Updated Nov-2021 E05 Exam Practice Test Questions
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NEW QUESTION 14
Why may an insurer insert a continuing warranty into an insurance policy?
- A. To encourage good risk management by the insured throughout the policy period.
- B. To enable an insurer to charge an additional premium if the warranty is continually breached.
- C. To ensure that underinsurance is avoided at all times.
- D. To maintain the annual aggregate limit of liability throughout the policy period.
Answer: A
NEW QUESTION 15
What are the main objectives of the principle of insurable interest?
- A. To reduce physical hazard and to discourage profiteering.
- B. To reduce moral hazard and to discourage wagering.
- C. To reduce physical hazard and to discourage wagering.
- D. To reduce moral hazard and to discourage profiteering.
Answer: B
NEW QUESTION 16
According to statute, a term under a consumer personal accident insurance policy may potentially be considered unfair if the insurer
- A. provides coverage that is more restrictive than that of other insurers.
- B. requires notification of a claim within a very short time period.
- C. imposes a premium loading.
- D. applies a specific exclusion within the policy wording.
Answer: B
NEW QUESTION 17
A breach of warranty under the general law of contract legally entitles an injured party to
- A. claim damages.
- B. avoid the contract ab initio.
- C. obtain specific performance.
- D. avoid the contract from the date of the breach.
Answer: A
NEW QUESTION 18
Tim is a local insurance broker. He has authority to receive premiums for a personal lines insurer and earns commission from the insurer for sales. Paul, an elderly customer, asked Tim for advice regarding his personal insurance requirements and to assist with completing the proposal form for household insurance. In these circumstances, who, if anyone, is Tim's principal?
- A. Both the insurer and Paul at different times.
- B. Paul as it is a consumer contract.
- C. No one as Tim is not a party to the insurance contract.
- D. The insurer at all times.
Answer: D
NEW QUESTION 19
A property policy contains a condition regarding prompt loss notification. If the insured fails to comply with this condition, in practice, the insurer is likely to
- A. settle the claim and recover its outlay from the insured.
- B. settle the claim and cancel the insurance policy from inception.
- C. only avoid the claim if the delay has seriously prejudiced its investigation and handling of the claim.
- D. avoid the claim automatically due to the breach of the policy condition.
Answer: D
NEW QUESTION 20
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 return the claim settlement in exchange for the painting.
- B. Bill must buy the painting back.
- C. Bill may exercise an option to buy the painting back.
- D. Bill may keep the claim settlement and also keep the painting.
Answer: C
NEW QUESTION 21
Two liability policies with different insurers cover the same loss of £15,000,000. The limit of liability is
£10,000,000 under policy X and £20,000,000 under policy Y. Neither policy has a non-contribution clause.
What amount will policy Y contribute towards the claim payment?
- A. £5,000,000
- B. £7,500,000
- C. £9,000,000
- D. £10,000,000
Answer: C
NEW QUESTION 22
The test of the materiality of facts in an insurance contract is defined according to the opinion of a
- A. reasonable person.
- B. prudent underwriter.
- C. honest proposer.
- D. diligent broker.
Answer: B
NEW QUESTION 23
Within what time period, from the date when the damage first began, does the owner of an office block have a right to sue the builder for negligent construction work?
- A. 15 years.
- B. 3 years.
- C. 6 years.
- D. 9 years.
Answer: B
NEW QUESTION 24
Who is entitled to the surplus if a subrogation recovery from a negligent third party is greater than the amount the insurer has paid to the insured?
- A. It is shared between the insurer and the insured.
- B. The State
- C. The insurer only.
- D. The insured only.
Answer: D
NEW QUESTION 25
The principle of subrogation prevents a policyholder from profiting from
- A. assigning abandonment rights to the insurer.
- B. claiming under both his insurance policy and against any negligent third party.
- C. submitting a full claim recovery under more than one insurance policy.
- D. retaining salvaged property.
Answer: B
NEW QUESTION 26
The branch of law particularly relevant when handling negligence claims is
- A. administrative.
- B. civil law.
- C. public law.
- D. constitutional law.
Answer: B
NEW QUESTION 27
For this question more than 1 option is correct. You must select all the correct options to gain the mark.
The Insurance: Conduct of Business sourcebook (ICOBS) rules in respect of claims handling specify that an insurer must
- A. not unreasonably reject an insured's claim.
- B. handle a claims notification within 14 days.
- C. settle a claim promptly once settlement has been agreed.
- D. provide reasonable guidance to an insured to help him make a claim.
Answer: A,C,D
NEW QUESTION 28
For this question more than 1 option is correct. You must select all the correct options to gain the mark. What are the characteristics of a corporation aggregate?
- A. It is answerable to its shareholders or members.
- B. It is not treated as a separate legal entity.
- C. It is an organisation with a separate legal existence to its membership.
- D. It is a legal person representing one official position.
Answer: A,C
NEW QUESTION 29
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