Insurance Awareness Questions Set 09 (Principles of Insurance)

Important Insurance Awareness Principles Related Questions and Answers for NICL, NIACL, LIC and other competitive exams. 

  1. Which of the following principles of Insurance denotes a positive duty of the person seeking insurance to voluntarily disclose all facts material to the risk being proposed whether requested or not?
    A) Insurable Interest
    B) Utmost Good Faith
    C) Principle of Contribution

    D) Principle of loss Minimization
    View Answer
    Option B
    Some Extra:
    Utmost Good Faith is one of the principles that insurance is based on. It denotes a positive duty of the person seeking insurance to voluntarily disclose accurately and fully, all facts material to the risk being proposed whether requested or not.
    The principle of Utmost Good Faith is also known as Uberrimae Fides.
  2. Which of the following principles of Insurance assures about the financial interest that the assured possesses in whatever is being insured?
    A) Insurable Interest
    B) Utmost Good Faith
    C) Principle of Contribution

    D) Principle of Indemnity
    View Answer
    Option A
    Some Extra:
    The person (the assured) should possess the thing whatever he has opted to get insured. In other words, it is the right of a person to insure something which, when lost or damaged, would mean a financial loss to him.
    The person cannot insure something that he does not own.
  3. Which of the following principles of Insurance tells that an insured may not be compensated by the insurance company in an amount exceeding the insured’s economic loss?
    A) Insurable Interest
    B) Utmost Good Faith
    C) Principle of Contribution

    D) Principle of Indemnity
    View Answer
    Option D
    Some Extra:
    Indemnity means security or compensation against loss or damage. The principle of indemnity is such principle of insurance stating that an insured may not be compensated by the insurance company in an amount exceeding the insured’s economic loss.
  4. Which of the following principles of Insurance enables the insured to claim the amount from the third party responsible for the loss?
    A) Insurable Interest
    B) Principle of Subrogation
    C) Principle of Contribution

    D) Double insurance
    View Answer
    Option B
    Some Extra:
    The principle of subrogation enables the insured to claim the amount from the third party responsible for the loss. It allows the insurer to pursue legal methods to recover the amount of loss, For example, if you get injured in a road accident, due to reckless driving of a third party, the insurance company will compensate your loss and will also sue the third party to recover the money paid as claim.
     
  5. Which of the following principles of Insurance denotes insurance of same subject matter with two different companies or with the same company under two different policies?
    A) Principle of Proximate Cause
    B) Principle of Subrogation
    C) Double insurance

    D) Principle of Indemnity
    View Answer
    Option C
    Some Extra:
    Double insurance denotes insurance of same subject matter with two different companies or with the same company under two different policies. Insurance is possible in case of indemnity contract like fire, marine and property insurance.
  6. What is called when insurance contract comes into existence when one party makes an offer or proposal of a contract and the other party accepts the proposal?
    A) Nature of contract
    B) Utmost Good Faith
    C) Principle of Contribution

    D) Double Insurance
    View Answer
    Option A
    Some Extra:
    Nature of contract is a fundamental principle of insurance contract. An insurance contract comes into existence when one party makes an offer or proposal of a contract and the other party accepts the proposal.
  7. What is the Principle of Insurance called which is applicable when the loss is the result of two or more causes?
    A) Double Insurance
    B) Principle of Subrogation
    C) Principle of Proximate Cause 

    D) Principle of Indemnity
    View Answer
    Option A
    Some Extra:
    Proximate cause or Principle of ‘CAUSA PROXIMA’ literally means the ‘nearest cause’ or ‘direct cause’. This principle is applicable when the loss is the result of two or more causes. This principle is applicable when there are series of causes of damage or loss.
    The loss of insured property can be caused by more than one cause in succession to another.
  8. What is the Principle of Insurance called under which insured must always try his level best to minimize the loss of his insured property, in case of uncertain events?
    A) Principle of Loss Minimization
    B) Principle of Subrogation
    C) Principle of Proximate Cause 

    D) Principle of Indemnity
    View Answer
    Option A
    Some Extra:
    According to the Principle of Loss Minimization, insured must always try his level best to minimize the loss of his insured property, in case of uncertain events like a fire outbreak or blast, etc. The insured must take all possible measures and necessary steps to control and reduce the losses in such a scenario.
    Also called Mitigation Principle.
  9. What is the Principle of Insurance called under which the insured can claim the compensation only to the extent of actual loss either from all insurers or from any one insurer?
    A) Insurable Interest
    B) Principle of Subrogation
    C) Principle of Contribution
    D) Double insurance
    View Answer
    Option D
    Some Extra:
    Principle of Contribution is a corollary of the principle of indemnity. It applies to all contracts of indemnity, if the insured has taken out more than one policy on the same subject matter. According to this principle, the insured can claim the compensation only to the extent of actual loss either from all insurers or from any one insurer. If one insurer pays full compensation then that insurer can claim proportionate claim from the other insurers.

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