Questions and Answers
What does the principle of insurable interest ensure in an insurance contract?
How does the principle of indemnity function in an insurance contract?
What is the significance of the principle of utmost good faith in insurance?
What role does the principle of subrogation play in insurance claims?
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In the context of fire insurance, what is typically the focus of erstwhile tariff rules?
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What is the primary purpose of fire insurance policies?
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Which of the following is not a basic principle of insurance?
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What can occur if an insured fails to disclose relevant information when taking an insurance policy?
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What condition must be met for the insurance to continue after a material alteration?
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Under which circumstance does an insurance policy cease to attach to the property affected?
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What happens to the insurance policy when the insured's insurable interest ceases due to the sale of property?
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Which of the following is true concerning the death of the insured?
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When can the insurance be continued if insurable interest has ceased?
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What is the marine clause in fire insurance?
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What type of policies can overlap according to the content provided?
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Which of the following does NOT cause the insurance to cease?
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What is the maximum liability of the company in case of an insured event?
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Which of the following is NOT covered under the definition of fire for insurance purposes?
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What type of loss is excluded when property undergoes its own fermentation?
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If a fire spreads from a haystack that underwent spontaneous combustion to other haystacks, how is the loss treated?
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What is a crucial factor that determines whether a loss due to fire is covered?
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Why is the phrase 'its own' significant in the context of spontaneous combustion?
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Which of the following scenarios would result in coverage under the fire insurance policy?
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Which would likely be covered by an insurance policy against fire damage?
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Which principle is a corollary of the principle of indemnity?
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What is generally excluded under fire insurance policies regarding stocks?
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Which principle gives legal validity to insurance contracts?
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How many conditions are generally prescribed in a fire policy?
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What does the principle of indemnity primarily aim to ensure?
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In the event of a fire loss of Rs. 35,000 with a sum insured of Rs. 75,000 on a property valued at Rs. 1,00,000, what would be the claim payable?
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Which condition is typically included in fire policy documentation?
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Which of the following is a principle related to loss distribution in insurance?
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What happens to a claim if the insured does not file a suit within 12 calendar months after a disclaimer by the insurer?
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What is the purpose of the time limitation on filing suits related to claims?
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What is meant by the 'right of entry' condition?
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Which condition must the insured comply with to not forfeit benefits under the policy?
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What does the right of abandonment allow under a Marine Policy that is not permitted under a fire policy?
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Why is it problematic for the insurer to allow claims to be reopened after a long period?
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What happens if the insured does not cooperate during the claims process?
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Which of the following statements is true regarding claims under fire policies?
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Study Notes
Chapter 1: Basic Principles and the Fire Policy
- Explains terms of a fire insurance contract and foundational insurance principles.
- Principles of insurable interest, indemnity, subrogation, and utmost good faith are crucial to fire insurance.
Key Principles
- Insurable Interest: Only individuals or entities that stand to suffer a financial loss can take out insurance.
- Indemnity: Ensures that insurance indemnifies losses, preventing profit from insurance.
- Subrogation: Allows the insurer to recover losses from a third party responsible for the loss, avoiding insurer's liability for negligent actions.
- Utmost Good Faith: Requires full disclosure of all relevant facts when obtaining an insurance policy.
Fire Policy Coverage
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Perils Covered:
- Primarily includes actual ignition or burning of property.
- Excludes losses from fermentation, natural heating, or spontaneous combustion.
Exclusions and Examples
- Spontaneous combustion applies to affected property only; other properties might be covered if damaged.
- Examples illustrate the exclusion effects, such as spontaneous combustion of haystacks impacting insurance claims.
Material Alteration and Insurable Interest
- Insurance ceases for property under material alterations that increase risk (e.g., trade changes, unoccupancy over 30 days).
- Insurable interest is lost upon property transfer, except under specific conditions (death of insured or sanctioned transfers).
Marine Clause and Claims
- Loss covered beyond marine policy limits; overlaps possible during storage.
- Claim time limits mandated; must be filed within 12 months post-disclaimer or deemed abandoned.
Rights and Conditions
- Insurers hold the right to access loss locations, salvage property, and manage it as needed.
- Insured cannot abandon property to insurers, differentiating fire policies from marine policies.
Summary of Key Terms
- Fire Insurance Business: Covers risks related to fire damage.
- Utmost Good Faith: Legal requirement for honest representation in contracts.
- Subrogation: Insurer's right to claim against third parties.
- Contribution: Share in losses among multiple insurers.
- Insurable Interest: Financial stake in property.
- Indemnity Principle: Focus on covering losses, not profits.
- Proximate Cause: Direct cause of loss triggering policy coverage.
- Market Value: Current worth of insured property.
- Reinstatement Value: Cost to replace insured property.
- Fire Tariff: Rate guidelines for fire insurance.
- Operative Clause: Key operational terms in the policy.
- Terrorism Damage: Coverage related to fire damage due to terrorism.
- Indemnity Condition: Terms outlining how indemnity works.
- Pro-rata Average Condition: Treatment for partial losses.
- Arbitration Condition: Framework for resolving disputes.
Practice Questions
- Correlation between principles of indemnity, subrogation, and contribution.
- Legal validity of insurance contracts attributed to the principle of insurable interest.
- Calculation of claim amount considering property value and insured sum.
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Description
Test your knowledge on fire insurance principles and policies with our comprehensive quiz covering chapters 1 to 8. From basic fire policy concepts to underwriting and claims, this quiz assesses your understanding of crucial topics in the field.