Ic s01 Marine Cargo and Hull Insurance

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE
WWW.TEXT.IN AND SURVEY AND LOSS ASSESSMENT
About TEXT.in
Welcome to TEXT!
We, at TEXT, offer you online KNOWLEDGE BANKS for various INSURANCE exams. Our KNOWLEDGE BANKS
not only provide important questions but also the correct answers along with its brief explanation which helps
you to understand the topic very well.
We understand that in order to be successful in today’s competitive world, one needs to keep updating self-
knowledge time to time. But for many, it becomes a crucial task while handling other responsibilities. Therefore,
at TEXT, we have designed our KNOWLEDGE BANKS in such a way that you can achieve your goals
successfully along with your regular responsibilities.
The basic idea behind these KNOWLEDGE BANKS is “More knowledge in Less Time”.
We have well experienced team of professionals working on these KNOWLEDGE BANKS. The mock tests questions
designed by them have the highest probability of being asked in the exams. Therefore, with these highly valued
KNOWLEDGE BANKS, the success rate at TEXT is almost 100%.
At TEXT, we believe more in quality than in quantity. Therefore, we select the most important 300-400
practice questions and answers instead of offering you thousands of questions. We keep on updating our exams
time to time in order to keep our students up to date with the current exam trends.
With TEXT KNOWLEDGE BANKS, you will surely pass your exams with flying colours.
WE WISH YOU ALL THE BEST!
ATTENTION
The student rights to view this downloaded KNOWLEDGE BANK will automatically expire
after 90 days from the date of purchase.
All Rights Reserved. No Part of this documents may be reproduced, stored in a retrieval system, or transmitted, in
any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior
written permission from TEXT.in. For any clarification regarding this document or if you feel there are errors
in the KNOWLEDGE BANK, please write us at info@TEXT.in.
QUESTIONS BASED ON
‘MARINE CARGO AND HULL INSURANCE’

QUESTIONS BASED ON ‘MARINE CARGO AND HULL INSURANCE’
Question 1 Clause B of Inland Transit Clauses (Rail or Road) relates to ______ .

(a) Cover for risk due to water coming inside the vessel only
(b) Cover for risk of fire only
(c) Cover for risk due to abnormal loss in cargo only
(d) Cover for Basic Risks
(e) Cover for all risks
Correct Answer Cover for Basic Risks

Answer Explanation Clause B of Inland Transit Clauses (Rail or Road) relate to covering the basic risk.
Copyright WWW.TEXT.IN
QUESTIONS BASED ON

Question 2 Vijay wants to know the advantages of an Open Cover. Guide him as to which of the
following is the correct option.
(a) 1. Open cover is automatic and continuous 2. Savings in administrative costs for both
insurer's and their clients 3. The premium rates are agreed at inception and this
assists the insured to identify his costs of insurance right at the outset
(b) 1. There are many holidays in India and if consignments are to be sent during
holidays, it will be difficult to arrange for the insurance. 2. If any insurance is wrongly
taken or not taken by mistake, corrections cannot be done
(c) 1. There is no compulsion on the insured to insure all the consignments with one
insurance company during a period as he can change the insurance company for each
shipment. 2. If any insurance is wrongly taken or not taken by mistake, corrections
cannot be done
(d) 1. There is no compulsion on the insured to insure all the consignments. If he wishes
he may not insure at all. 2. If there are many transits during a period of time, it will
become very difficult to control operational part as it is not easy to arrange for many
policies before commencement of each transit.
(e) In an Open Cover, the rates are also not fixed. They will vary with market conditions
etc., and so there is no certainty that the cover will be granted and at what price.
Correct Answer 1. Open cover is automatic and continuous

2. Savings in administrative costs for both insurer's and their clients
3. The premium rates are agreed at inception and this assists the insured to identify
his costs of insurance right at the outset
Answer Explanation Open cover is an agreement in which the insurer undertakes to insure all the
shipments declared by the assured within the scope if the policy. It’s beneficial to
both client & the insurer as the client doesn’t have to negotiate insurance of each
shipment & the insurer is assured of continuity of insurance in the client’s activities.
QUESTIONS BASED ON

Question 3 What should the consignee do when goods have arrived by rail and are outwardly
damaged or appear to have been tampered with?
(a) Immediately inform the insurer of the damage
(b) A claim should be lodged against the carrier within 7 days of delivery
(c) Take examined delivery from the Railways and obtain a certificate of damage and /or
shortage
(d) To determine the extent of loss, a surveyor has to be appointed
(e) The consignee should refuse to take the delivery of the damaged goods
Correct Answer Take examined delivery from the Railways and obtain a certificate of damage and /or
shortage
Answer Explanation When goods have arrived by rail and are outwardly damaged or appear to have been
tampered with the consignee should take an examined delivery and obtain a
certificate of damage and /or shortage from the railways. The consignee must also
issue notice of claims against the carrier.
Question 4 ______ establish standards, guidelines and rules for the design, construction and
survey of ships and of other marine structures.
(a) Ship classification societies
(b) Port classification societies
(c) Marine classification societies
(d) Vessel classification societies
(e) Craft classification societies
Correct Answer Ship classification societies

Answer Explanation Ship classification societies establish standards, guidelines and rules for the design,
construction and survey of ships and of other marine structures.
The Classification Certificate is the document confirming that a ship has been built
according to the rules and standards of the relevant Classification Society.
QUESTIONS BASED ON

Question 5 In Marine Hull Insurance, if a physical hazard reveals some adverse feature, the
Insurer may insist on _______.
(a) Loading of premium
(b) Declining the insurance proposal
(c) issuing the policy on Sub Standard basis
(d) giving special treatment to such cases
(e) None of the above
Correct Answer Loading of premium

Answer Explanation If the physical hazard reveals adverse features, the insurer may insist on -
- Pre - insurance survey
- Loading of premium
- Limiting the scope of cover etc.
Each insurance company will have a list of hull risk not to be favorably considered.
Question 6 Identify the correct statement with respect to the liability of an insurer in respect of
general average (GA) losses as per Institute cargo clauses.
(a) The insurer is liable for all GA losses
(b) The insurer is liable for any GA loss only where the GA act was incurred in respect of
an insured peril
(c) The insurer is only liable up to the value of indemnity as stated in the policy
(d) The insurer is liable for part value of the part lost in comparison of the sum insured
(e) The insurer is liable for value of the goods insured under the policy
Correct Answer The insurer is liable for any GA loss only where the GA act was incurred in respect of
an insured peril.
Answer Explanation The liability of an insurer in respect of general average (GA) losses as per Institute
cargo clauses is that the insurer is liable for any GA loss only if the GA act was
incurred in respect of an insured peril i.e., GA charges incurred to avoid loss from any
cause (s) except those excluded
QUESTIONS BASED ON

Question 7 What is the advantage of Specific Voyage Policy?

