Difficulty: Mixed
What does sum insured commonly represent?
A Stated maximum coverage limit
B Premium paid yearly
C Every claim’s automatic payout
D Beneficiary’s annual income
Answer: A. Stated maximum coverage limit. Sum insured commonly sets a limit, subject to policy wording.
Does sum insured guarantee a claim payment?
A Yes, always
B No, terms and loss matter
C Only after renewal
D Only for life cover
Answer: B. No, terms and loss matter. Payment depends on covered loss, exclusions, limits, and conditions.
What is the sum insured usually shown in?
A Hospital menu
B Agent’s business card
C Policy schedule
D Repair receipt
Answer: C. Policy schedule. The schedule states policy-specific coverage amounts.
How does sum insured differ from premium?
A Both mean claim amount
B Premium sets beneficiary
C They are identical
D Limit versus coverage price
Answer: D. Limit versus coverage price. Sum insured is a coverage limit; premium is the price paid.
What does an annual aggregate limit cap?
A Total eligible payments yearly
B Premium installment size
C Policyholder age
D Number of beneficiaries
Answer: A. Total eligible payments yearly. An annual aggregate is a maximum for eligible payments during a policy year.
What may a per-claim limit cap?
A All future premiums
B Payment for one claim
C Policy duration
D Insurer office hours
Answer: B. Payment for one claim. A per-claim limit applies to an individual claim.
What is a family-floater sum insured?
A Separate limit for every hospital
B Premium for one member
C Shared limit for covered family
D Guaranteed payout per person
Answer: C. Shared limit for covered family. A floater typically shares coverage among insured family members.
What is an individual sum insured?
A Shared household premium
B Vehicle repair cost
C Annual travel budget
D Limit assigned to one insured
Answer: D. Limit assigned to one insured. An individual policy assigns a coverage amount to a named insured.
How can a claim affect remaining annual cover?
A It may reduce available balance
B It always doubles cover
C It removes all exclusions
D It ends every policy
Answer: A. It may reduce available balance. Claims may use part of an annual limit, subject to policy design.
What is a restoration benefit?
A Premium tax refund
B Possible refill of used limit
C Automatic policy cancellation
D Claim-free discount
Answer: B. Possible refill of used limit. Some plans restore a limit under specified conditions.
Does restoration apply to every claim automatically?
A Yes, always
B Only to cash claims
C No, conditions vary
D It has no conditions
Answer: C. No, conditions vary. Restoration benefits have product-specific eligibility and limits.
What can a sublimit restrict?
A Policy start date
B Premium frequency
C Beneficiary identity
D Specific expense or treatment
Answer: D. Specific expense or treatment. A sublimit caps payment for a defined category.
Why check sublimits separately from total sum insured?
A They may be lower
B They erase the premium
C They name the insurer
D They guarantee all bills
Answer: A. They may be lower. A sublimit can restrict a category below the overall limit.
What is underinsurance?
A Premium paid annually
B Cover below potential loss need
C A policy without claims
D Coverage above replacement need
Answer: B. Cover below potential loss need. Underinsurance means coverage may be insufficient for a covered loss.
What can an average clause do when property is underinsured?
A Increase the sum insured
B Refund premiums
C Reduce eligible claim payment
D Remove every deductible
Answer: C. Reduce eligible claim payment. Some contracts proportionally reduce claims under an average clause.
Do all property policies use the same underinsurance rule?
A Yes, globally identical
B Only premiums vary
C No rule can apply
D No, wording differs
Answer: D. No, wording differs. Underinsurance treatment depends on policy wording and local rules.
What should guide a building sum insured?
A Rebuilding cost basis
B Land market price
C Mortgage balance alone
D Neighbor’s sale price
Answer: A. Rebuilding cost basis. Building cover is commonly based on reconstruction costs rather than land value.
Is a home’s sale price identical to rebuilding cost?
A Yes, always
B No, they measure different things
C Only for apartments
D Only after repairs
Answer: B. No, they measure different things. Sale price and rebuilding costs measure different components of value.
What can affect rebuilding cost?
A Favorite room color
B Home’s postal code length
C Materials, labor, and size
D Owner’s age
Answer: C. Materials, labor, and size. Construction details and local costs can influence rebuilding estimates.
What can guide contents sum insured?
A Property tax only
B Mortgage interest
C Neighbor’s inventory
D Value of covered belongings
Answer: D. Value of covered belongings. Contents cover should reflect the value of insured possessions under policy terms.
Why keep a home inventory?
A Estimate contents coverage needs
B Guarantee full reimbursement
C Remove sublimits
D Set market value
Answer: A. Estimate contents coverage needs. An inventory helps identify belongings and approximate their value.
What may happen when possessions increase significantly?
A Coverage automatically doubles
B Review contents coverage
C Premium becomes zero
D Every item is excluded
Answer: B. Review contents coverage. New valuables can change coverage needs and may need to be disclosed.
What is a life-policy sum assured often intended to state?
A Health deductible
B Annual home limit
C Specified life benefit amount
D Motor repair cap
Answer: C. Specified life benefit amount. Life policies often state a sum assured or benefit amount.
Can sum insured and sum assured mean identical things everywhere?
A Yes, always
B Only for motor policies
C Neither is a limit
D Terminology varies by product
Answer: D. Terminology varies by product. Terms may be used differently across products and jurisdictions.
How do indemnity and fixed-benefit policies differ?
A Actual loss versus stated benefit
B Premium versus deductible
C Annual versus monthly
D Insurer versus agent
Answer: A. Actual loss versus stated benefit. Indemnity responds to covered financial loss; fixed-benefit products pay specified amounts.
