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III IC-88 practice questions

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Question 1IC-88 syllabus content (domain names not published on the retrieved page)

In the III IC-88 syllabus, which term describes the total sum insured across all policies covering the same risk under one insurer?

  1. Reinstatement value
  2. Average clause
  3. Sum insured aggregate Correct answer.
  4. Policy excess

Explanation

The aggregate sum insured is the combined limit across all policies covering one risk with a single insurer. It matters because it caps the total the insurer will pay, regardless of how many separate policies exist.

Question 2IC-88 syllabus content (domain names not published on the retrieved page)

An insured holds two III IC-88 property policies with different insurers covering the same building. When a loss occurs, which principle governs how the claim is shared?

  1. Utmost good faith
  2. Indemnity
  3. Subrogation
  4. Contribution Correct answer.

Explanation

Contribution is the principle that allows insurers covering the same interest to share the loss proportionately so the insured does not recover more than the actual loss. Subrogation and indemnity are related but do not describe the sharing between co-insurers.

Question 3IC-88 syllabus content (domain names not published on the retrieved page)

Which document in III IC-88 practice sets out the precise scope of cover, exclusions and conditions that bind both insurer and insured?

  1. The proposal form
  2. The policy wording Correct answer.
  3. The claims register
  4. The cover note

Explanation

The policy wording is the contractual document that defines what is covered, what is excluded and the conditions that apply. Proposal forms and cover notes are pre-contract or temporary documents.

Question 4IC-88 syllabus content (domain names not published on the retrieved page)

Under III IC-88 practice, what is the primary purpose of a deductible in a commercial property policy?

  1. To extend cover to additional perils
  2. To reduce the sum insured automatically
  3. To transfer small losses to the insured Correct answer.
  4. To increase the premium payable

Explanation

A deductible leaves the first portion of each loss with the insured, removing small claims from the insurer and encouraging loss prevention. It does not extend perils or change the sum insured.

Question 5IC-88 syllabus content (domain names not published on the retrieved page)

A III IC-88 liability policy is written on an occurrence basis. Which event triggers cover?

  1. The date the injury or damage occurs Correct answer.
  2. The date the policy is renewed
  3. The date the insured is sued
  4. The date the claim is reported to the insurer

Explanation

An occurrence-basis policy responds to injury or damage that takes place during the policy period, whenever the claim is later made. Claims-made policies instead respond to when the claim is notified.

Question 6IC-88 syllabus content (domain names not published on the retrieved page)

In III IC-88 terminology, what does the term 'salvage' refer to after a total loss has been settled?

  1. The premium refunded on cancellation
  2. The residual value of damaged property that remains Correct answer.
  3. The insurer's right to recover from a negligent third party
  4. The reinstatement of the sum insured

Explanation

Salvage is the remaining value of damaged property, which the insurer may sell to offset the claim paid. Recovery from a negligent third party is subrogation, a distinct principle.

Question 7IC-88 syllabus content (domain names not published on the retrieved page)

Which of the following best describes the duty of disclosure owed by a proposer under III IC-88 practice?

  1. To disclose every fact material to the insurer's assessment of the risk Correct answer.
  2. To disclose only facts known to third parties
  3. To disclose facts only after the policy is issued
  4. To disclose only facts the insurer specifically asks about

Explanation

The duty of utmost good faith requires the proposer to volunteer all material facts, not merely answer questions asked. A fact is material if it would influence a prudent insurer's decision or terms.

Question 8IC-88 syllabus content (domain names not published on the retrieved page)

Which term in III IC-88 describes a policy provision that automatically restores the sum insured after a partial loss claim is paid?

  1. Automatic reinstatement Correct answer.
  2. Salvage clause
  3. Pro rata condition
  4. Waiver of subrogation

Explanation

Automatic reinstatement restores the full sum insured after a claim without requiring a new agreement or additional premium. Waiver of subrogation and pro rata conditions address different contractual issues.

Question 9IC-88 syllabus content (domain names not published on the retrieved page)

A cargo owner insures goods for 100,000 but their actual insurable value is 125,000. Applying the average clause, how much will a 20,000 partial loss attract?