(a) In this policy, the insured has the freedom to select the shipment which is to be
insured. He doesn’t have to insure shipments of less value, thus reducing the cost of
premium
(b) In this policy, if the consignments are to be dispatched during holidays then it will be
difficult to arrange for the insurance
(c) In this policy, if any insurance is wrongly taken or not taken by mistake, there is no
scope for correction
(d) In India, where there are many holidays and if the consignment is to be dispatched
during holidays it will be difficult to arrange for the insurance
(e) In Specific Voyage Policy, the operational control and administrative cost are high as
a new policy is to be taken for every dispatch
Correct Answer In this policy, the insured has the freedom to select the shipment which is to be
insured. He doesn’t have to insure shipments of less value, thus reducing the cost of
premium
Answer Explanation Under the Specific Voyage Policy, the insured is not bound insure all his shipments as
is the case under Open Cover. He is free to select the shipment which is to be insured
and doesn’t need to insure shipments of less value, which reduces the cost of
premium.
Question 8 -A 'Letter of Abandonment' is sent by the insured to the insures before a claim is
made for CTL and this is ________.
(a) usually declined by the insurer in writing
(b) usually accepted by the insurer in writing
(c) a part of the legal process to initiate the claim
(d) verified by the surveyor for admitting the claims
(e) procedure serves as a notice to initiate the claim payment
Correct Answer usually declined by the insurer in writing

Answer Explanation A claim for CTL (Constructive Total Loss) must be preceded by a Letter of
Abandonment from the insured to the insurers, which is usually declined by the
insurer in writing. It is because of the fact that once accepted, the insurers cannot
reject the abandonment.
QUESTIONS BASED ON

Question 9 -A valued policy has the words, - ‘100 bales of cotton insure for Rs. 8,00,000 so
valued’. Calculate the amount payable to the insured if 50 bales of cotton are lost in
transit?
(a) Rs. 800000
(b) Rs. 400000
(c) Rs. 200000
(d) Rs. 100000
(e) Rs. 600000
Correct Answer Rs. 400000

Answer Explanation 100 bales of cotton insure for Rs. 8,00,000 so valued under the valued policy. When
50 bales were lost in transit, the claim payable would be Rs. 4,00,000 since each bale
is valued at Rs. 8000 (800000 / 100 bales) & the loss of 50 bales would be 50 x 8000 =
Rs. 4,00,000.
Question 10 The highest cargo carrying capacity is in which of the following vessels?
(a) Liner Vessels
(b) Dry Bulk Carriers
(c) Super Tankers
(d) Liquid bulk carriers
(e) General cargo Vessels
Correct Answer Super Tankers

Answer Explanation Super tankers have the highest cargo carrying capacity. These are either VLCC or
ULCC i.e. Very Large crude Carriers or Ultra Large crude Carriers, with capacity of
75,000 to 1, 50,000 & 1, 50,000 to 3, 00,000 Tons DWT.
QUESTIONS BASED ON

Question 11 With respect to Marine Open Cover, which of these statements is NOT correct?
(a) In an open cover, there is a specific sum insured
(b) In Marine Open Cover, the premium rates are agreed upon at the beginning,
therefore the insured knows his insurance costs at the outset
(c) Marine Open Cover is not a policy so it is not stamped
(d) There are two limits in Open Cover - Limit per bottom and Limit per location
(e) Marine Open Cover provides continuous insurance protection to regular importers
and exporters
Correct Answer In an open cover, there is a specific sum insured

Answer Explanation All the options are true except that there is a specific sum insured in an open cover.
On the contrary, the open cover has no sum insured & all the consignments are
automatically covered for regular exporter/ importer at the rates agreed in
advance.
Question 12 The Insurance Act, 1938 requires that claims exceeding ______ should be surveyed
by a surveyor holding a valid license from the controller of insurance.
(a) Rs. 10,000
(b) Rs. 20,000
(c) Rs. 30,000
(d) Rs. 40,000
(e) Rs. 50,000
Correct Answer Rs. 20,000

Answer Explanation
QUESTIONS BASED ON

Question 13 Mr. Subhash is a regular exporter and has taken an Open Cover to cover his
shipments for a period of one year. He somehow forgot to declare one of his
shipments out of this. What will be the effect for him?
(a) In such an event, usually no correction can be done
(b) The shipment will be held covered and will not void the open cover
(c) He can take a fresh policy and can club the goods in transit for which the policy has
not been taken with other goods in transit
(d) He can take a new policy and cancel the old policy
(e) An application has to made to the insurance company to make changes in the policy
Correct Answer The shipment will be held covered and will not void the open cover
Answer Explanation In case any shipment is missed out to declare under an open cover, this will not void
the open cover and his shipment will be held covered. Open Cover provides an
automatic & continuous insurance protection to an insured engaged in international
trade
Question 14 In the 'Documents against payment' method of payment, which bank releases the
documents to the buyer, to collect the shipment, once the buyer has paid the
amount of Bill of Exchange?
(a) Reserve Bank of India
(b) Collecting Bank
(c) Advising Bank
(d) Transferring Bank
(e) Remitting Bank
Correct Answer Collecting Bank

Answer Explanation Bills of exchange are negotiable instruments which contain an order to pay a certain
amount to a particular person within a stipulated period of time. Bill of exchange is
issued by the creditor to the debtor when the debtor owes money for goods or
services. If the debtor doesn't accept it, it doesn't have any value.
The Collecting Bank releases the documents to the buyer, to collect the shipment,
once the buyer has paid the amount of Bill of Exchange.
QUESTIONS BASED ON

Question 15 A cargo of _____ can gain weight in case it is shipped under imperfect condition.
(a) Fruits
(b) Vegetables
(c) Grains
(d) Crude Oil
(e) All of the above
Correct Answer Grains

Answer Explanation Certain cargo like grains would gain weight in case they are shipped under imperfect
condition. In cargo insurance, the susceptibility of goods to damage by various
causes is a vital consideration.
Question 16 The act of cargo being thrown overboard at the time of a peril to save the adventure
from total loss (cargo and ship belonging to the same party) is known as ______ .
(a) General Average

(b) Clause Paramount
(c) Garbling
(d) Jettison
(e) Parachuting Clause
Correct Answer Jettison

Answer Explanation Definition of Jettison - The intentional throwing overboard of part of the cargo or
some piece of the ship in order to save the ship or its cargo. Virtually all
ocean marine policies cover the peril of jettison.
QUESTIONS BASED ON