Can an indemnity claim exceed actual covered loss?
A Yes, always
B Generally not under indemnity
C Only with a floater
D Every claim doubles
Answer: B. Generally not under indemnity. Indemnity generally aims to compensate covered loss, subject to limits.
What is the maximum liability concept?
A Premium schedule
B Policyholder address
C Upper bound under coverage
D Claim filing date
Answer: C. Upper bound under coverage. The sum insured can set an upper bound for a coverage.
Why can the final claim be below sum insured?
A Sum insured is a premium
B Claims never use limits
C It names the beneficiary
D Loss and wording matter
Answer: D. Loss and wording matter. Actual covered loss, deductibles, exclusions, and sublimits affect payment.
What does a health plan’s sum insured usually cap?
A Eligible medical benefits
B Every health expense worldwide
C Premium payments
D Treatment outcomes
Answer: A. Eligible medical benefits. The limit applies to eligible benefits as defined by the policy.
Does a higher sum insured always mean better cover?
A Yes, in every case
B Not without reviewing terms
C Only if premium is zero
D It removes exclusions
Answer: B. Not without reviewing terms. Limits should be considered alongside exclusions, cost-sharing, and affordability.
How can inflation affect property coverage needs?
A Premiums always fall
B Limits never change
C Repair costs may rise
D Claims become guaranteed
Answer: C. Repair costs may rise. Construction and replacement costs can change over time.
When should property sum insured be reviewed?
A Only after a claim
B Never
C Every day
D At renewal or after changes
Answer: D. At renewal or after changes. Review coverage when property values or circumstances change.
What can renovations do to rebuilding needs?
A Increase replacement costs
B Remove all exclusions
C Lower every premium
D Change beneficiary
Answer: A. Increase replacement costs. Major renovations may change the cost to rebuild.
What is an agreed-value basis?
A Premium paid in cash
B Value agreed under contract
C Policyholder’s estimate alone
D Claim document
Answer: B. Value agreed under contract. Some contracts use an agreed valuation basis subject to terms.
What does market value typically reflect?
A Cost to rebuild only
B Annual premium
C Sale value in current market
D Deductible amount
Answer: C. Sale value in current market. Market value reflects what a property may sell for.
Why distinguish land value from building value?
A Land sets the premium
B Building has no value
C They are always identical
D Land may not be insured
Answer: D. Land may not be insured. Property coverage may focus on structures rather than land.
What can a policy limit apply to besides total cover?
A Per-person or per-event amounts
B Only premium dates
C Agent commission
D Application length
Answer: A. Per-person or per-event amounts. Contracts may specify limits by person, event, or benefit category.
Can multiple policies always add their limits together?
A Yes, without limit
B No, coordination terms matter
C Only life policies
D All exclusions disappear
Answer: B. No, coordination terms matter. Other-insurance and coordination clauses can affect overlapping coverage.
What is a benefit cap?
A Premium payment mode
B Claimant’s age
C Maximum payable for benefit
D Policyholder’s address
Answer: C. Maximum payable for benefit. A benefit cap sets the maximum for a specified benefit.
How can a deductible interact with sum insured?
A It raises every limit
B It names a beneficiary
C It extends policy dates
D It may reduce payable amount
Answer: D. It may reduce payable amount. A deductible can reduce the amount payable on an eligible loss.
What should a buyer compare for coverage limits?
A Limits, sublimits, and exclusions
B Logo and colors
C Agent’s favorite plan
D Website loading speed
Answer: A. Limits, sublimits, and exclusions. Review the overall limit alongside sublimits and exclusions.
What should be done if the scheduled sum insured looks wrong?
A Ignore the schedule
B Ask insurer to correct it
C Wait until a claim
D Change it by hand
Answer: B. Ask insurer to correct it. Contact the insurer to correct policy details through its official process.
What should a sum-insured selection consider?
A Only premium price
B A friend’s choice
C Needs, assets, and affordability
D Advertisement headline
Answer: C. Needs, assets, and affordability. Choose a limit with reference to needs, insured property, and cost.
What does reinstatement value usually relate to?
A Resale value of land
B Past premium total
C Claim-free years
D Cost to restore property
Answer: D. Cost to restore property. Reinstatement wording generally concerns restoring or replacing insured property.
Can a large sum insured guarantee every item is covered?
A No, exclusions still apply
B Yes, always
C Only at renewal
D It removes conditions
Answer: A. No, exclusions still apply. A high limit does not override exclusions or coverage definitions.
What should a policyholder review after a major life change?
A Only website password
B Coverage amount and beneficiaries
C Agent’s office hours
D Unrelated policy
Answer: B. Coverage amount and beneficiaries. Changed obligations may call for reviewing life coverage and beneficiary details.
Which statement about sum insured is accurate?
A It is always cash paid
B It equals all premiums
C Contract wording defines its use
D It guarantees every claim
Answer: C. Contract wording defines its use. The policy defines how its limit applies to a claim.
Why request clarification about a coverage limit?
A Limits are always obvious
B Agents set all laws
C No written policy exists
D Terms can be product-specific
Answer: D. Terms can be product-specific. Ask the insurer when a limit or valuation basis is unclear.
What can help avoid an unsuitable limit?
A Use a valuation method
B Guess from advertisements
C Copy another policy
D Ignore exclusions
Answer: A. Use a valuation method. A suitable valuation method supports a better coverage estimate.
Which details help interpret a stated limit?
A Agent’s favorite brand
B Currency and coverage period
C Room paint color
D Website font
Answer: B. Currency and coverage period. The schedule and wording show the currency and period to which a limit applies.