  1. 20,000
  2. 25,000
  3. 16,000 Correct answer.
  4. 12,500

Explanation

The average clause applies the ratio of sum insured to value: 100,000 divided by 125,000 equals 0.8, and 0.8 times 20,000 equals 16,000. Underinsurance therefore reduces the claim proportionately.

Question 10IC-88 syllabus content (domain names not published on the retrieved page)

An insured negligently fails to maintain a fire alarm as required by a policy condition, and a fire causes a larger loss. Which III IC-88 concept most directly affects the insurer's response?

  1. Breach of a condition precedent to liability Correct answer.
  2. Innocent misrepresentation
  3. Doctrine of proximate cause
  4. Doctrine of abandonment

Explanation

Where a policy makes maintenance a condition precedent to liability, breach allows the insurer to decline the claim. Proximate cause identifies the dominant cause of loss but does not itself address breach of condition.

Question 11IC-88 syllabus content (domain names not published on the retrieved page)

A liability policy has a limit of 500,000 per occurrence and 1,000,000 in the aggregate. Two occurrences each produce claims of 400,000. What is the maximum the insurer pays?

  1. 400,000
  2. 1,000,000
  3. 500,000
  4. 800,000 Correct answer.

Explanation

Each occurrence of 400,000 is within the 500,000 per-occurrence limit, and the combined 800,000 remains below the 1,000,000 aggregate. The insurer therefore pays 800,000 in total.

Question 12IC-88 syllabus content (domain names not published on the retrieved page)

An insured deliberately sets fire to their own insured warehouse. How does III IC-88 practice treat the claim?

  1. The claim is declined because the loss was caused by the insured's wilful act Correct answer.
  2. The claim is paid but reduced by the deductible
  3. The claim is paid only for the building, not the stock
  4. The claim is payable because fire is a covered peril

Explanation

Wilful acts by the insured are excluded, and a deliberate fire is not an insured event under the policy. The peril of fire covers accidental loss, not losses intentionally caused by the insured.

Question 13IC-88 syllabus content (domain names not published on the retrieved page)

A broker arranges cover on Monday but the formal policy is issued three weeks later. Which document provides interim evidence of cover?

  1. Endorsement
  2. Certificate of incorporation
  3. Renewal notice
  4. Cover note Correct answer.

Explanation

A cover note provides temporary evidence that insurance is in force until the full policy is issued. An endorsement varies an existing policy rather than creating interim cover.

Question 14IC-88 syllabus content (domain names not published on the retrieved page)

An insurer pays a claim for water damage caused by a contractor's faulty pipework, then pursues the contractor. Which principle supports this action?

  1. Subrogation Correct answer.
  2. Proximate cause
  3. Contribution
  4. Average

Explanation

Subrogation allows the insurer, having indemnified the insured, to exercise the insured's rights of recovery against the party responsible. Contribution and average allocate loss between insurers or adjust for underinsurance.

Question 15IC-88 syllabus content (domain names not published on the retrieved page)

Which statement correctly distinguishes a warranty from a representation in III IC-88 insurance contracts?

  1. A representation is always written into the policy schedule
  2. A warranty is a pre-contract statement, while a representation is a policy term
  3. Both terms refer only to statements made after a loss
  4. A warranty is a policy term that must be complied with, while a representation is a statement made before the contract Correct answer.

Explanation

A warranty is a term of the contract that the insured promises to comply with, whereas a representation is a statement made during negotiations before the contract. Breach of warranty can affect cover, which is why the distinction matters.

Question 16IC-88 syllabus content (domain names not published on the retrieved page)

A building is insured for 300,000 on a reinstatement basis, but rebuilding costs have risen to 400,000 and the policy has no index linking. What risk does the insured face on a partial loss?

  1. Cover limited to the market value of the site
  2. No risk, because reinstatement cover ignores value
  3. Automatic full payment of the rebuild cost
  4. A reduced claim due to the average clause Correct answer.

Explanation

Reinstatement policies usually include an average condition, so underinsurance relative to rebuilding cost reduces partial claims proportionately. Index linking exists precisely to keep the sum insured in line with inflation.

Question 17IC-88 syllabus content (domain names not published on the retrieved page)

Which peril is typically excluded from a standard III IC-88 commercial property policy unless specifically extended?