Question 17 Identify the reason as to why it is necessary to re-bale even the damaged material as
per the 'Picking Clause'?
(a) Because it will enable the insurer to value the cargo and pay the right amount of
claim in the event of loss
(b) Because the insurance claim in the event of a loss can be recovered from a third
party
(c) Because by doing so the good material can be separated out
(d) Because even the damaged material will have to have to be returned as a part of the
insurance claim
(e) Because the damaged material does have salvage value and the insurer is liable for
the insured value of the pickings less the salvage proceeds of the picked material
Correct Answer Because the damaged material does have salvage value and the insurer is liable for
the insured value of the pickings less the salvage proceeds of the picked material
Answer Explanation Cotton, wool & similar items which are shipped in bales, the damage is usually
restricted to outer surface. The damaged fiber may be picked & the remainder would
be sound. The Picking Clause provides that the insurer will pay the cost of re-bailing
both sound and damaged material, because the damaged material may have some
salvage value.
Question 18 Under which clause of cargo insurance is this statement included -- ' This clause
includes the risks of theft, pilferage and non-delivery, fresh water and rain water
damage, hooks, oils, mud, acid and other extraneous substances or heating and
sweating & damage by other cargo ‘?
(a) Second hand replacement clause
(b) Label clause
(c) Comprehensive Clause
(d) Cutting clause
(e) Garbling clause
Correct Answer Comprehensive Clause

QUESTIONS BASED ON

Question 19 Which are the two types of excess of loss covers?

(a) Working covers and Catastrophe covers
(b) Alternate covers and Aggregate covers
(c) Per loss covers and Catastrophe covers
(d) Premium covers and Per loss cover
(e) Working covers and Loss covers
Correct Answer Working covers and Catastrophe covers

Answer Explanation The two types of excess of loss covers are: Working covers (also called Excess of loss
treaty) and Catastrophe covers. They cover normal losses and catastrophe losses.
Question 20 In which of the following payment methods, does an importer take the delivery of
goods and ensures the supplier to make the payment at some specific date in future?
(a) Documentary Credit

(b) Consignment Purchase
(c) Down Payment
(d) Cash in advance
(e) Open Account
Correct Answer Open Account

Answer Explanation In case of an Open Account, an importer takes delivery of the goods and assures the
supplier of making payment at some specific date in the future. Such payments are
mostly seen in cases where the importer has a strong credit history and is well
known to the seller.
Open Account method of payment offers no protection in case of non-payment to

the seller.
QUESTIONS BASED ON

Question 21 Identify the TRUE statement with respect to International Underwriting Association
of London (IUA).
(a) IUA is the main body to fight against all types of maritime crimes and malpractices
(b) IUA appoints and control the Lloyd’s Agents
(c) The aim of IUA is to safeguard and develop insurers interests in marine and transport
insurance
(d) IUA is a division of the International Chamber of Commerce (ICC)
(e) IUA works for promoting the implementation of process reforms and electronic
interfaces across the markets
Correct Answer IUA works for promoting the implementation of process reforms and electronic
interfaces across the markets
Answer Explanation The International Underwriting Association of London (IUA) differ from the
International Union of Marine Insurers (IUMI) in a way that IUA works for promoting
the implementations of process reforms and electronic interfaces across the marine
insurance market, where as IUMI works for safeguarding and developing insurer’s
interests in marine and transport insurance.
Question 22 An insurer was verifying a proposal for insuring a vessel for hull insurance and the
insurer felt that there was an indication of MORAL HAZARD. What would the insurer
do?
(a) Proposal would be accepted with strict conditions
(b) Increase the premium
(c) Limit the coverage scope
(d) Do a special survey
(e) Proposal will be declined by the insurer
Correct Answer Proposal will be declined by the insurer

Answer Explanation If there is an indication of moral hazard, the proposal will be declined.
Superior or inferior types of vessels can be rated, but moral hazard cannot be rated.
QUESTIONS BASED ON

Question 23 Which of the following have been provided in Institute cargo clauses ‘B’ and ‘C’
under Risk Clause 1.1?
(a) Only the losses reasonably attributable to insured perils are covered and not
proximately caused by them
(b) In case the property suffers loss before the assured acquires his interest, then he is
protected by the policy, only if the risk in the goods has passed to him
(c) In case of a fraud, the complete marine policy can be avoided
(d) The warranty of seaworthiness is applicable only when the exporter is aware about
the un-seaworthiness of the vessel at the time of shipment
(e) Although the assured has the right to claim under the policies in any order as per his
choice, each insurer is responsible for only his due proportion of the loss
Correct Answer Only the losses reasonably attributable to insured perils are covered and not
proximately caused by them
Answer Explanation Under Risk Clause 1.1 of Institute cargo clauses ‘B’ and ‘C’, it is provided that the
losses reasonably attributable to insured perils are covered and not proximately
caused by them. E.g., Fire or explosion, general average, jettison etc. The insurance
covers perils except as excluded by the provisions of various clauses.
Question 24 The 'Garbling Clause' provides that the insurer will pay the cost of garbling because
______.
(a) only when the insurer pays the amount the subject matter of the insurable interest
can be established
(b) the insured had paid the premium which included this cost and the insured needs to
be reimbursed for it
(c) as such an exercise prevents further damage and reduces the claim
(d) as the insured is liable for any such loss taking place
(e) it’s as per the rules of Lloyd's
Correct Answer as such an exercise prevents further damage and reduces the claim
Answer Explanation Garbling means sifting or cleansing or separating of sound from the hole which may
have got mixed up with some other material. Generally, this term is applied to
insurance of tobacco. It’s an exercise which prevents further damage and reduces the
claim; the insurer may have to pay.
QUESTIONS BASED ON

Question 25 Mr. Mandar found that there were many packages missing in his cargo which had
arrived by sea. The first action of Mr. Mandar would be -
(a) To immediately appoint a surveyor in respect of short landing
(b) To give written notices to the carriers within seven days of landing of goods
(c) To apply for a survey by the ocean carrier/ port authority
(d) To claim immediately on the Port Authority, Carriers or other Bailees
(e) To obtain a certificate of damage / shortage from port authorities
Correct Answer To claim immediately on the Port Authority, Carriers or other Bailees
Answer Explanation If it is found that there are some missing packages of goods in the cargo arrived by
sea, and then the first action would be to claim immediately on the Port
Authority, Carriers or other Bailees for any missing packages.
Question 26 -Identify the correct statement regarding the insurance cover provided to cargo
carried in sailing vessels.
(a) ‘General Average Contribution’ is not executed from the insurance cover which is
given to cargo carried in sailing vessels
(b) Loss of cargo due to jettison is totally excluded from insurance cover given to the
cargo carried in sailing vessels
(c) The insurance cover given to cargo carried in sailing vessels is as per the provisions of
Inland Transit Clauses
(d) Loss / damage to cargo reasonably attributable to vessel being burnt is covered
under Clause C of insurance given to cargo carried in sailing vessels
(e) Loss / damage willfully caused by negligence of crew is covered under Clause A of
insurance given to cargo carried in sailing vessels
Correct Answer Loss / damage to cargo reasonably attributable to vessel being burnt is covered
under Clause C of insurance given to cargo carried in sailing vessels
Answer Explanation There are three types of covers available for cargo carried in sailing vessels i.e.,
Clause ‘A’, Clause ‘B’ & Clause ‘C’.
Under Clause ‘B’, the loss / damage to cargo reasonably attributable to vessel being
burnt or sunk is covered under Clause C of insurance provided to cargo carried in
sailing vessels.
QUESTIONS BASED ON

