Insurance & FM Awareness Quiz For LIC AAO Mains 2023-3rd March

Q1. Insurance works on the principle of:
(a) Sharing of losses
(b) Probabilities
(c) Large numbers
(d) Randomness
(e) All of the above
Q2. The principle of _____________ ensures that an insured discloses all information
(a) Utmost Good Faith
(b) Insurable Interest
(c) Proximate Cause
(d) Subrogation
(e) Indemnity
Q3. The principle of _____________ ensures that an insured has an interest in the insured life.
(a) Proximate Cause
(b) Insurable Interest
(c) Indemnity
(d) Subrogation
(e) Utmost Good Faith
Q4. The principle of _____________ ensures that the cause which is the closest and the main reason for a loss should be considered
(a) Insurable Interest
(b) Indemnity
(c) Proximate Cause
(d) Subrogation
(e) Utmost Good Faith
Q5. The purpose of ………. are to hold the negligent person responsible for the loss and prevent the insured from collecting twice for the same loss.
(a) Causa Proxima
(b) Indemnity
(c) Uberrima fides
(d) Subrogation
(e) Utmost Good Faith
Q6. The principle of _____________ ensures that the insurance will only cover you for the loss that has happened
(a) Causa Proxima
(b) Utmost Good Faith
(c) Uberrima fides
(d) Subrogation
(e) Indemnity
Q7. The principle of _____________ ensures that if you have taken insurance from more than one insurer, both insurers will share the loss
(a) Contribution
(b) Causa Proxima
(c) Indemnity
(d) Uberrima fides
(e) Subrogation
Q8. The principle of _____________ ensures that you must take all the necessary steps to limit the loss
(a) Contribution
(b) Loss Minimization
(c) Causa Proxima
(d) Indemnity
(e) Uberrima fides
Q9. The principle of average applies when the value is _____________ in the proposal
(a) Not ascertainable
(b) Overstated
(c) Understated
(d) Negligible
(e) Only sentimental
Q10. Fidelity Guarantee Policies cover losses due to fraud by ____________
(a) Customers
(b) Borrowers
(c) Suppliers
(d) Employees
(e) Financiers

Solution

S1. Ans. (e)
Sol. Insurance works on all these principles.
S2. Ans. (a)
Sol. According to this principle, you have to disclose all the information that is related to the risk, to the insurance company truthfully.
S3. Ans. (b)
Sol. According to this principle, you must have an insurable interest in the life that is insured. That is, you will suffer financially if the insured dies. You cannot buy a life insurance policy for a person on whom you have no insurable interest.
S4. Ans. (c)
Sol. While calculating the claim for a loss, the proximate cause, i.e., the cause which is the closest and the main reason for a loss should be considered. Though it is a vital factor in all types of insurance, this principle is not used in Life insurance.
S5. Ans. (d)
Sol. This principle comes into play when a loss has occurred due to some other person/party and not the insured. In such a case, the insurance company has a legal right to reach that party for recovery.
S6. Ans. (e)
Sol. The principle of indemnity states that the insurance will only cover you for the loss that has happened. The insurer will thoroughly inspect and calculate the losses. The main motive of this principle is to put you in the same position financially as you were before the loss. This principle, however, does not apply to life insurance and critical health policies.
S7. Ans. (a)
Sol. According to the principle of contribution, if you have taken insurance from more than one insurer, both insurers will share the loss in the proportion of their respective coverage. If one insurance company has paid in full, it has the right to approach other insurance companies to receive a proportionate amount.
S8. Ans. (b)
Sol. You must take all the necessary steps to limit the loss when it happens. You must take all the necessary precautions to prevent the loss even after purchasing the insurance. This is the principle of loss minimization.
S9. Ans. (c)
Sol. In cases where you’re underinsured, the average clause is used to make sure you won’t receive a full payout when you’ve only paid part of the premium you should have been paying. It means insurers can reduce the amount they pay out by the same proportion as the person is underinsured.
S10. Ans. (d)
Sol. Fidelity guarantee insurance (FGI) exists to safeguard your firm or organization against theft of the firm’s own money, securities or property by an employee, partner, contractor or volunteer. FGI can also be known as first-party fraud, theft or employee dishonesty cover.