Deck 23: Insurance

Question 1

Alexandra insures her car,worth $10,000,for $8,000 with Company Ace and for $7,000 with Company Bee.If the car is written off and Company Ace pays her $8,000,how much is she entitled to receive from Company Bee?

A)$2,000.
B)$0.
C)$1,000.
D)$7,000.

Answer 1

A

Question 2

To whom may an insured apply in relation to a dispute with a general insurer?

A)Life Insurance Complaints Service Ltd.
B)Insurance Enquiries and Complaints Ltd.
C)General Insurance Division Ombudsman.
D)Insurance Broker's Dispute Facility.

Answer 2

C

Question 3

Which of the following is NOT a material fact requiring disclosure by an applicant to an insurer?

A)The health of the applicant.
B)Whether the applicant has a criminal record.
C)Whether the applicant has had financial problems in the past.
D)A fact that reduces the risk.

Answer 3

D

Question 4

Insurance aims to protect parties by spreading risk.

Question 5

Which of the following is an example of an insurable interest?

A)Mortgagees and mortgagors.
B)Landlords and tenants.
C)A creditor against a debtor's insolvency.
D)All of the above.

Question 6

At common law,the insured in every contract of general insurance had to have something called:

A)Pecuniary Interest.
B)Equitable Interest.
C)Valuable Interest.
D)Insurable interest.

Question 7

Insurance contracts by their very nature are indemnity contracts.

Question 8

Which of the following statements about subrogation is NOT correct?

A)Subrogation only applies to contracts of indemnity.
B)For subrogation to apply it must be agreed to by the parties as a term of the contract.
C)Subrogation gives the insurer all the rights of the insured against a third party who caused the loss.
D)Subrogation applies only after the insurer has paid the insured for their loss.

Question 9

Does an innocent misrepresentation in an application for general insurance entitle the insurer to refuse to pay a claim?

A)No,but they can reduce their liability to nil if they can show that would not have entered into the contract if the misrepresentation had not been made.
B)Yes,the insurer can refuse,but only if the insurer is in a different position than they would have been had the misrepresentation not been made.
C)Yes,the insurer is entitled to avoid the contract entirely.
D)No,the insurer cannot refuse to pay the claim.

Question 10

Sophie over-insures her car,worth $10,000,for $12,000.If the car is written off,how much would she receive under an indemnity policy?

A)$10,000.
B)$12,000.
C)$2,000.
D)$0.

Question 11

The aim of a contract of indemnity insurance is:

A)to assist the insured to rebuild his business or home.
B)to put the insured back to the position they occupied before the occurrence of the loss.
C)to assist the insured to make a profit out of their loss.
D)to assist the insured against unforseen business or economic losses.

Question 12

Before an insured party can place a claim on their policy,they must prove:

A)they have suffered a loss because of the damage to or destruction of the property insured.
B)they have an insurable interest in the property insured.
C)they have either a legal or an equitable interest in the property insured.
D)they are the owner of the property insured.

Question 13

Where an insured party intentionally understates their age on a life insurance policy,the insurer has the option to:

A)reduce the premiums payable and repay the overpaid premiums with interest.
B)cancel the policy.
C)increase the sum insured proportionately.
D)reduce the sum insured proportionately.

Question 14

Explain the dynamics that exist between insurance and tort law.

Question 15

How does an insurance contract differ from an ordinary business contract?

A)There is uncertainty that could result in either a gain or a loss.
B)Both parties believe that the contractual price and the value of the contractual goods are equivalent.
C)The insured will receive a sum of money on the occurrence of an event which must occur at some time,although the time of the occurrence is uncertain.
D)One party knows that they are paying a price far less than the value provided by the other party and that the other party will only have to perform if certain conditions are met.

Question 16

Which of the following statements about insurance is NOT correct?

A)The insurance premium is calculated on the basis of the risk insured.
B)Insurance is a means for people and businesses to protect themselves against the risk of loss.
C)It is possible to insure against both speculative and pure loss.
D)It is possible to insure against loss caused by natural disasters or legal action.

Question 17

Which of the following statements about the duty of disclosure is NOT correct?

A)The duty applies at the time of the contract and at renewal.
B)An insurer must inform the insured in writing of their duty of disclosure.
C)The insured must disclose everything they know,suspect or believe to be relevant.
D)The duty applies to all co-insureds.

Question 18

A party insured under a general insurance contract is obligated to disclose to the insurer:

A)all facts that could influence the insurer as to whether or not to accept the risk.
B)all facts known to be material by the insured.
C)all facts known to be material by a reasonable person in the position of the insured.
D)all material facts.

