LIABILITY INSURANCE

5.3 EXERCISE 5.1

1. The policy structure that declares the cover is on a claims made basis will stated in
A. recital clause.
B. operative clause.
C. general condition.
D. general exclusion.

2. Failure to notify the company of any other insurance taken out on the same property
before or after the policy is issued will allow the insurer to
A. forfeit all insurance benefits.
B. pay only their portion of the claim.
C. ask for written clarification from the insured.
D. pay only for certain benefits and not the full sum insured

3. Policy exclusions are included for the following reasons, EXCEPT:
A. the risks are uninsurable.
B. the cover is not demanded by insureds.
C. insurer requires additional premium for such cover.
D. cover can be provided under more appropriate policies.

4. Which of the following clauses lists or introduces the parties in the contract?
A. The operative clause.
B. The exclusion clause.
C. The preamble or recital clause.
D. The schedule of benefits clause.

5. Car park liability clause stated that
A. the risk for parking the vehicle is third party’s own responsiblity.
B. the insurance extended to cover the legal liability of the insured’s vehicle under his
control whilst in the car park of the insured.
C. the insurance excluded all the legal liability towards the loss or damage of the third
party’s vehicle.
D. the third party must pay the extra premium to get the protection.

6. The liability policy may be cancelled at any time, with the condition of:
A. on 7-days writing notice by the insurer to the last known of insured’s address.
B. on 30-days writing notice by the insured to the insurer.
C. on 30-days writing notice by the insurer to the last known of insured’s address.
D. on 30-days writing notice by the insured to the insurer and provided no claim has
arisen during the current period of insurance.

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7. The condition stated that all the premium must be paid within sixty days of the inception
date of the policy refers to
A. cancellation condition.
B. premium warranty.
C. notification condition.
D. condition to precedent.

8. The general exclusions commonly stated in the liability policy are:
A. War, asbestos, and defamation.
B. War, asbestos and terrorism.
C. War, asbestos and dishonesty.
D. Radioactive contamination and defamation.

9. The clause that allows the one insured party to sue another insured party that are under
the same policy is
A. cross liability.
B. jurisdiction clause.
C. alteration clause.
D. limit of liability.

10. Why do insurance companies send out renewal notices?
A. Insurance companies are required to send out renewal notices.
B. They are issued by insurers in order to secure renewals.
C. Insurers want to fulfil their obligations.
D. BNM requires insurers to send out renewal notices.

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6.0 ANSWER KEY

EXCERCISE 1.1
1. B 2. D 3. B 4. B 5. A 6. C 7. B 8. D 9. A 10. D

EXCERCISE 2.1
1. D 2. C 3. D 4. A 5. C 6. B 7. D 8. C 9. C 10. B

EXCERCISE 3.1 5. C 6. D 7. B 8. D 9. B 10. B
1. A 2. C 3. A 4. C

EXCERCISE 4.1
1. D 2. D 3. D 4. C 5. B 6. B 7. D 8. A 9. A 10. D

EXCERCISE 5.1
1. B 2. B 3. A 4. C 5. B 6. C 7. B 8. B 9. A 10. B

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REFERENCES
Emmet J Vaughn, T. M. (2014). Fundamental Risk and Insurance (11th ed.). Wiley.
General Insurance Technical Guide. (2015). Allianz General Insurance Company (Malaysia)

Berhad.
Institute, T. M. (2014). Pre-Contract Examination for Insurance Agents (9th ed.). The

Malaysian Insurance Institute.
J.McNamara, G. E. (2017). Principles Of Risk Management and Insurance (13th ed.). London:

Pearson.
Tai, S. M. (2015). Liability Insurance (1st ed.). Kuala Lumpur: The Malaysian Insurance

Institute.

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