Class Test On Insurance
Class Test On Insurance
Class Test On Insurance
2. Tariqs new sports car is worth $30 000 but he has insured it for $24 000.
Yesterday the car was involved in an accident and will cost $15 000 to repair. If
Tariq claims on his policy, what is the maximum amount that the insurance
company is likely to pay out?
A $9000 B $12 000 C $15 000 D $18 750
7. The Safeguard Insurance Company needs a pool of $500 000 out of which claims
are met. It has 2500 policy holders who are each charged a premium of $200.
If the company were able to double its number of policy holders to 5000, what
effect would this have on the premiums payable?
A They would go down to $100. B They would stay the same.
C They would go up slightly to $300. D They would double to
$400.
8. Ahmed owns a factory. He obtained the following information about insuring his
factory building with an insurance company.
2
10. If a trader wishes to insure his stock, from whom would he seek advice?
A an actuary B an assessor C a broker D an
underwriter
Questi 1 2 3 4 5 6 7 8 9 10
on
Answer
PART 2: Answer the following
Use the diagram shown in Fig. 1 to help you answer the following questions.
(a) Explain the benefits of the pooling of risk to the 500 companies. [3]
(b) (i) Calculate the total premiums paid to the insurance company for fire insurance. Show
your working. [2]
(ii) Apart from paying claims, state two other uses for the insurance premiums. [2]
(c) Explain how the principle of insurable interest applies to each of the 500 companies. [4]
(d) (i) Name three other business risks against which the 500 companies might insure.
[3]
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(ii) Explain why it is important that the companies insure against these risks. [6]
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2. Mr Ahmed and Mrs Singh are sole traders owning shops of equal size in the same street.
(a) Explain two business risks, apart from fire, against which both Mr Ahmed and Mrs Singh
should insure. [4]
(b) Explain why Mr Ahmed and Mrs Singh should obtain quotations from several insurance
companies. [2]
(c) Mr Ahmed and Mrs Singh will complete a proposal-form provided by the insurance company
they decides to use. Why is this necessary? [4]
(d) Explain two reasons why an insurance company may refuse to provide Mr Ahmed and Mrs
Singh with a fire insurance policy. [4]
(e) Mr Ahmed and Mrs Singh could use an insurance broker or she could contact several
insurance companies to arrange motor insurance. Discuss both options. Which would you
recommend? Give reasons for your answer. [6]
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