OBJECTIVE QUESTIONS

1. The requirements for insurability from the viewpoint of the insured include all but one of these

a. The loss must be intentional and intended

b. The chance of loss must be calculable

c. The premium must be economically feasible

d. The loss must be determinable and measurable

2. The main disadvantage of insurance is

a. Economic cost

b. Loss of money

c. Opportunity cost

d. All of the above.

3. Which insurance benefit aims at reducing the probability of loss so that the frequency of loss is
reduced or eliminated?

a. Social benefits

b. Loss prevention

c. Security

d. Stimulus to business

4. Which of these is not a benefit of insurance?

a. Security

b. Uncertainty is reduced

c. Savings

d. Profit making

5. The transfer of risk from the insured (buyer of the policy) to the insurer (seller of the policy) through a
process of substituting financial certainty for a situation of financial uncertainty is a benefit of this social
scheme-Insurance.

a. False

b. True
c. Not sure

6. Which of these only can be insured?

a. A marriage in case of divorce

b. Stocks of an investor

c. Fire at a factory

d. Bet9ja stakes

7. The benefit an insured looks forward to when an unforeseen event resulting in a loss insured against
occurs is known as

a. Satisfying

b. Redemption

c. Indemnification

d. Loan

8. Which of these is not a condition for insurability?

a. The loss must be accidental and unintentional

b. The chance of loss must be calculable

c. The premium must be economically feasible

d. The buyer should not be over 60 years of age

9. Indemnity refers to

a. Money paid by the insured

b. Evidence of insurance contract

c. Compensation paid for financial loss

10. In order for insurance to take place, a person’s loss must be

a. Explainable

b. Noticeable

c. Realizable

d. Calculable
11. Which of the following is not a condition for insurance?

a. Large number of exposure

b. Loss must be calculable

c. Premium must be economically feasible

d. Insured must be gullible

12. What must be economically feasible before insurability?

a. Indemnification

b. Insured

c. Insurer

d. Premium

13. A premium must be fair, equitable and impartial means that;

a. The premium paid for all kind of risk insurable should be the same

b. The insurance premium of similar risk should be equal

c. The premium payable by each member in a pool should be calculated with respect to the risk he/she
brings to the pool.

d. The premium payable by all the policy holders should be the same throughout the country.

14. The premium paid by the insured to the insurer for which the insurer assumes the risk of the insured
is

a. Real cost of insurance

b. Opportunity cost of insurance

c. Money cost of insurance

d. Implicit cost of insurance

15. Insurance offers compensation for the following type of risk except

a. Financial risk

b. Speculative risk

c. Particular risk
16. One of these is not an advantage of insurance

a. Loss attraction

b. Loss control

c. Indemnification

17. Insurance indemnifies risk through the accumulation of

a. Savings

b. Premiums

c. Deposits

18. One of these could stop one from buying insurance policy

a. The risk is foreseen

b. No direct connection with subject matter of insurance

c. Loss is not calculable

d. All the above

19. The benefit of loss being calculable helps to

a. Determine the premium to be charged

b. Maximize the wellbeing of the insured

c. Reduce loss occurrence

d. A and B

20. An insured can make profit from buying an insurance policy

a. True

b. False

c. Not sure

21. What permits an individual, family to be restored after a loss; as a result that they can maintain their
financial security

a. Premium

b. Indemnification
c. Insurance policy

d. Social benefits

22. What aims at reducing the probability of loss so that the frequency of loss is reduced or eliminated?

a. Salvage corps

b. Loss prevention

c. Savings

d. Social benefits

23. Any insurance contract entered with either an insane, infant or an unsound mind is considered

a. Void

b. Legal

c. Forcible

d. Acceptance

24. In insurance, all members (buyers) of the scheme qualified for indemnification are called

a. Partners

b. Insurance people

c. Contributions fellow

d. Policy holders

25. One benefit of insurance is that it secures the continued existence of a business, losses that would
otherwise have resulted in closing down the business.

