an insured peril

• The loss must be foreseeable