Question 27 When does the cover of insurance come into force for goods sent through Registered
Post?
(a) The insurance cover come into force from the time the goods are delivered to the
seller as mentioned in the policy
(b) The insurance cover come into force from the time the insured goods are loaded on
the vehicle which will transport them to the post office
(c) The insurance cover come into force when the insured fills up the Declaration Form
and submits to the concerned post office
(d) The insurance cover come into force from the time the insured goods are deposited
at the post office at the place mentioned in the policy
(e) The insurance cover come into force from the time the goods are manufactured and
stored at the seller’s place and are ready to be dispatched to the post office
Correct Answer The insurance cover come into force from the time the insured goods are deposited
at the post office at the place mentioned in the policy
Answer Explanation In case of goods sent through Registered Post, the insurance attaches from the time
the goods hereby insured are deposited / registered at the Post Office at the place
named in the policy and continues until the goods are delivered to the addressee or
his representative at the destination named in the policy.
QUESTIONS BASED ON

Question 28 Among the following options, which is exclusion to the Institute Strikes Clauses
(Cargo)?
(a) Loss or damage or expense to the subject matter insured caused by any act of
terrorism or by any person acting from political motive
(b) Loss or damage or expense to the subject matter insured caused by strikes, locked-
out workmen or persons taking part in labor disturbances, riots and civil commotions
(c) General Average and Salvage Charges incurred to avoid loss / damage from a risk
covered
(d) Loss to the subject matter arising from shortage or withholding of labor resulting in
strike, lock-out, labor disturbance, riot or civil commotion
(e) Under Duty of the Assured Clause, charges reasonably incurred to avert or minimize
an insured loss and to preserve and pursue recovery rights
Correct Answer Loss to the subject matter arising from shortage or withholding of labour resulting in
strike, lock-out, labour disturbance, riot or civil commotion
Answer Explanation Under the Institute Strikes Clauses (Cargo), Loss, damage or expense arising from
absence, shortage or withholding of labour resulting from strike, lock-out, labour
disturbance, riot or civil commotion is an exclusion.
QUESTIONS BASED ON

Question 29 Identify the CORRECT statement with respect Double Insurance.

(a) In Double Insurance, even if the property suffers loss before the assured acquires his
interest, he is still protected by the policy
(b) In Double Insurance, in case the assured receives any sum in excess of the indemnity,
he is deemed to hold such sum in trust for the insurers, according to their right of
contribution among themselves
(c) In Double Insurance, in case a recovery from third party is based on a value lower
than the insured value, then the insured cannot participate in the recovery until the
insurers have been fully reimbursed
(d) In Double Insurance, the assured cannot claim under any circumstances, payment
from the insurers in such order as he may think fit
Correct Answer In Double Insurance, in case the assured receives any sum in excess of the indemnity,
he is deemed to hold such sum in trust for the insurers, according to their right of
contribution among themselves
Answer Explanation Where the assured is over-insured by double insurance, the assured is deemed to
hold the excess in trust in accordance with the insurer’s right of mutual contribution.
This is as per Marine Insurance Act (MIA) 1963 - Section 34(1).
QUESTIONS BASED ON

Question 30 Every Indian ship has to be registered and certificate to be obtained from Director
General of Shipping. This is as per which Act?
(a) IRDAI Act 1999
(b) Merchant Shipping Act 1958
(c) Marine Insurance Act 1963
(d) Customer Act 1862
(e) Insurance Act 1938
Correct Answer Merchant Shipping Act 1958

Answer Explanation Under the Merchant Shipping Act 1958, every Indian ship exceeding 15 tons net and
employed solely in navigation on the coast of India, is required to be registered
with Director General of Shipping.
Question 31 Consider a situation. Mr. Santosh has taken delivery from a Multimodal Transport
Operator (MTO) and he sees that the goods were damaged during transit. When
should he serve a notice on the MTO to obtain the damages?
(a) At the time of delivery
(b) Within 24 hours of delivery
(c) Within 3 days of delivery
(d) Within a week of delivery
(e) Within a month of delivery
Correct Answer At the time of delivery

Answer Explanation A notice should be served at the time of delivery of goods on the MTO in accordance
with the Multimodal Transportation of Goods Act, 1993, in case the goods were
damaged during transit.
QUESTIONS BASED ON

Question 32 Generally an Open Policy is issued for a period of ____ .

(a) one week
(b) one month
(c) three months
(d) six months
(e) twelve months
Correct Answer twelve months

Answer Explanation An open policy is generally issued for a period of 12 months & may be increased by
issuing an endorsement by charging appropriate additional premium. The policy may
exhaust earlier if the sum insured is exhausted prior to the expiry of the policy.
Question 33 As per the Major Port Trusts Act, 1963 of India, what happens if the goods are not
cleared in 7 days from the date of landing?
(a) If the goods are not cleared in 7 days, the goods will remain in the shipyard and the
Board of Trustees will be responsible for any loss / damage
(b) If the goods are not cleared in 7 days, the port authorities have to deliver the goods
to the consignee
(c) If the goods are not cleared in 7 days, the goods will remain on the premises of the
Board of Trustees at the sole risk and expense of the owner
(d) If the goods are not cleared in 7 days, the port authorities will return the goods back
to the consignor and recover the cost from the consignee
(e) If the goods are not cleared in 7 days, the port authorities will return the goods back
to the consignor and recover the cost from the consignor
Correct Answer If the goods are not cleared in 7 days, the goods will remain on the premises of the
Board of Trustees at the sole risk and expense of the owner
Answer Explanation As per the Major Port Trusts Act, if the goods are not cleared in 7 days, the goods will
remain on the premises of the Board of Trustees at the sole risk and expense of the
owner.
QUESTIONS BASED ON

