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BASIC NON-LIFE EXAM REVIEWER

SET A
True or False:
______________1. Comprehensive insurance issued to cover private houses and household under fire
policy is otherwise known as package policy.

______________2. The value of the ship is its value at the beginning of the risk including all articles or
changes which add to its permanent value.

______________3. There is reinsurance when the same risk is insured by several insurers repeatedly in
respect to the same subject and interest.

______________4. The definition of “insured” as used in the auto liability policy includes as insured the
employees of a garage who may be operating the automobile with permission of the name insured.

______________5. Death or bodily injury to any person in the employ of the insured arising out of and
in the course of such employment is not compensable under a motor car policy.

______________6. Suretyship exists whenever one party guarantees performance by another party of
an obligation or undertaking.

______________7. All risks policies include all perils.

______________8. If the insured property is more than ¾ destroyed, it may be abandoned to the
company as a total loss, according to the standard fire policy.

______________9. Warranty in Marine Insurance is a stipulation forming part of the policy as to some
fact, condition or circumstance relating to the risk.

______________10. If more than 2/3 of the goods value is actually lost the owner has the right to
abandon and consider it a total loss.

Multiple Choice: Encircle the letter of your choice.

11. Explosion to be recoverable as extraneous risk and written in conjunction with the standard fire
policy must be:

a. Explosion from pressure vessels

b. Any explosion
c. Chemical explosion, as in the case of gas used for lighting or domestic purposes
d. None of the above

12. Under the provision of the Insurance Code, a cancellation notice to the insured from the insurer, to
be effective, shall be based on the occurrence of any of the following except:

a. Non-payment of premium
b. Verbal notice to the insured
c. Discovery of fraud or material misrepresentation
d. Physical changes in the property insured making the property uninsurable
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13. A contract signed and executed by a third party in favor of a bonding company by virtue of which
said party binds himself to indemnify the company against loss which may arise by reason of the
issuance of the bond is called:

a. Contractor’s bond
b. Fiduciary bond
c. Surety bond
d. Third party indemnity agreement

14. Why must an insured have an insurable interest in the property insured?

a. To obtain a measurement of the insured’s loss

b. Guard against moral hazard
c. Prevent wagering
d. All the above

15. All of the following are true, except

a. A Surety bond cannot be made a substitute for an insurance policy as cover for a motor
vehicle under the CMVLI
b. A Certificate of cover issued to an operator of motor vehicle may serve as proof of coverage
c. A certificate of cover can be presented to government agents in charge of enforcing traffic
laws
d. Certificate of cover may be issued in lieu of a certificate of insurance

16. In Fidelity or Surety bonds, the word “indemnity” refers to:

a. An agreement to protect both principal and obligee

b. An agreement to protect the surety
c. An agreement to protect the principal
d. An agreement to protect the obligee

17. A passenger, under the LTO insurance

a. Is always a fare paying person being transported and conveyed by a motor vehicle for
transportation of passenger for compensation
b. Need not necessarily be a fare paying passenger
c. Combination of a & b
d. None of the above

18. A term which refers to a relative division of risk between the insurer and the insured depending
upon the relative amount of the policy and the actual value of the property insured and takes effect only
when the actual loss is partial and less than the amount of the policy is

a. Reinsurance
b. Co-insurance
c. Double insurance
d. Over insurance

19. A kind of insurance that protects the insured against loss due to non-performance of contract to
which he is a party is
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a. Disability insurance
b. Cooperative insurance
c. Excess insurance
d. Guaranty insurance

20. Which of the following statements in Marine Insurance on “abandonment” is false?

a. It is an act of the insured which after a constructive total; loss, he declares the
relinquishment to the insurer of his interest in the thing insured
b. It can be partial or conditional
c. It is equivalent to a transfer by the insured of his interest in the thing insured
d. It can be sustained only upon cause specified in the notice of abandonment

21. An insuring agreement:

a. Defines the liability

b. Specifies how much the insured will receive
c. Defines the condition under which benefits will be paid subject to exclusions and limitation
d. Binds the insurance company to the risk

22. Why is the application for insurance important?

a. It gives the company information for the sale of insurance at a later date
b. Because it gives the company information on other prospects in the family
c. It is the easiest way to get the applicant to sign up for coverage
d. Because the company accepts or rejects the applicants based on the information in the
application

23. The provision in a Standard Fire Policy that-except as may be stated on the face of this policy there is
no other insurance on the property hereby covered- breach of this condition will render the policy null
and void is known as

a. Control of the property clause

b. Waiver of premium
c. Average clause
d. Other insurance clause

24. With respect to Coinsurance Average or Contribution Clause which of following statements is true

a. The insured is never penalized

b. The insured is always penalized
c. Under some circumstances, the insured is penalized
d. None of the above

25. Under the average clause of the fire policy, the insured:

a. Shall be paid the full value of his loss

b. Is not bound to insure the property
c. Shall be considered a self-insurer of the uninsured portion
d. None of the above
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26. The insurance law specifically prohibits misrepresentation by agents with regard to which of the
following matters:

I. The terms, benefits or advantages of any policy

II. The dividends to be paid by the insurance company
III. The financial condition of any company
IV. The dividends previously paid by the insurance company

a) I and III
b) I, II and III
c) I
d) All of the above

27. Jettison, in Marine insurance

a. Includes every wrongful act willfully committed by the master or crew to the prejudice of
the owner
b. Refers to temporary detainment of property with a view to ultimate release
c. Refers to throwing overboard of cargo or part of a vessel’s equipment in order to relieve a
vessel when it is in peril
d. None of the above

28. Losses or damages due to consequences of civil war, revolution, rebellion, insurrection or civil strike
are covered by:

a. Institute Cargo Clause-strike, riots and civil commotion

b. Institute War Clause
c. Institute all risk (AR)
d. None of the above

29. With respect to the Standard fire Policy, the term “Vacancy ” means

a. Unfurnished and not lived in

b. Furnished but not lived in
c. Lived in but not furnished
d. None of the above

30. According to the term of the “Loss Clause” (which is contained in the coverage from attached to a
Fire Policy) must an insured request the reinstatement of his insurance after a loss has occurred?

a. Not until the premises have been restored

b. Yes, if the loss exceeds 5%
c. No, the coverage is not reduced by the occurrence (or payment) of a loss
d. No, the insurance company will reinstate the coverage automatically

31. In a court action to regain possession of his personal property, the plaintiff files a bond known as

a. Attachment bond
b. Seizure bond
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c. Replevin bond
d. Requisition bond

32. Under the Insurance Law, a fund was created to be used in the payment of allowed claims against an
insurance company authorized to transact business in the Philippines, remaining unpaid by reason of
insolvency of such company. The fund is the

a. Security Fund
b. Mutual Fund
c. Charitable Trust Fund
d. Variable Contract Fund

33. Under the liability feature of an insurance policy, the term “upper limit” means the

a. Extent of the liability for any accident involving more than one person
b. Extent of the liability for one person injured or killed in an accident
c. Amount of the company will pay for property damage
d. Amount the company will pay for property damage and medical coverage

34. Under the Compulsory Motor Vehicle Insurance, the basis for determining the amount of insurance
required for passenger liability is

a. Horse power
b. Displacement capacity
c. Number of passenger
d. Unladen weight

35. Which of the following perils are not covered under the Standard Fire Policy

a. Rebellion
b. Civil War
c. Enemy attack
d. All of the above

36. In Health Insurance, total Disability is taken to mean

a. A complete inability of the insured to engage in his occupation for a period specified in the
policy
b. Inability to engage in any gainful occupation for which he is fitted by education and training
c. The insured is not able to perform any gainful occupation
d. All of the above

37. An insured property being shipped may be stationary temporarily at a certain location. The property
will eventually continue its way to its destination. The kind of shipment, in insurance is known a

a. F.O.B.
b. C.I.F
c. On consignment
d. In due course of transit

38. A misrepresentation is not material unless it led the insurance company to issue coverage that
would have been issued if the true facts had been known. This statement is
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a. Valid only if there was a witness

b. False
c. True
d. False, a misrepresentation is always material

39. Generally, Fidelity Bonds are issued to become effective as of a given date for

a. A continuous term
b. Specified term
c. A term of employment
d. Concealment

40. An insurable interest exist in the following instances

I. In the love and affection of persons related by blood or by law

II. If a person is interested in the well-being of another person
III. If a person is interested in buying insurance on another person
IV. If a person has an economic interest in the insured even though he is not related to the
insured

a. I, II and III
b. I and IV
c. I,III and IV
d. I,II,III and IV
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Matching Type.

COLUMN A COLUMN B

1. Form of coverage which primarily concerned with the a. Insurance contract

protection of goods in transit and the means of
transportation
2. Insurance affected in property either in one or several b. Particular average
companies to an amount which separately or in aggregate,
exceeds the actual cash value of the insured’s interest in
the property
3. Indicate that the title will pass from the shippers to the c. Replevin bond
consignee at the specified point in transit
4. Exists when the same risk insured by several insurers d. Over-insurance
separately in respect to the same subject and interest
5. Statement by the insured, the truth of which becomes a e. Cover notes
condition of the validity of the policy
6. Written evidence of provisional insurance contracts which f. Marine insurance
are to be issued only when regular fire policies cannot be
granted for certain valid reasons
7. Agreement among three parties whereby a surety g. Warranty
company guarantees the performance by an individual of
an obligation or undertaking in favor of the third party
8. Bond to prevent an individual from committing a specific h. Injunction bond
act that will injure him such as selling a business
9. A provision which specifies that the insurance company i. Double insurance
will pay only a part of a loss and requires policyholder to
pay the balance himself
10. Term used in marine insurance which means partial loss j. Surety Bond
k. co-insurance
l. F.O.B.

m. Physical Hazard
n. Loss of voyage
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Key to correction

1. False 11. C 21. D 31. C 1. F

2. True 12. B 22. D 32. D 2. D
3. True 13. C 23. D 33. B 3. L
4. True 14. D 24. D 34. C 4. I
5. True 15. D 25.C 35. D 5. G
6. True 16. B 26. C 36. B 6. E
7. True 17. B 27. C 37. A 7. J
8. False 18. B 28. D 38. C 8. H
9. True 19. D 29. A 39. C 9. K
10. True 20. B 30. A 40. B 10. B