  1. Storm
  2. Fire
  3. Lightning
  4. War and civil commotion Correct answer.

Explanation

War, invasion and civil commotion are standard exclusions in property policies because the exposure is catastrophic and difficult to price. Fire, lightning and storm are normally included perils.

Question 18IC-88 syllabus content (domain names not published on the retrieved page)

An insured's stock is insured for 80,000 but the declaration at each renewal understates turnover. Which mechanism most commonly corrects the premium in a declaration-linked policy?

  1. A fixed premium that never changes
  2. A no-claims discount
  3. A salvage credit
  4. A deposit premium adjusted at the end of the period Correct answer.

Explanation

Declaration policies collect a deposit premium at inception and adjust it at the end of the period based on actual declared values. This ensures the premium reflects the true exposure.

Question 19IC-88 syllabus content (domain names not published on the retrieved page)

A policy contains a 'pro rata condition of average' and the insured is underinsured by 25 percent. How does this affect a valid partial loss claim?

  1. The claim is declined entirely
  2. The claim is paid in full
  3. The claim is increased to reflect the shortfall
  4. The claim is reduced in the same proportion as the underinsurance Correct answer.

Explanation

Under pro rata average, the claim is reduced by the ratio of the sum insured to the actual value, so a 25 percent shortfall reduces the payout by 25 percent. Total decline would only occur under a different condition.

Question 20IC-88 syllabus content (domain names not published on the retrieved page)

In III IC-88 practice, why does an insurer require a 'condition precedent to liability' rather than an ordinary condition?

  1. Because ordinary conditions are unenforceable in law
  2. Because breach of a condition precedent automatically voids the entire contract from inception
  3. Because the insurer's liability does not arise unless the condition is complied with Correct answer.
  4. Because it removes the need for a deductible

Explanation

A condition precedent to liability means the insurer is not liable at all unless the condition is met, giving it stronger effect than an ordinary condition. It does not necessarily void the contract from inception.

Question 21IC-88 syllabus content (domain names not published on the retrieved page)

Two policies cover the same property: Policy A for 60,000 and Policy B for 40,000, with a loss of 50,000. Under the common contribution method, how much does Policy A pay?

  1. 60,000
  2. 30,000 Correct answer.
  3. 50,000
  4. 20,000

Explanation

Independent liability contribution shares the loss in proportion to the sums insured: A's share is 60,000 divided by 100,000, or 0.6, multiplied by 50,000, giving 30,000. Policy B would pay the remaining 20,000.

Question 22IC-88 syllabus content (domain names not published on the retrieved page)

An insured suffers a loss caused by two events: a storm weakened a roof, and a later burglary occurred through the damaged roof. Which doctrine determines whether the insurer pays for the burglary loss?

  1. Doctrine of average
  2. Doctrine of subrogation
  3. Doctrine of contribution
  4. Doctrine of proximate cause Correct answer.

Explanation

Proximate cause identifies the dominant, effective cause of a loss when several events combine, and the insurer pays only if that cause is an insured peril. The other doctrines deal with recovery rights, sharing between insurers and underinsurance.

Question 23IC-88 syllabus content (domain names not published on the retrieved page)

A policy excludes loss caused by 'wear and tear'. A pipe bursts because of gradual corrosion. Which reasoning best applies the exclusion?

  1. The exclusion applies because gradual corrosion is wear and tear, so the escape of water loss is excluded Correct answer.
  2. The exclusion applies only to buildings, not to contents
  3. The exclusion is overridden by the burst pipe peril in all cases
  4. The exclusion never applies where water is involved

Explanation

Where gradual corrosion, a form of wear and tear, is the proximate cause of the escape of water, the wear and tear exclusion operates. The burst pipe peril does not override the exclusion when the dominant cause is excluded deterioration.

Question 24IC-88 syllabus content (domain names not published on the retrieved page)

An insurer discovers that a proposer concealed a material fact about previous fire losses. Which remedy is most consistent with III IC-88 principles where the concealment was deliberate?

  1. The insurer must pay any claim in full
  2. The insurer may avoid the policy and refuse the claim Correct answer.
  3. The insurer must renew the policy on the same terms
  4. The insurer may only increase the deductible

Explanation

Deliberate concealment of a material fact breaches the duty of utmost good faith, entitling the insurer to avoid the contract and decline claims. Less severe remedies apply to innocent or negligent non-disclosure.