Question 34 Which of these options is correct with respect to insurance for containers in Inland
Transport?
(a) The containers are insured subject to Institute Container Clauses in inland transport
(b) The containers are not protected against damage or loss due to fire in inland
transport
(c) The containers are treated like cargo and they are insured just like cargo carried in
sailing vessels
(d) In inland transport, the containers are treated like cargo and they are insured under
(e) In inland transport, the containers are not protected against the risk of overturning
of vehicles
Correct Answer In inland transport, the containers are treated like cargo and they are insured under
Answer Explanation Insurance for containers is of two types i.e. Inland & Overseas. Regarding insurance
of containers involved in inland transit, the containers are treated like cargo and they
are insured under Inland Transit Clauses.
Question 35 __________ is a pro-rata reinsurance contract in which the insurer and reinsurer
share premiums and losses according to a fixed percentage.
(a) Surplus Treaty
(b) Pooling arrangement
(c) Quota share reinsurance
(d) Treaty reinsurance
(e) Excess of loss reinsurance
Correct Answer Quota share reinsurance

Answer Explanation Quota share reinsurance is a pro-rata reinsurance contract in which the insurer and
reinsurer share premiums and losses according to a fixed percentage.
Quota share reinsurance allows an insurer to retain some risk and premium while
sharing the rest with an insurer up to a predetermined maximum coverage. Overall,
it's a way for an insurer to boost and preserve some of its capital.
QUESTIONS BASED ON

Question 36 Ram has dispatched goods to his buyer Shyam by registered post. Why is it important
for Ram to preserve the receipt given to him by the Post Office?
(a) In case the package is delivered with seals intact but with loss of contents, this
receipt will be required as proof
(b) Ram will send the receipt to Shyam and Shyam would need it to accept the delivery
of the goods
(c) The receipt will be used as proof in case of claim for non-delivery
(d) In case the address of the addressee was not mentioned clearly, then this receipt will
be required as proof for non-delivery of contents
(e) The receipt would be needed by Shyam to identify the goods against the receipt at
the time of delivery
Correct Answer The receipt will be used as proof in case of claim for non-delivery
Answer Explanation Shyam must preserve the receipt given to him by the Post Office as the receipt will
be required as proof in case of claim for non-delivery.
Question 37 From the options given below, which one is a feature of Roll on - Roll off (RO-RO)
ships?
(a) These vessels are specially designed to carry containers
(b) These vessels are specially designed to carry liquid likes crude oils etc
(c) These vessels carry containers in the forms of barges and massive cranes for loading
and unloading operations
(d) These vessels are mainly used in transportation of passengers
(e) These vessels are specially designed to carry wheeled cargo such as cars, trucks etc.
that are driven on and off the ship on their own wheels
Correct Answer These vessels are specially designed to carry wheeled cargo such as cars, trucks etc.
that are driven on and off the ship on their own wheels
Answer Explanation A RO-RO vessel does not have any cranes. The vehicles like lorries, trailers etc. are
driven on board with the cargo and once they reach the destination, they are driven
out. Cars and other vehicles also can be transported by them.
These vessels are very useful where there are inadequate handling facilities.
QUESTIONS BASED ON

Question 38 Among the following options, which are exclusions to the Institute Strikes Clauses
(Cargo)?
(a) Loss or damage or expense to the subject matter insured caused by any act of
terrorism or by any person acting from political motive
(b) Loss or damage or expense to the subject matter insured caused by strikes, locked-
out workmen or persons taking part in labor disturbances, riots and civil commotions
(c) General Average and Salvage Charges incurred to avoid loss / damage from a risk
covered
(d) Loss to the subject matter arising from shortage or withholding of labor resulting in
strike, lock-out, labor disturbance, riot or civil commotion
(e) Under Duty of the Assured Clause, charges reasonably incurred to avert or minimize
an insured loss and to preserve and pursue recovery rights
Correct Answer Loss to the subject matter arising from shortage or withholding of labour resulting in
strike, lock-out, labour disturbance, riot or civil commotion
Answer Explanation Under the Institute Strikes Clauses (Cargo), Loss, damage or expense arising from
absence, shortage or withholding of labour resulting from strike, lock-out, labour
disturbance, riot or civil commotion is an exclusion.
QUESTIONS BASED ON

Question 39 Mr. Jindal secures a Marine Cover Letter for the goods he is shipping by sea. What is
the provision in the event of loss or damage to these goods before the shipment?
(a) As the loss has occurred before the shipment, no insurance claim will be honored
(b) The basis of valuation shall be only the charges actually incurred and for which the
insured is liable. No claim can be made for the value of goods
(c) The basis of valuation shall be based on one-third of the prime cost of the goods for
which the insured is liable
(d) The basis of valuation shall be the prime cost of the goods plus charges actually
incurred and for which the insured is liable
(e) The basis of valuation shall be for only the prime cost of the goods for which the
insured is liable
Correct Answer The basis of valuation shall be the prime cost of the goods plus charges actually
incurred and for which the insured is liable
Answer Explanation As per marine cover letter, the provision in the event of loss/damage to the goods
prior to shipment, the basis of valuation shall be the prime cost of the goods plus
charges actually incurred and for which the insured is liable. E.g. if freight is not
incurred, there is no liability for freight.
Question 40 Megha has declared the value of the goods to be of Rs. 500000 and has taken an
Annual Policy for her goods. These goods were damaged in transit. Later it was found
that the value of the goods should have been Rs. 600000. Scrutinize this situation
and choose the correct option -
(a) Megha will not get any claim due to wrong declaration
(b) These goods will get forfeited due to wrong declaration
(c) Megha can pay extra premium and her total loss shall be reimbursed
(d) Megha shall have to bear the extra loss of Rs. 100000
(e) Megha shall have to bear the total loss of Rs. 600000
Correct Answer Megha shall have to bear the extra loss of Rs. 100000
Answer Explanation The annual policy is subject to a condition of average. Accordingly, if the value of
goods in transit is more than the sum insured, the insured shall be considered as
being his own insurer for the difference, and shall bear the loss accordingly.
Therefore, Megha will have to bear the extra loss of Rs 100000.
QUESTIONS BASED ON

Question 41 A policy is ______ where different species of goods are insured by the same contract.
(a) renewable
(b) sharable
(c) acceptable
(d) enforceable
(e) Apportionable
Correct Answer apportionable

Answer Explanation A policy is apportionable where different species of goods are insured by the same
contract, e.g., tobacco and coffee or where separate valuations of the goods are
agreed.
Question 42 While sending a cargo by sea, there is always a possibility of handling and stowage
losses. To avoid such losses, DUNNAGE is used. What does it mean by Dunnage?
(a) Palletizing of goods to save space and avoid damage
(b) Loose material like wooden planks to support the cargo to avoid contact
(c) Stacking of heavier goods at the bottom and light weight goods on top
(d) Stacking goods to save space and avoid damage
(e) Spreading the goods throughout the deck of ship to maintain balance
Correct Answer Loose material like wooden planks to support the cargo to avoid contact
Answer Explanation In order to avoid handling and stowage loss, dunnage is used to give necessary
protection. The term ‘Dunnage’, refers to loose materials like mats, wooden planks
etc. used to support and protect cargo in a ship’s hold to avoid contamination and
contact to give necessary protection.
QUESTIONS BASED ON

