Insurance Policy Clauses Quiz

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What is the insured's responsibility when it comes to facts and the insurance contract?

To keep all facts secret from the insurer

To disclose all material facts to the insurer (correct)

To disclose only minor facts to the insurer

To only disclose facts that might benefit the insurer

What is the insurer's duty of disclosure to the insured?

Disclose only a few material facts

Avoid accepting risks registered with them

Mislead insured about policy coverage

Notify the insured of premium discounts (correct)

What may result in the voiding of an insurance policy?

Being transparent about policy coverage

Keeping all information secret from the insurer

Failure to disclose material facts (correct)

Fully disclosing all facts to the insurer

Which of the following is an essential characteristic for a fact to be considered misrepresentation?

It must be a fact rather than a statement of law, opinion, or belief Signup and view all the answers

What does the insurer avoid by exercising utmost good faith in relation to risk acceptance?

Avoid unenforceable contracts Signup and view all the answers

What is the consequence of misleading an insured about the policy coverage?

Breach of utmost good faith Signup and view all the answers

How is indemnity determined for a building under a Property Insurance policy?

By calculating the replacement cost at the time of loss Signup and view all the answers

What is the basis for determining indemnity for machinery & equipment with a ready second-hand market?

Cost of second-hand item plus transport and installation costs Signup and view all the answers

How is indemnity determined for stock under a Property Insurance policy?

By calculating the replacement cost at the time of loss Signup and view all the answers

What happens to the indemnity value for machinery & equipment when there is no ready second-hand market?

It becomes the cost of repair or replacement less an allowance for wear and tear Signup and view all the answers

What is included in a manufacturer’s stock in trade?

Raw materials, work in progress, and finished stock Signup and view all the answers

What factor determines the measurement of indemnity for buildings under a Property Insurance policy?

The cost of repair or reconstruction at the time of loss Signup and view all the answers

What does the inclusion of a replacement cost 'as new' clause in an insurance policy result in?

The policy owner receives an amount more than what he is actually entitled to. Signup and view all the answers

When is the agreed value cover often used in insurance policies?

For unique or hard-to-value properties. Signup and view all the answers

What is a valued policy in insurance terms?

A policy where the value of the subject matter is agreed at the start. Signup and view all the answers

In a valued policy, what amount must the insurer pay in case of a total loss claim?

The agreed value as stated in the policy. Signup and view all the answers

What does subrogation refer to in insurance?

When one person assumes the rights of another against a third party. Signup and view all the answers

Why might an insurer pay an amount more than what the policy owner is actually entitled to?

Due to the principle of indemnity and specific clauses in the policy. Signup and view all the answers

What right does the clause regarding subrogation give to insurers?

Right to control the insured's claim Signup and view all the answers

In what situation can the insured bring an action against a third party without the insurers' agreement?

When there is no breach of duty to the insurers Signup and view all the answers

How does the principle of subrogation operate when the recovery from a third party equals the loss suffered by the insured?

Insurers keep all the recovered amount Signup and view all the answers

What will happen if insurers pay S$4,750 due to a policy excess of S$250, and then recover S$5,000 from a third party?

Insurers will pass on the S$250 to the insured Signup and view all the answers

What is the consequence if the insured waives his rights against a third party without insurer's agreement?

Insured will lose coverage under the policy Signup and view all the answers

What happens if there is a surplus after insurers recover their money from a third party?

Insured gets to keep it Signup and view all the answers

What must be the proximate cause of loss in a Householder’s Insurance policy covering fire or lightning damage?

Fire or lightning Signup and view all the answers

If a tree branch lands on electrical circuitry and causes an electrical fault which leads to a fire, will the resulting fire damage be covered?

Yes Signup and view all the answers

In Example 4.4, why is the water damage covered even though it's an uninsured peril?

Because water is used to put out the fire Signup and view all the answers

If a fire starts in the bedroom of a house covered by insurance, and the firefighters use foam instead of water to extinguish it, would the resulting foam damage be covered?

No, foam damage is not caused by fire or lightning Signup and view all the answers

If a fire reaches a gas cylinder and causes an explosion, would the resulting explosion damage be covered under the policy?

No, because explosion is an excluded peril Signup and view all the answers

Why is the fire damage covered in the scenario where water causes additional damage to household contents?

Because water damage is considered a direct physical loss Signup and view all the answers