Question 25IC-88 syllabus content (domain names not published on the retrieved page)

An insured holds a policy with a sum insured of 200,000 and a policy excess of 2,500. A valid claim of 60,000 occurs. What amount is payable, assuming no other adjustments?

  1. 57,500 Correct answer.
  2. 62,500
  3. 60,000
  4. 200,000

Explanation

The deductible is subtracted from the valid claim: 60,000 minus 2,500 equals 57,500. The sum insured is not reached, so no further limitation applies.

Question 26IC-88 syllabus content (domain names not published on the retrieved page)

In III IC-88 insurance practice, what is the primary purpose of the principle of indemnity?

  1. To ensure the insured receives a profit from the claim
  2. To guarantee that the insurer pays the full sum insured regardless of the loss amount
  3. To restore the insured to approximately the same financial position as before the loss Correct answer.
  4. To punish the insurer for failing to prevent the loss

Explanation

The principle of indemnity holds that insurance should restore the insured to the financial position held immediately before the loss, no better and no worse. It prevents profit from loss and underpins concepts such as sum insured, average, and subrogation. III IC-88 applies this principle when assessing claims and policy limits.

Question 27IC-88 syllabus content (domain names not published on the retrieved page)

Which document in III IC-88 practice is issued by the insurer as formal evidence of the contract and typically contains the full policy wording?

  1. The policy document Correct answer.
  2. The policy schedule
  3. The certificate of insurance
  4. The cover note

Explanation

The policy document is the formal contract of insurance and incorporates the full terms, conditions, and exclusions. The schedule summarizes key details but is not the complete contract. Cover notes provide temporary evidence, and certificates are usually for specific purposes such as proof of cover.

Question 28IC-88 syllabus content (domain names not published on the retrieved page)

Under III IC-88 practice, what does the term 'subrogation' refer to in the claims process?

  1. The insured's right to claim under multiple policies
  2. The insurer's right to recover losses from a third party who caused the damage Correct answer.
  3. The insurer's obligation to pay the claim within a set period
  4. The process of reinstating the sum insured after a partial loss

Explanation

Subrogation allows the insurer, after paying a claim, to step into the insured's shoes and pursue recovery from the party responsible for the loss. It supports the principle of indemnity by preventing the insured from recovering twice. The right arises after payment and is subject to policy terms.

Question 29IC-88 syllabus content (domain names not published on the retrieved page)

Which of the following best describes 'contribution' in III IC-88 insurance practice?

  1. The right of an insurer to recover from another insurer that also covers the same loss Correct answer.
  2. The insured's share of the loss under an excess
  3. The amount the insurer contributes to a pool for catastrophic losses
  4. The premium paid by the insured towards the policy

Explanation

Contribution is the principle that allows an insurer that has paid a claim to seek a proportionate share from other insurers covering the same interest against the same peril. It prevents the insured from recovering more than the loss and ensures equitable sharing among insurers. It operates alongside indemnity and subrogation.

Question 30IC-88 syllabus content (domain names not published on the retrieved page)

In III IC-88 terminology, what is a 'warranty' in an insurance contract?

  1. A promise by the insured that a particular state of affairs exists or will be fulfilled, breach of which may allow the insurer to avoid liability Correct answer.
  2. An optional endorsement that extends cover for an additional premium
  3. A statement made by the insured during negotiations that is not part of the contract
  4. A guarantee by the insurer to pay all claims regardless of policy terms

Explanation

A warranty is a fundamental term of the contract by which the insured promises that something is or will be done. Breach of a warranty can entitle the insurer to avoid liability, although III IC-88 may apply specific rules on materiality and causal connection. Warranties are distinct from representations, which are statements that induce the contract.

Question 31IC-88 syllabus content (domain names not published on the retrieved page)

What is the main purpose of a 'condition precedent to liability' in a III IC-88 policy?

  1. To describe the insured's obligations before the policy starts
  2. To list the perils that are covered by the policy
  3. To set out the procedure for renewing the policy
  4. To specify that the insurer is not liable unless the insured has complied with certain requirements Correct answer.