a. True

b. False

c. Not sure

26. A major condition for insurability is “there must be large number of exposure units involved”

a. True

b. False

27. Insurance does not compensate all types of losses

a. True

b. False

28. Does a policy holder (insured) get paid his premium back if there is no loss for the period insured
against?

a. Yes

b. No

29. A buyer ill with stage 4 cancer can insure his life

a. True

b. False

30. Before the insurer indemnifies the insured, the loss that occurred must be

a. Accidental and unintentional

b. Intentional

c. A and B

31. The importance of insurable interest under insurability is that

a. Insurable interest is a wagering contract

b. Insurable interest checks the validity of an insurance contract

c. None of the above

d. All of the above

32. All these are non-insurable risks except

a. Non-financial risk

b. Speculative risk

c. Pure risk

d. Fundamental risk

33. The seller of the policy (insurance) will investigate the relationship between the proposed insured
and evaluate if there is a/an

a. Predictable loss
b. Large exposure

c. Insurable interest

d. Proof of loss

34. The conditions for insurability includes all but one

a. The loss must be predictable

b. The loss exposure must be large

c. The loss should not be catastrophic

d. The loss can be measurable and immeasurable

35. Which of these is not a condition for insurability?

a. There must be a large number of exposure units

b. The premium must be economically feasible

c. Worry and fear are reduced

d. The loss should not be catastrophic

36. The following are benefits of insurance except?

a. Promoting risk control

b. Provision of sense of security

c. Provision of employment opportunities

d. It is an easy way to save money

37. What is the risk that conforms to the norms and specifications of the insurance policy?

a. Insurable interest

b. Indemnity

c. Insurable risk

38. The major function which is also a benefit of insurance is

a. Risk transfer

b. Hazard
c. Peril

d. Opportunity cost

39. The benefits to society that results from insurance includes all except

a. Reduces worry and fear

b. Prevents loss

c. Indemnification for loss

d. Eliminates moral hazard

40. Statement A: Insurance is relevant only if there is possible economic loss

Statement B: An event which will certainly happen cannot be insured.

a. Only A is true

b. Only B is true

c. Both are true

d. Neither of two

41. Statement A: Insurance provides sense of security

Statement B: Insurance ensures that no loss will take place

a. Only A is true

b. Only B is true

c. Both are true

d. Neither of the two

42. All buyers of an insurance policy pay the same premium

a. Yes

b. No

43. The opportunity cost of buying an insurance policy is a benefit to an individual’s business

a. No

b. Yes
44. Does the buyer of a policy get paid (indemnified) for the occurrence of loss not relating to the policy
he bought?

a. Yes

b. No

45. The major social and economic benefit of insurance as a stimulus to business is

a. True

b. Not true

46. Insurance benefits includes all but one of the following

a. Pools funds for investment

b. Helps increase the GDP of a country

c. promotes moral hazard

d. Indemnification for losses

47. After an insurer considers the class of a risk, he moves on to check the frequency and severity of that
risk

a. True

b. False

48. An insurer is

a. The party who collects money (premium) in exchange for bearing all or part of a risk.

b. The party or persons who seek protection against risks

c. None of the above

d. All of the above

49. In indemnification, the restoration of the insured is made to a policy holder’s

a. Financial position before the happening of the event

b. Financial position before the happening of the event plus interest

c. Financial position minus the premium paid

d. None of the above

50. The agreement which is legally binding on the parties (insured and the insurer) and which if broken
may be enforced by action against the defaulting party in a court of law is referred to as insurance

a. Policy

b. Contract

c. Premium

d. None of the above

ANSWERS
1. A 16.A 31.B 46.C

2. C 17 B 32.C 47.A

3. B 18 D 33.C 48.A

4. D 19.A 34.D 49.A

5. B 20.B 35.C 50.B

6. C 21.B 36.D

7. C 22.B 37.C

8. D 23.A 38.A

9. C 24.D 39.D

10. D 25.A 40.A

11. D 26.A 41.A

12. D 27.A 42.B

13. C 28.B 43.A

14. C 29.A 44.B

15. B 30.A 45.A