Module 1 – Basic Principles mock test

Which of the following best describes the concept of insurance?

• A savings plan for future needs

• A risk transfer mechanism where the insured pays premiums to the insurer to cover potential losses

• A government welfare scheme

• A way to avoid all risks

What is the main purpose of risk pools?

• To increase competition among insurers

• Store premiums to cover losses, costs, and profit for the insurer

• To reduce paperwork

• To avoid paying claims

Which type of insurance indemnifies the client?

• Life insurance

• Short-term insurance

• Investment insurance

• Pension insurance

Which of these is NOT a way insurers can indemnify clients?

• Repair the item

• Replace the item

• Pay cash

• Increase the client’s premium

Who is referred to as the 'insured'?

• The insurance company

• The government

• The person or organisation that purchases insurance

• The broker

What does 'sum insured' mean?

• The total premiums paid

• The maximum amount the insurer will pay for a claim

• The value of the insured item

• The profit for the insurer

Which principle requires honesty and full disclosure of material facts?

• Proximate cause

• Good faith

• Subrogation

• Contribution

A void contract…

• Can be enforced by law

• Has no legal force

• Is always valid

• Is a type of insurance policy

Which clause allows an insurer to terminate a policy with 30 days’ notice?

• Indemnity clause

• Subrogation clause

• Cancellation clause

• Contribution clause

Which is an example of a physical hazard?

• Poor vehicle brakes

• Dishonesty

• Fraud

• Over-insurance