Chapter 4 - Insurable Interest

Question 1

What must exist for there to be an insurable interest?

• Subject-matter, ownership and financial value.
• Subject-matter, ownership, and financial loss.
• Subject-matter, legal relationship, and financial value
• Subject-matter, legal relationship and financial loss

Answer 1

Subject-matter, legal relationship, and financial value

Question 2

Dorothy and James are getting married and have taken out insurance for their wedding day. In terms of insurable interest, their wedding day is the:

• legal relationship.
• Subject-matter.
• Financial value.
• Risk.

Answer 2

Subject-matter

Question 3

If an insurance company wants to reinsure part of a risk and hold, the financial interest in the original insurance is known as the:

• Subject-matter of insurance.
• Anticipated insurable interest.
• Legal liability
• Subject matter of the contract

Answer 3

Subject matter of the contract

Question 4

A couple arranged a joint life insurance contract shortly after they were married. They divorced five years later. It is TRUE to say the contract is:

• Still enforceable, because the insurable interest existed at Inception.
• Not enforceable because the insurable interest no longer exists.
• Still enforceable, but only if either partner remarries.
• Only enforceable until the point they divorced

Answer 4

Still enforceable, because the insurable interest existed at inception

Question 5

Aiden sold his car to his friend Darren. Two weeks later, Darren had an accident in the car causing significant damage. As Aidan has not cancelled his original insurance policy. He submitted a claim on Darren’s behalf. His claim was refused because:

• He was only covered for third-party fire and theft.
• He had no financial interest in the car at the time of the claim.
• Darren was not a named driver on the policy.
• His claim amount exceeded the cover on the policy.

Answer 5

He had no financial interest in the car at the time of the claim

Question 6

Which class of insurance requires the existence of insurable interest at both interception, and at the time of loss?

• Level term assurance
• Marine insurance
• An endowment plan
• General insurance

Answer 6

General insurance

Question 7

Insurable interest can be created by:

• Ownership, contract and court order.
• Ownership, contract and legislation.
• Ownership, agency agreement, and legislation.
• Ownership, contract and agency agreement.

Answer 7

Ownership, contract and legislation

Question 8

A dry cleaner has an insurable interest in the garments, it cleans and is therefore referred as a(n):

• Bailee
• Tenant
• Agent
• Part owner

Answer 8

Bailee

Question 9

Why does a tenant have insurable interest in the property I live in?

• They own property for insurance purposes.
• They act as an agent for the owner.
• They may be liable for the cost of repairs.
• They are treated as part owners for insurance purposes.

Answer 9

They may be liable for the cost of repairs

Question 10

Robert is affecting an insurance policy on behalf of another party. Robert is not the owner of the property but he’s able to arrange insurance because he is a(n):

• Bailee
• Principle
• Agent for the other party
• Tenant

Answer 10

Agent for the other party