Question 43 Two conditions are attached to the subject of insurable interest - which are they?
(a) 1. The insurer must have an insurable interest in the object when the insurance is
effected 2. He must have an interest in the object at the time of the loss
(b) 1. The assured must have a reasonable expectation of acquiring an insurable interest
in the object being insured 2. He must have an interest in the object at the time of
the loss
(c) 1. The insurer must have a reasonable expectation of acquiring an insurable interest
in the object being insured 2. He must have an interest in the object at the time of
the loss
(d) 1. The assured must have an insurable interest in the object when the insurance is
effected 2. Have a reasonable expectation of acquiring an insurable interest in the
object
(e) 1. The assured must have an insurable interest in the object when the insurance is
effected 2.He must have an interest in the object at the time of the loss
Correct Answer 1. The assured must have a reasonable expectation of acquiring an insurable interest
in the object being insured
2. He must have an interest in the object at the time of the loss
Answer Explanation As per Marine Insurance Act 1963, there must be physical object exposed to marine
perils & the insured must have some legal relationship. It further states when the
insurable interest must attach. According to it, the assured must have a reasonable
expectation of acquiring an insurable interest in the object being insured and he
must have an interest in the object at the time of the loss.
QUESTIONS BASED ON

Question 44 Sometimes, due to overbooking etc., some cargo is short shipped as there is lack of
space on the ship. This is known as ______ .
(a) Overflow Cargo
(b) Shutout Cargo
(c) Excess Cargo
(d) Overloaded Cargo
(e) Overbooked Cargo
Correct Answer Shutout Cargo

Answer Explanation Sometimes, due to overbooking or any other reason, some cargo is short shipped as
there is lack of space on the ship and this is known as Shutout Cargo. It also refers to
cargo arriving too late for a vessel at the loading port.
Question 45 The _________ element of risk is mainly determined by the size of the ship.
(a) Total Loss
(b) Particular Average
(c) Ex TL rate
(d) DWT
(e) GT
Correct Answer Ex TL rate

Answer Explanation Ex TL (Ex Total Loss) rate is mainly determined by the size of the ship. It is fixed as a
certain amount multiplied by the DWT (Deadweight Tonnage) or the GT (Gross
Tonnage).
QUESTIONS BASED ON

Question 46 To decide the market value or reinstatement value of goods at the time of loss in
Marine Insurance is a difficult proposition. Why?
(a) Because in the Marine Insurance Act, there is no provision for such valuation
(b) Because in marine policies, agreed rule concept is adopted
(c) Because the insured property in marine insurance is moving property, that is ships
and cargoes
(d) Because once a property is insured property it does not have a market value
(e) Because the insured property is subjected to only double insurance
Correct Answer Because the insured property in marine insurance is moving property, that is ships
and cargoes
Answer Explanation It is difficult to decide market value or reinstatement value of goods at the time of
loss in Marine Insurance, as the insured property in marine insurance is moving
property, that is ships and cargoes and the values keeps on fluctuating and the cargo
appreciates as it reaches closer to the destination.
Question 47 With reference to insurance of inland vessels, the inland waters are all sheltered and
protected waters such as harbor waters, back waters, sea water within a radius of
_____ from the entrance to harbor/port, river waters and the like.
(a) 3 NM
(b) 5 NM
(c) 10 NM
(d) 12 NM
(e) 15 NM (Nautical Miles)
Correct Answer 12 NM
Answer Explanation
QUESTIONS BASED ON

Question 48 During a war, if the contract of carriage is terminated and the goods are discharged
short of destination, what options does the assured have with the goods?
(a) Since the goods were discharged short of destination, the assured can send legal
notice to the carriage owner
(b) As the war is in force, the goods will remain on the carriage till the war is over
(c) The goods may be sold locally or forwarded by some other means to the destination
named in the policy
(d) The assured can request the carriage owner to buy the goods at a mutually agreed
price
(e) The ship owner and the assured have to wait for the war to get over and then the
goods will be discharged at the destination
Correct Answer The goods may be sold locally or forwarded by some other means to the destination
named in the policy
Answer Explanation During a war, if the contract of carriage is terminated and the goods are discharged
short of destination, the goods can be sold locally or forwarded to the destination
mentioned in the contract or to some alternate destination.
Question 49 _________ involves rapid movement and transport of standard cargo containers by
sea, land and air and which has reduced cargo handling, particularly in Door-to-Door
shipments.
(a) Bulk cargo
(b) Palletizing
(c) Intermodal Transport
(d) Mass Rapid Transport
(e) VLCC
Correct Answer Intermodal Transport

Answer Explanation Intermodal Transport involves rapid movement and transport of standard cargo
containers by sea, land and air and which has reduced cargo handling, particularly in
Door-to-Door shipments.
QUESTIONS BASED ON

Question 50 In case the Institute Warranties are breached by a vessel, this can result in ______ .
(a) Concealed Damage clause coming into force
(b) Cancellation of the policy
(c) Registration certificate of the vessel will be cancelled
(d) Charging of additional premium
(e) Penalties imposed by the concerned insurance company
Correct Answer Charging of additional premium

Answer Explanation As per Institute Classification Clause, it lays down certain standards. In case of any
non-compliance of any terms of the clause, the insurers have the right to charge
additional premium on ‘Held Cover Basis’.
Question 51 Which of the following will NOT come under the technical details of the proposal
form for hull insurance?
(a) Type of vessel
(b) Age of vessel
(c) Name of the builders and place built
(d) Valuation of the vessel
(e) Dimensions of the vessel
Correct Answer Valuation of the vessel

Answer Explanation Valuation of the vessel is not a technical detail and is not required.
QUESTIONS BASED ON

Question 52 At what value is the insurance done for ships which are mortgaged to the
Government?
(a) As per the current market value
(b) As per the value fixed by Government
(c) The value will be comparatively higher
(d) At a discounted premium value
(e) As per the value fixed by a classification society
Correct Answer As per the value fixed by Government

Answer Explanation If a ship is mortgaged to the Government, it is necessary to insure for the value fixed
by the Government for the purpose of insurance.
Question 53 An insurer will be liable for the import duty of the damaged spare part of insured
machinery only in the case ______.
(a) when the damage to the spare part is because of improper handling of the
machinery by the shipping company employees
(b) when due to jettison, the spare part is damaged
(c) when the damage to the spare part is due to heavy fire or major explosion
(d) when the full import duty was included in the sum insured on the machine
(e) when some part of the import duty was included in the sum insured on the spare
part
Correct Answer when the full import duty was included in the sum insured on the machine
Answer Explanation As per Institute Replacement Clause, unless the full duty was included in the sum
insured on the machine, the underwriter is not liable for duty of the spare part.
QUESTIONS BASED ON