Explanation

A condition precedent to liability makes the insurer's liability dependent on the insured fulfilling specified obligations, such as maintaining protective measures or notifying claims promptly. If the condition is not met, the insurer may deny liability even if the loss is otherwise covered. This is a strong condition that distinguishes it from ordinary conditions.

Question 32IC-88 syllabus content (domain names not published on the retrieved page)

In III IC-88 practice, what does 'utmost good faith' require of the insured when applying for insurance?

  1. To report all claims within 24 hours
  2. To disclose all material facts that could influence the insurer's decision Correct answer.
  3. To pay the premium within 30 days
  4. To maintain the insured property in good repair

Explanation

Utmost good faith requires the insured to disclose all material facts relevant to the risk, and the insurer to act fairly. A material fact is one that would influence a prudent insurer's decision on whether to accept the risk or on what terms. Failure to disclose can allow the insurer to avoid the contract.

Question 33IC-88 syllabus content (domain names not published on the retrieved page)

Which of the following is typically an insurable interest in III IC-88 property insurance?

  1. A mortgagee's interest in the mortgaged property Correct answer.
  2. A person's interest in the property of a stranger
  3. A passer-by's interest in a public building
  4. A competitor's interest in a rival's success

Explanation

Insurable interest exists where a person has a financial relationship with the subject matter such that they benefit from its preservation or suffer loss from its damage. A mortgagee has a clear insurable interest in the mortgaged property because the property secures the loan. Mere curiosity or general interest is insufficient.

Question 34IC-88 syllabus content (domain names not published on the retrieved page)

In a III IC-88 liability policy, what does the 'aggregate limit' represent?

  1. The total premium payable for the policy
  2. The maximum payable for any single occurrence
  3. The maximum payable for all claims during the policy period Correct answer.
  4. The amount of the deductible per claim

Explanation

The aggregate limit is the cap on the total amount the insurer will pay for all covered claims within the policy period. It operates alongside the per-occurrence limit, which caps each individual loss. Once the aggregate is exhausted, no further claims are paid for that period.

Question 35IC-88 syllabus content (domain names not published on the retrieved page)

An insured's building is insured for 200,000, but at the time of loss it is established that the reinstatement value is 250,000. The policy contains a pro rata condition of average. A loss of 50,000 occurs. How much will the insurer pay, ignoring any excess?

  1. 25,000
  2. 50,000
  3. 40,000 Correct answer.
  4. 10,000

Explanation

Under pro rata average, the insurer pays the proportion of the loss that the sum insured bears to the value at risk. Here the sum insured (200,000) is 80% of the value (250,000), so the insurer pays 80% of the 50,000 loss, which is 40,000. The insured bears the remaining 10,000 as underinsurance.

Question 36IC-88 syllabus content (domain names not published on the retrieved page)

An insured holds two property policies covering the same building: Policy A for 60,000 and Policy B for 40,000. A loss of 30,000 occurs. Under the common law principle of contribution, how will the loss be shared?

  1. Policy A pays 18,000 and Policy B pays 12,000 Correct answer.
  2. Policy A pays 30,000 and Policy B pays nothing
  3. Each policy pays 15,000
  4. Policy A pays 20,000 and Policy B pays 10,000

Explanation

Contribution shares the loss among insurers in proportion to the sums they insure, unless the policies specify otherwise. The total sum insured is 100,000, so Policy A bears 60% and Policy B bears 40% of the 30,000 loss. This yields 18,000 from A and 12,000 from B.

Question 37IC-88 syllabus content (domain names not published on the retrieved page)

An insured deliberately damages their own insured property to claim on the policy. How does III IC-88 practice treat the claim?

  1. The insurer may repudiate the claim and avoid the policy for fraudulent misrepresentation Correct answer.
  2. The insurer pays only 50% of the loss as a penalty
  3. The insurer must pay because the loss is covered by the peril
  4. The insurer pays the claim but cancels the policy at renewal

Explanation

Deliberate damage by the insured is not an insured peril and constitutes fraud. III IC-88 practice allows the insurer to repudiate the claim and, depending on the terms and applicable law, avoid the policy for fraudulent misrepresentation. The insured cannot benefit from their own wrongful act.

