Online Access Free M05 Practice Test

Which of the following best defines an insurance contract?

• A.A contract in which one party agrees to indemnify another against specified risks in exchange for premiums.
• B.A contract for the protection of physical property only.
• C.A contract where the insurer assumes no liability.
• D.A contract that only applies to personal property insurance.

A professional indemnity policy includes a condition requiring that the insured must give prompt notice of any circumstance that could give rise to a claim. What type of condition is this?

• A.A suspensive condition.
• B.A condition precedent to liability.
• C.A collateral condition.
• D.A condition precedent to the contract.

Bill owned a painting which was insured under a policy containing a first refusal clause. The painting was stolen and Bill's claim was settled, but several months later the painting was recovered by the police. As a consequence, what is Bill's position under his insurance policy?

• A.Bill must buy the painting back.
• B.Bill may keep the claim settlement and also keep the painting.
• C.Bill must return the claim settlement in exchange for the painting.
• D.Bill may exercise an option to buy the painting back.

In which of the following cases can the insurer void an insurance contract?

• A.If the insurer cannot locate the policyholder
• B.If the policyholder has misrepresented a material fact at the time of underwriting
• C.If the insurer fails to provide a certificate of insurance
• D.If the policyholder does not pay the premium

What are the main reasons why the law requires insurable interest to exist?

• A.Discourage underinsurance and ensure premium adequacy.
• B.Reduce physical hazard and discourage gambling.
• C.Reduce moral hazard and discourage gambling.
• D.Discourage betterment and ensure premium adequacy.