Question 54 A ship was carrying livestock and due to bad weather, the supplies and food meant
for the livestock got damaged. To preserve the livestock, the captain had to buy new
supplies at an intermediate port. Under which clause of the marine insurance policy
will this expense be covered?
(a) General average and salvage
(b) Particular average loss
(c) Particular charges
(d) Sue and Labor
(e) Pollution Hazard
Correct Answer Sue and Labor

Answer Explanation The above mentioned expenses would be covered under Sue and Labour clause of
the marine insurance policy. Basically, expenses incurred with the intention of
preventing or minimizing loss or damage which is recoverable under the marine
policy falls under Sue and Labor clause.
Question 55 A Standard Survey Report in case of loss / damage will contain which of the following
details?
(a) Open assessment report by the carrier
(b) Ship survey report
(c) Claim form and claim bill
(d) Copies of correspondence exchanged with carriers
(e) All of the above
Correct Answer All of the above

Answer Explanation A Standard Survey Report in case of loss / damage will contain all of the above-
mentioned details.
QUESTIONS BASED ON

Question 56 Investigations into hull insurance claims is difficult due to ________ .

(a) Trading warranties
(b) Nature of cargo
(c) Nature of clauses
(d) Nature of perils
(e) Limits of navigation
Correct Answer Nature of perils

Answer Explanation The nature of perils in hull insurance is such that investigation of most of the claims
presents difficulties. A total loss of an insured vessel may be engineered at times but,
even after most exhaustive investigation, proof of willful misconduct or fraud can
rarely be obtained.
QUESTIONS BASED ON

Question 57 AAA Insurance contracted with BBB Insurance an Excess of Loss Treaty reinsurance
agreement and the retention limit was set to Rs. 70 crores. Calculate the liability of
AAA Insurance and BBB Insurance if the policy losses were Rs. 100 crores in that year.
(a) AAA Insurance will bear the loss of Rs 70 crores and BBB Insurance will bear the loss
of Rs 30 crores
(b) AAA Insurance will bear the loss of Rs 30 crores and BBB Insurance will bear the loss
of Rs 70 crores
(c) BBB Insurance will bear the total loss of Rs 100 crores
(d) AAA Insurance will bear the total loss of Rs 100 crores
(e) Both will bear the loss equally i.e. Rs 50 crores each
Correct Answer AAA Insurance will bear the loss of Rs 70 crores and BBB Insurance will bear the loss
of Rs 30 crores
Answer Explanation The maximum amount of risk retained by an insurer is called retention. Beyond that,
the insurer cedes the excess risk to a reinsurer. The point beyond which the insurer
cedes the risk to the reinsurer is called retention limit.
In the above question, AAA Insurance set a retention limit of Rs. 70 crore, which
means losses up to Rs. 70 crores will be borne by them and any extra loss over Rs. 70
crore will be borne by the reinsurer - BBB insurance.
Question 58 Which warranties are not written on the policies but are deemed to be there?
(a) Assumed Warranties
(b) Subrogation Warranties
(c) Abandonment Warranties
(d) Implied Warranties
(e) Express Warranties
Correct Answer Implied Warranties

Answer Explanation The implied warranties are not written on the policies but are deemed to be there.
Under MIA, there are two implied warranties i.e., seaworthiness of the vessel at the
commencement of the voyage and legality of the adventure.
QUESTIONS BASED ON

Question 59 A person has sold his goods on FOB basis. In such a case, when does the risk pass on
from seller to the buyer?
(a) The risk passes when the goods reach their destination
(b) The risk passes before the start of transit
(c) The risk passes only after arrival of the ship at the destination port
(d) The risk passes after the receipt of shipping documents
(e) The risk passes on loading of the cargo on the overseas vessel
Correct Answer The risk passes on loading of the cargo on the overseas vessel
Answer Explanation In case of cargo sold on FOB terms of sale, the risk pass on from seller to the buyer
on loading of the cargo on the overseas vessel or the goods pass the ship’s rail.
Question 60 In case a declaration of value is not made until after notice of loss or arrival, the
policy must be treated as ________ .
(a) Valued Policy
(b) Unvalued Policy
(c) Floating Policy
(d) Carriers policy
(e) Alternate policy
Correct Answer Unvalued Policy

Answer Explanation In case a declaration of value is not made until after notice of loss or arrival, the
policy must be treated as unvalued policy as regards the subject matter of that
declaration. It will be the prime cost of the goods plus charges actually incurred.
QUESTIONS BASED ON

Question 61 Which types of vessels are invariably subject to the warranty that they are classed
and class maintained throughout the currency of the policy period?
(a) War ships
(b) Ocean going vessels
(c) Fishing vessels
(d) Dredgers
(e) Vessels which are 20 years old or more
Correct Answer Ocean going vessels

Answer Explanation Ocean going vessels are most likely to be subject to the warranty that the vessel is
classed and class maintained throughout the currency of the policy period.
Question 62 All fishing/Trawlers vessels shall contain the warranty that the vessel shall be _____
adequately at all times except when in harbor or in safe waters.
(a) Repaired
(b) Slowed down
(c) Marooned
(d) Manned
(e) Secured
Correct Answer Manned

Answer Explanation As per the Adverse Weather Warranty - All fishing/Trawlers vessels shall contain the
warranty that the vessel shall be manned adequately at all times except when in
harbor, sheltered/safe waters, where it should be secured properly and adequate
watch and ward maintained throughout the period it remains therein.
QUESTIONS BASED ON

Question 63 When does the period of insurance start for War Risks Cover?
(a) The War Risk Cover is attached to the goods only if there is a war between the
importing and exporting country
(b) The War Risk Cover is attached to the goods immediately when the goods are loaded
on the trucks from the exporter’s warehouses
(c) The War Risk Cover is attached to the goods only when they are loaded on the
overseas vessel
(d) The War Risk Cover is attached to the goods when the overseas vessel containing the
goods reaches the destination port
(e) The War Risk Cover is attached to the goods on the conclusion of the contract of
cargo policy
Correct Answer The War Risk Cover is attached to the goods only when they are loaded on the
overseas vessel
Answer Explanation War Cover will attach only when goods are loaded on the overseas vessel and it
ceases when goods are discharged from the overseas vessel.
Question 64 In a fire accident on a ship, some cargo was not destroyed by fire but was damaged
due to the water which was used to extinguish the fire. This is an example of -
(a) Contributory Loss
(b) General Average Loss
(c) Salvage Loss
(d) Constructive Total Loss
(e) Particular Average Loss
Correct Answer General Average Loss