Question 38IC-88 syllabus content (domain names not published on the retrieved page)

An insured fails to disclose a previous declined insurance application when completing a proposal form for a commercial property policy. The insurer would have declined the risk had it known. What remedy is most consistent with III IC-88 practice?

  1. The insurer must pay the claim but increase the premium retrospectively
  2. The insurer may only cancel the policy prospectively
  3. The insurer must pay the claim because the non-disclosure was not intentional
  4. The insurer may avoid the policy from inception because of the non-disclosure of a material fact Correct answer.

Explanation

Non-disclosure of a material fact, even if innocent, can entitle the insurer to avoid the policy from inception under the duty of utmost good faith. A declined application is clearly material because it would influence a prudent insurer's decision. Avoidance means the insurer treats the policy as never having existed and may refuse the claim.

Question 39IC-88 syllabus content (domain names not published on the retrieved page)

A policy excludes loss caused by 'wear and tear'. A pipe bursts because of gradual corrosion that was not visible. Which reasoning best applies under III IC-88 practice?

  1. The claim is excluded because the proximate cause is wear and tear, which is excluded Correct answer.
  2. The claim is payable because a burst pipe is a sudden and unforeseen event
  3. The claim is payable because corrosion is not mentioned in the exclusion
  4. The claim is excluded only if the insured knew about the corrosion

Explanation

The proximate cause of the loss is gradual corrosion, which falls within the wear and tear exclusion. Even though the burst appears sudden, the underlying cause is the excluded deterioration. III IC-88 practice applies proximate cause analysis to determine whether an exclusion applies.

Question 40IC-88 syllabus content (domain names not published on the retrieved page)

An insured suffers a loss when a storm weakens a roof and a later burglary occurs through the damaged roof. The policy covers storm but excludes burglary. How does III IC-88 practice typically analyze the claim?

  1. The entire loss is covered because the storm was the first event
  2. The storm damage is covered, but the burglary loss is excluded as a separate proximate cause Correct answer.
  3. The entire loss is excluded because burglary is excluded
  4. The loss is covered only if the insured can prove the burglary would not have occurred without the storm

Explanation

Where two distinct events cause separate losses, each loss is assessed against its own proximate cause. The storm damage is covered, while the burglary loss is excluded because burglary is the proximate cause of that part. III IC-88 practice separates the losses rather than treating them as a single indivisible event.

Question 41IC-88 syllabus content (domain names not published on the retrieved page)

An insured has a policy with a sum insured of 300,000 and a policy excess of 5,000. A valid claim of 80,000 occurs. What amount will the insurer pay, assuming no average applies?

  1. 5,000
  2. 80,000
  3. 75,000 Correct answer.
  4. 85,000

Explanation

The policy excess is deducted from the loss before the insurer pays. The valid claim of 80,000 minus the 5,000 excess equals 75,000. The sum insured is sufficient to cover the loss, so no average applies.

Question 42IC-88 syllabus content (domain names not published on the retrieved page)

In III IC-88 practice, which of the following best describes the role of a 'broker' in the insurance transaction?

  1. An intermediary who acts on behalf of the insured to arrange cover with insurers Correct answer.
  2. An employee of the insured who manages claims
  3. A government regulator who approves policy wordings
  4. An agent of the insurer who binds cover on the insurer's behalf

Explanation

A broker is an intermediary who acts for the insured, not the insurer, when placing business. The broker owes duties to the insured, including disclosure of material information to insurers and acting in the insured's best interests. This contrasts with an agent, who typically acts for the insurer.

Question 43IC-88 syllabus content (domain names not published on the retrieved page)

An insured omits to disclose a material fact to a broker, who then places the risk with an insurer. In III IC-88 practice, who is generally responsible for the non-disclosure?

  1. No one, because the broker is the agent of the insurer
  2. The insurer, because it should have asked about the fact
  3. The broker, because the broker should have discovered the fact
  4. The insured, because the duty of disclosure rests with the proposer Correct answer.

Explanation

The duty of utmost good faith and disclosure rests primarily with the insured, who knows the facts. A broker can only pass on what the insured discloses, although the broker may also have duties to the insured. III IC-88 practice generally holds the insured responsible for material non-disclosure.

