E05 Practice Test Questions Answers Updated 52 Questions
E05 dumps & Insurance Law (M05) Sure Practice with 52 Questions
NEW QUESTION 31
What are the main objectives of the principle of insurable interest?
- A. To reduce moral hazard and to discourage profiteering.
- B. To reduce physical hazard and to discourage wagering.
- C. To reduce moral hazard and to discourage wagering.
- D. To reduce physical hazard and to discourage profiteering.
Answer: C
NEW QUESTION 32
A household insurance policyholder leaves his home to go to work without setting the burglar alarm. Whilst he was out, his new tumble dryer overheats and causes fire damage to the kitchen. In what circumstances may the insurer legally reject a fire claim?
- A. If the policyholder exaggerates the value of the claim.
- B. If the tumble dryer is covered by extended warranty insurance.
- C. If there is a breach of a warranty requiring the burglar alarm to be set.
- D. If there is a subrogation action against the manufacturer of the tumble dryer.
Answer: A
NEW QUESTION 33
According to statute law, an unfair term in a consumer insurance contract is defined as one which
- A. has been individually negotiated and is to the detriment of either one of the parties.
- B. does not restrict liability for death or personal injury.
- C. causes a significant imbalance in the parties' rights to the detriment of the consumer.
- D. provides insurance where the scope of cover is narrow compared to the premium charged.
Answer: C
NEW QUESTION 34
In respect of a life assurance policy, the duty to take reasonable care NOT to make a misrepresentation ends when the proposer
- A. assigns the contract to a third party.
- B. dies and his estate submits a claim to the insurer.
- C. forms the contract with the insurer.
- D. signs and submits the completed proposal form to the insurer.
Answer: C
NEW QUESTION 35
Ambiguous terms in a household insurance contract are generally construed against the
- A. policyholder due to the literal rule.
- B. insurer due to the ejusdem generis rule.
- C. policyholder due to the noscitur a sociis rule.
- D. insurer due to the contra proferentem rule.
Answer: D
NEW QUESTION 36
What is the intended purpose of a subrogation waiver clause in an insurance po
- A. The insured has a duty to ensure that the insurer's subrogation rights are maintained.
- B. Cover is suspended whilst the insurer pursues an action for subrogation.
- C. The insurer's subrogation rights will not be exercised against certain parties associated with the insured.
- D. The doctrine of subrogation is excluded from the policy.
Answer: C
NEW QUESTION 37
For this question more than 1 option is correct. You must select all the correct options to gain the mark.
A proposer for private motorcycle insurance carelessly states the motorcycle's engine capacity as 500cc when in fact it is 1500cc. A policy is issued by the insurer on this basis. In the event of a valid claim causing damage to the motorcycle, what potential remedies are available to the insurer under the Consumer Insurance (Disclosure and Representations) Act 2012?
- A. Avoid the contract, refuse all claims and keep the premium.
- B. Reduce the claim amount in proportion to the premium it would have charged.
- C. Apply any terms it would have applied if the misrepresentation had not taken place.
- D. Reject the claim, but maintain the policy.
Answer: B,C
NEW QUESTION 38
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 may exercise an option to buy the painting back.
- C. Bill must buy the painting back.
- D. Bill may keep the claim settlement and also keep the painting.
Answer: B
NEW QUESTION 39
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. applies a specific exclusion within the policy wording.
- D. imposes a premium loading.
Answer: B
NEW QUESTION 40
John owns stock that he intentionally insured for £15,000, although the full value of the stock is £18.000. His insurance policy has no excess and is subject to a pro rata condition of average. In the event of water damaging
£6.000 of John's stock, how much will the insurer pay for a valid claim after the application of average?
- A. £3,000
- B. £6,000
- C. £5,000
- D. £15,000
Answer: C
NEW QUESTION 41
For this question more than 1 option is correct. You must select ail the correct options to gain the mark.
In what circumstances does the Fires Prevention (Metropolis) Act 1774 require insurance companies to ensure that claims monies are used to rebuild or reinstate buildings destroyed or damaged by fire?
- A. Where the building was destroyed by an explosion.
- B. Upon the request of any person(s) interested in the buildings.
- C. Where there is underinsurance.
- D. When fraud or arson by the insured is suspected.
Answer: B,D
NEW QUESTION 42
In the tort of negligence, a primary victim of nervous shock is a class of person who suffers psychiatric injury
- A. as a result of stress or harassment at work.
- B. through fear for the safety of another person involved in an accident which he witnessed.
- C. as a result of grief or sorrow for the loss of a person with whom he had a close relationship.
- D. through fear for his own safety in an accident.
Answer: D
NEW QUESTION 43
The test of the materiality of facts in an insurance contract is defined according to the opinion of a
- A. reasonable person.
- B. diligent broker.
- C. prudent underwriter.
- D. honest proposer.
Answer: C
NEW QUESTION 44
What is the maximum contingency fee percentage under a damages-based agreement that can be charged by a solicitor for personal injury cases and employment tribunal cases respectively?
- A. 35% for personal injury cases and 25% for employment tribunal cases.
- B. 35% for both cases.
- C. 25% for personal injury cases and 35% for employment tribunal cases.
- D. 50% for both cases.
Answer: C
NEW QUESTION 45
A claimant may possibly recover money transferred under an illegal contract when
- A. the illegality makes the contract voidable rather than void.
- B. the contract is against public policy but not substantive law.
- C. both parties to the contract are equal in wrongdoing.
- D. the legal portion of the contract can be severed from the illega portion.
Answer: C
NEW QUESTION 46
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. The insurer at all times.
- B. No one as Tim is not a party to the insurance contract.
- C. Both the insurer and Paul at different times.
- D. Paul as it is a consumer contract.
Answer: A
NEW QUESTION 47
A professional indemnity policy includes a condition requiring that the insured must give prompt notice of any circumstance that could give rise to a claim. What type of condition is this?
- A. A collateral condition.
- B. A condition precedent to liability.
- C. A suspensive condition.
- D. A condition precedent to the contract.
Answer: B
NEW QUESTION 48
In what circumstances is abandonment automatic under a marine hull insurance policy?
- A. The insured has sent a formal notice of abandonment.
- B. The insured has performed an action of abandonment.
- C. The constructive total loss of the vessel.
- D. The actual total loss of the vessel.
Answer: D
NEW QUESTION 49
How can an agency relationship be best described?
- A. A person, who has paid another party under a contract, has the right to stand in the place of that other party and avail himself of the rights and remedies of that party.
- B. A person has ratified another party's action.
- C. A person has the authority to act on behalf of another party.
- D. A person has transferred his obligations under a contract to another party.
Answer: C
NEW QUESTION 50
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