Question 19

What governmental organisation regulates insurance companies' business practices?

A)The Australian Insurance Commission.
B)The Australian Securities and Investments Commission.
C)The Australian Prudential Regulation Authority.
D)The Australian Competition and Consumer Commission.

Question 20

The doctrine of subrogation:

A)is limited in its application by the Insurance Contracts Act 1984 (Cth).
B)continues without restriction.
C)was abolished by the Insurance Contracts Act 1984 (Cth).
D)was overruled by the High Court.

Question 21

Subrogation applies to all contracts of insurance.

Question 22

If an exclusion clause is ambiguous,a court will not read it down to ensure it retains its commercial purpose.

Question 23

Life insurance policies are treated as ongoing contracts and therefore not subject to renewal.

Question 24

With respect to indemnity,the value of the insured property is taken after the date of loss when determining how much the insured can recover.

Question 25

Claudia insures the contents of her house for $200,000 when they are in fact worth $300,000.If the contract contains a 'subject to average' clause and goods worth $60,000 are stolen,how much is the insurer obliged to pay?

A)$40,000.
B)$200,000.
C)$60,000.
D)$20,000.

Question 26

Carla insures her residence for $300,000 when it is in fact worth $500,000.If the contract contains a 'subject to average' clause and a fire causes $100,000 worth of damage,how much is the insurer obliged to pay?

A)$75,000.
B)$60,000.
C)$100,000.
D)$80,000.

Question 27

In what circumstances can an insurer cancel an insurance policy?

A)If the insured has breached their duty of good faith.
B)If the insured has breached a term of the contract.
C)If the insured has made a fraudulent claim.
D)All of the above.

Question 28

Fraud on the part of one co-insured will always prevent the other from recovering under an insurance policy.

Question 29

Insurable interest means that the insured must suffer a pecuniary or financial loss.

Question 30

In the case of goods insured at market value,their value is assessed:

A)at the date the goods were lost or destroyed.
B)at the date the goods were purchased.
C)at the date of the claim.
D)at the date the contract of insurance commenced.

Question 31

Which of the following is NOT a duty of an insurance agent or broker?

A)To keep proper books and records.
B)To maintain confidentiality.
C)To disclose any commission received in addition to their remuneration.
D)To act in person and in good faith.

Question 32

Contracts of insurance are contracts of utmost good faith.

Question 33

Explain why it is important for an insured to disclose all material facts.

Question 34

In the context of an insurance policy,'market value' means the cost of the item when purchased new in the market.

Question 35

The consideration in a contract of insurance is called the premium.

Question 36

An employee of an insurance company who completes a proposal form on behalf of an intending insured is acting as:

A)an independent agent.
B)the agent of the insured.
C)a principal in his/her own right.
D)the agent of the insurer.

Question 37

Make a list of the differences between the regulation of general insurance and the regulation of life insurance.

Question 38

In a contract of insurance,the offer is accepted when:

A)the insurer sends the insured a proposal form (acceptance)following the insured's request (offer).
B)the insured completes and submits (acceptance)the proposal form sent out by the insurer (offer).
C)the insurer issues a cover note (acceptance)following the insured's request (offer).
D)the insurer accepts the proposal (acceptance)submitted by the insured (offer).

Question 39

Explain the purpose of a cover note.

Question 40

The onus of proving that all material facts have been disclosed rests with the insured.

Question 41

All contracts of insurance are arranged through intermediaries.

Question 42

List the duties of an insurance agent or insurance broker.

Question 43

An insurance broker is:

A)an employee of an insurance company.
B)an employee of the insured.
C)an agent of an insurance company.
D)an independent adviser.

Question 44

Which of the following is NOT an example of general insurance?

A)Credit insurance.
B)Motor vehicle insurance.
C)Life insurance.
D)Professional indemnity.

Question 45

Payment of an insurance premium to an insurance broker or agent discharges the liability of the insured to the insurer.

Question 46

Which of the following statements about fire insurance is correct?

A)A fire policy is a contract of assurance.
B)A fire policy is a contract of contingency.
C)A fire policy is a contract of indemnity.
D)A fire policy is a contract of property insurance.

Question 47

An insurer is responsible for the actions of their agents provided they are acting within the scope of their authority.

Question 48

Which of the following is NOT an example of life insurance?

A)Personal accident policies.
B)Annuity policies.
C)Disability insurance.
D)Endowment policies.

Question 49

Public liability is an example of general insurance.

Question 50

A life insurance policy is a contract of indemnity.