1. Insurance is a mechanism of …

a. carrying the financial consequences of risks transferred by either personal or commercial entities.

b.carrying risks transferred by either personal or commercial entities due to negligence or infirmity.

c.carrying the financial consequences of risks transferred by either personal or commercial entities due to negligence or infirmity.

b. carryingd. carryingTheft risks transferred by either personal or commercial entities.

2. An insurance policy means a/an …

a. life insurance or non-life insurance

b. a meeting of minds between an insurer and the insured about the subject of insurance.

c. document detailing the responsibilities of the insured and the insurer.

d. agreement between the insurer and the insured

3. An insurance proposal means a document that an …

a. insurer receives as an application for insurance coverage.

b. insurer completes and submits for the insured’s consideration and acceptance.

c. insured should keep as proof of having an insurance agreement.

d. insured uses as a basis for submitting a claim against the policy.

4. An insurance contract means …

a. terms and conditions that an insurer submits for consideration by the proposed insured.

b. terms and conditions that the insured proposed to the insurer.

c. terms and conditions upon which the insured and the insurer agree and have a meeting of minds.

d. terms and conditions that an insurer imposes on the insured for the latter’s compliance.

5. Fio Insurance has a quota share reinsurance agreement and cedes 30%. It received a claim of R1 200 000 on the fire policy from the insured, who owes a premium of R21 000. Determine the claim amount for which the insurer is liable.

a. R819 000

b. R360 000

c. R840 000

d. R339 000

6. An insurance provision serves as a … mechanism of risk management.

a.transferring

b.tolerating

c.terminating

7. Which of the following principles is a distinguishing feature of the difference between life insurance and non-life insurance?

a.insurable interest

b.consideration

c.indemnity

d. law of large numbers

8. … insurance policy is an example of commercial insurance.

a.A fire and third party

b.A business interruption

c.A third party only

d.A theft and fire

9. … insurance policy is an example of personal insurance.

a.A professional indemnity

b.A householders

c.A theft

d.A fire

10 An insurable interest …

a.distinguishes between gambling and insurance contracts.

b.renders an insurance contract void

c.is the legally a.distinguish relationship between the insured and the financial loss that the insured may experience.

d.is required for all insurance contracts.

11. Choose the statement that correctly describes the requirement of an insurable interest.

a.Tshegofatso is planning to buy a car in December; however, she is afraid that the car may be stolen or damaged and would like to insure the car from November of the same year.

b.Ada submitted a proposal for a health policy before working in the mining industry.

c.The directors of Lundi Company are concerned about the high rate of crime in the country where a new company branch will be opened. In response to this concern, they decided to obtain a group life policy for all employees who will be employed by the company when it starts operating

d.The directors of Venda Bank would like to secure a property insurance policy three months before the lease agreement is signed.

12. Choose the statement that best describes the requirement of good faith in an insurance contract.

a.An insurance policy serves as recognized evidence of good faith expressed by both parties to the insurance contract.

b.A proposal serves as the evidence of good faith expressed by both parties to the insurance contract.

c.A proposal serves as the evidence of good faith expressed by the insured.

d.An insurance policy serves as the evidence of good faith expressed by the insured.

13. ABC Insurers paid a claim of R90 000 to the insured and thereafter instructed its attorneys to institute a legal claim against the third party, for which it was successfully paid R98 000, excluding legal fees. ABC Insurers made use of the … provision of the contract.

a.average

b.contribution

c.subrogation

d.indemnity