Question 44IC-88 syllabus content (domain names not published on the retrieved page)

Which of the following is a typical exclusion in a III IC-88 commercial property policy?

  1. Damage caused by war or nuclear risks Correct answer.
  2. Accidental water damage from a burst pipe
  3. Theft following forcible entry
  4. Fire caused by lightning

Explanation

War and nuclear risks are commonly excluded because they are catastrophic and difficult to price. Standard commercial property policies often exclude such perils unless specifically extended. Fire, water damage, and theft are typically covered perils, subject to conditions.

Question 45IC-88 syllabus content (domain names not published on the retrieved page)

An insured's stock is insured for 80,000, but the actual value at the time of loss is 100,000. The policy contains an average clause. A loss of 20,000 occurs. How much will the insurer pay?

  1. 4,000
  2. 16,000 Correct answer.
  3. 20,000
  4. 10,000

Explanation

Under average, the insurer pays the proportion that the sum insured bears to the actual value. The sum insured (80,000) is 80% of the value (100,000), so the insurer pays 80% of the 20,000 loss, which is 16,000. The insured bears the remaining 4,000.

Question 46IC-88 syllabus content (domain names not published on the retrieved page)

In III IC-88 practice, what is the effect of a 'reinstatement' clause after a partial loss?

  1. It restores the sum insured only if the insured pays an additional premium Correct answer.
  2. It cancels the policy after the first claim
  3. It automatically restores the sum insured without additional premium
  4. It reduces the sum insured by the amount of the loss

Explanation

A reinstatement clause allows the sum insured to be restored after a loss, but typically requires the insured to pay an additional premium for the restored amount. This ensures the insurer receives consideration for the increased risk. Without such a clause, the sum insured remains reduced by the claim.

Question 47IC-88 syllabus content (domain names not published on the retrieved page)

An insured is required by a policy condition to maintain a fire alarm system. The insured negligently fails to maintain it, and a fire causes a larger loss than it would have if the alarm had worked. How does III IC-88 practice typically treat the claim?

  1. The insurer must pay the claim but cancel the policy immediately
  2. The insurer pays only the policy excess
  3. The insurer may reduce or reject the claim to the extent the breach increased the loss Correct answer.
  4. The insurer pays the full claim because the fire is a covered peril

Explanation

Where a condition requires the insured to maintain protective measures, breach can entitle the insurer to reduce or reject the claim, especially if the breach increased the loss. III IC-88 practice applies the principle that the insured cannot benefit from their own failure to comply with a condition. The extent of the reduction depends on the policy wording and the causal link.

Question 48IC-88 syllabus content (domain names not published on the retrieved page)

In III IC-88 practice, what is the purpose of a 'deductible' or 'excess' in a policy?

  1. To share the risk by requiring the insured to bear a small portion of each loss Correct answer.
  2. To increase the insurer's liability for small claims
  3. To provide a discount on the premium without affecting claims
  4. To limit the insurer's liability to the sum insured

Explanation

A deductible or excess is the amount the insured must bear before the insurer pays. It reduces the number of small claims, shares risk, and can lower the premium. It is a form of risk retention by the insured.

Question 49IC-88 syllabus content (domain names not published on the retrieved page)

An insured has a policy with a sum insured of 500,000 and a 10% co-insurance clause. A loss of 100,000 occurs, and the insured is fully insured. How much does the insurer pay, ignoring any excess?

  1. 50,000
  2. 90,000 Correct answer.
  3. 10,000
  4. 100,000

Explanation

A co-insurance clause requires the insured to bear a specified percentage of each loss. With a 10% co-insurance, the insured bears 10% and the insurer pays 90% of the loss. Thus the insurer pays 90,000 of the 100,000 loss.

Question 50IC-88 syllabus content (domain names not published on the retrieved page)

In III IC-88 practice, which of the following best describes the 'principle of proximate cause'?

  1. The dominant and effective cause of the loss, even if not the last event Correct answer.
  2. The cause that is closest in time to the loss
  3. The last event before the loss is always the proximate cause
  4. The cause that the insured believes is most important

Explanation

Proximate cause is the dominant, effective, and efficient cause that sets in motion the chain of events leading to the loss. It is not necessarily the last event in time. III IC-88 practice uses proximate cause to determine whether a peril is covered or excluded.