Cairo University Final Exam Third Year
Faculty of Commerce Insurance Time: 2 hours
English Section Date: /9/2005
Answer the following questions:
First: Indicate whether each of the following statements is true or false &
correct the false ones:
1-If you knowingly withhold information that will affect the underwriting decision,
you have committed misrepresentation.
2-Grace period & reinstatement provisions are part of the conditions of the life
3-High frequency & high severity risks must be transferred to others.
4-One goal of underwriters is to prevent adverse selection from occurring.
5-The amount of insurance to own under the needs approach if the family head dies
is the family needs minus the existing assets & life insurance.
6-If you interfere with your insurer's subrogation rights against a third party; you
can lose your right to collect from your insurer.
7-Cancellation rights & subrogation provisions are part of the miscellaneous
provisions of the property insurance policy.
8-In property insurance, you can purchase insurance based on the expectation of
an insurable interest.
9-To define if a loss is covered under an all risks policy, you have to read the
10-Individuals must be mentioned by name in order to be covered under insurance
11-A blended family is one in which a son or daughter with children is also
supporting an aged parent or parents.
12-Riders modify the underlying property insurance contract.
Second: Fill ins:
1-A boat insured under the valued policy for $200,000, if the boat is totally burned &
the value of the boat at time of loss is $180,000, then the indemnity would
2-……..………………occurs if the insured intentionally failed to reveal material fact.
3-The information about property, insured & insurer's name in the insurance policy
are called ……………………...
4- ………………………clauses prevent the insured from profiting from multiple
insurance policies covering the same loss.
5- ……………....occurs if each insured does not pay the mathematically fair price for
6-……………..insurance provides protection against the financial impact of lawsuits.
7- When the success of a business - or in some instances its existence - depends
on one person, we call him a…………………………..
8- ……………………………is the most likely maximum amount of damage a peril
might cause under average circumstances.
9-………………..is a written provision to amend the life insurance policy.
10- ……………………..…..allows the policy to remain in force for a short period -
typically 31 days - while the premium is past due.
11-………………….means that the insured is restored to his approximate previous
12-Under the actual cash value policy rule, the insurer uses the method
of…………….……………………to determine the price of a similar product.
Third: Multiple Choice Questions:
1-The primary purpose of coinsurance in property insurance is to:
a)Reduce moral hazard. b)Minimize problems in settling claims.
c)Eliminate small business. d)Achieve equity in rating.
2-A false statement made by an applicant for insurance is an example of:
a)Misrepresentation. b)Breach of warranty.
c)Lack of offer & acceptance. a)Concealment.
3-Which of the following types of families is likely to have the least need for amount
of life insurance:
a)The single person family. b)The blended. family.
c)The traditional family. d)The sandwiched family.
4-The principle of utmost good faith is supported by all of the following legal
a)Subrogation. b)Warranty. c)Representation. d)Concealment.
5-The legal significance of a material misrepresentation in an insurance application
a)The contract is voidable at the insurer's option.
b)The contract is automatically voided from its inception.
c)Loss payments are reduced by the degree of the misrepresentation.
d)The insurer is immediately entitled to a high premium.
6-A contract in which the values exchanged are not equal because chance is
involved is called:
a)Aleatory contract. b)Unilateral contract.
c)Conditional contract. d)Contract of adhesion.
7-If the value of the risk for n = 400 is 0.8, then, the value of the risk for n=256 is:
a)0.8 b)1 c)1.25 d)1.485
8-The following coverages are exceptions to the rule of indemnity except:
a)Replacement cost insurance. b) Actual cash value property insurance.
c) Valued insurance policies. d)Life insurance.
9-Ayman has 2 health insurance policies: the basic policy from company A is for
$2,000 & the supplementary policy from company B for $1,000 with corridor
deductible $300. If Ayman has a $1,200 as a medical expenses, how much of the
expenses will be covered by each policy?
a)A pays $800 & B pays $400. b)A pays $1,200
c) Each policy pays $600. d)A pays $800 & B pays $100.
10-The fundamental purpose of the principle of indemnity is:
a)to minimize physical hazards. b)to reduce moral hazard.
c)to settle losses on a replacement cost basis
d)to require deductible in all property insurance policies.
11-A total loss under a valued policy is settled on the basis of the:
a)Market value of the loss. b)Amount of insurance.
c)Replacement value of the loss. d) Actual cash value of the loss.
12-Ali provides financial support for his children & his mother. Ali's family can be
described as a:
a)blended family. b)sandwiched family.
c)single-parent family. d)one-income earner family.
13-The insurer can refuse to pay a claim if an insured fails to abide by the policy
provisions because insurance contract is:
a)aleatory. b)unilateral. c)conditional d)adhesion
14-Ali purchased a TV for $2,000 & insured it on an actual cash value basis. Two
years later TV was destroyed by a covered peril. If depreciation is 30% & the
price of a new TV at this time was $2,400. How much will Ali receive from his
a)2,400. b)$1400. c)$1,680. d)$2,000.
15-The portion of a property & liability insurance contract that contains information
about the property or activity to be insured is called the:
a)Condition. b)Insuring agreement. c)Exclusion. d)Declarations.
16-The exclusion of flood in a homeowners policy is an example of:
a)Excluded loss. b)Excluded condition.
c)Excluded property. d)Excluded peril.