Answer Explanation Cargo which was damaged by water used for extinguishing the fire is an example
of General Average. It includes port of refuge expenses. Once the amounts allowable
in general average have been identified the total is divided pro rata over the net
arrived value (including sacrifices) of the property at the end of the voyage. The
proportions attaching to ship and cargo are usually recoverable under their
respective insurance policies. Stranding and Shifting of cargo in heavy weather are
other examples of GA.
QUESTIONS BASED ON

Question 65 The maximum time limit prescribed under the Multimodal transportation of Goods
Act, 1993 for taking legal action against MTO is __________ .
(a) Within 12 (twelve) months of the date of delivery of the goods or the date when the
goods should have been delivered
(b) Within 3 (three) months of the date of delivery of the goods or the date when the
(c) Within 6 (six) months of the date of delivery of the goods or the date when the goods
should have been delivered
(d) Within 1 (one) month of the date of delivery of the goods or the date when the
(e) Within 9 (nine) months of the date of delivery of the goods or the date when the
Correct Answer Within 9 (nine) months of the date of delivery of the goods or the date when the
Answer Explanation The maximum time limit prescribed for taking legal action against MTO (Multimodal
Transport Operator) under the Multimodal transportation of Goods Act, 1993 is
within 9 months of the date of delivery of the goods or the date when the goods
should have been delivered.
QUESTIONS BASED ON

Question 66 When any ocean-going ship is involved in an accident and has sustained damage, it is
essential that the owners and / or their agents give prompt notice to the insurers.
Why should this notice be given?
(a) So that appropriate steps can be taken for reconditioning the cargo and forwarding it
to its destination
(b) For insurers to calculate and adjust the claim amount
(c) To enable the insurer to initiate the repairs by the repairer as appointed by the
insurer
(d) To enable the insurers to appoint a surveyor to attend the vessel and survey the
damage
(e) To enable the insurer to take steps to minimize the loss or damage to the cargo
Correct Answer To enable the insurers to appoint a surveyor to attend the vessel and survey the
damage
Answer Explanation The purpose of giving such notice is to enable the insurers or their agents to appoint
a surveyor to attend the vessel and survey the damage.
QUESTIONS BASED ON

Question 67 A voyage has not been abandoned and the cargo remains in the vessel after
termination of adventure at an intermediate port short of destination following
accident or mishap. In such a case, which of the following will hold true?
(a) In this case a duplicate insurance can be issued which would take on from this point
(b) In this case the insurance would cease within 60 days from the time the cargo is
discharged at such port of refuge
(c) In this case the cover would continue up to 30 days from the time the vessel takes
refuge
(d) In this case the insurance will continue irrespective of any termination of voyage
(e) In this case the insurance would cease from the time the cargo is discharged at such
port of refuge
Correct Answer In this case the insurance would cease within 60 days from the time the cargo is
discharged at such port of refuge
Answer Explanation In case a voyage is not abandonment and the cargo remain in the vessel after
termination of adventure at an intermediate port short of destination following
accident or mishap, the insurance would cease within 60 days from the time the
cargo is discharged at such port of refuge (on additional premium if required).
Question 68 Mahesh is shipping his goods for exports and the goods were contracted as CFR (Cost
& Freight). Till where is the responsibility of Mahesh with respect to the insurance of
these goods?
(a) Mahesh is responsible only up to the ship’s rail
(b) Mahesh is responsible from the destination port to the warehouse of the buyer
(c) Mahesh is responsible from ‘warehouse to warehouse’
(d) Mahesh is responsible from his warehouse till destination port
(e) Mahesh is responsible only during the time the ship is sailing in the sea
Correct Answer Mahesh is responsible only up to the ship’s rail

Answer Explanation In case of CFR, the responsibility of seller is from his warehouse till the loading of the
cargo in the ship till the goods pass the ship's rails.
QUESTIONS BASED ON

Question 69 Who establishes the standards, guidelines and rules for the design, construction and
survey of ships and of other marine structures?
(a) Ship Classification Societies
(b) Marine Classification Societies
(c) Institute of London Underwriters
(d) Vessel Classification Societies
(e) Flag of convenience
Correct Answer Ship Classification Societies

Answer Explanation The standards, guidelines and rules for the design, construction and survey of ships
and of other marine structures are established by Ship Classification Societies. The
classification certificate confirms that the ship has been built according to rules &
standards of relevant Classification Society.
Question 70 There was a spelling mistake in a cargo insurance policy and this was corrected by
hand. Identify which of these options is correct in this regard?
(a) Handwriting will take precedence over typed words
(b) Both typed and handwritten words will hold good
(c) Handwritten words will not be considered.
(d) This insurance contract will stand void at the option of insurer
(e) This insurance contract will stand void at the option of insured
Correct Answer Handwriting will take precedence over typed words

Answer Explanation Additional rules of interpretation/ construction are used to construe the terms of the
policy documents. It suggests that the handwriting takes precedence over typed or
impressed wording. E.g. Correction of spelling mistake, addition of BL No. etc.
QUESTIONS BASED ON

Question 71 ___________ is covered under Marine Cargo policies.

(a) Charterer’s Liabilities
(b) Crew members
(c) Passengers
(d) Goods and Merchandise
(e) Hull & Machinery
Correct Answer Goods and Merchandise

Answer Explanation Goods and merchandise are covered under marine cargo policies. Hull & Machinery,
Charterer’s Liabilities, Passengers and Crew members are not the subject matter of
cargo policies.
Question 72 A Hull Policy which is issued on a time basis cannot be issued for a longer period than
______.
(a) 1 month
(b) 3 months
(c) 6 months
(d) 12 months
(e) 15 months
Correct Answer 12 months

Answer Explanation Hull policies are issued either on time basis or voyage basis. As per Marine Insurance
Act 1963, a time basis cannot be issued for a period longer than 12 months.
QUESTIONS BASED ON

Question 73 The Principal of Utmost Good Faith can be described by which of the following
statement?
(a) In a cargo policy, the warranty of seaworthiness is applicable only when the exporter
is not aware about the un-seaworthiness of the ship at the time of the shipment
(b) In a cargo policy, there is an implied warranty that the goods which have been
insured have to be seaworthy
(c) In a cargo policy, there is never an implied warranty that the goods insured are
seaworthy
(d) Under the ICC - 1982, in a cargo policy, the benefit of relaxation of warranty of
seaworthiness of the ship is extended to the consignee also if he is not aware about
un-seaworthiness of the ship at the time of start of the voyage
(e) In a cargo policy, there is an implied warranty that at the start of the voyage, the ship
should be reasonably fit to carry the goods to the destination
Correct Answer Under the ICC - 1982, in a cargo policy, the benefit of relaxation of warranty of
seaworthiness of the ship is extended to the consignee also if he is not aware about
un-seaworthiness of the ship at the time of start of the voyage
Answer Explanation The principal of utmost good faith applies in a cargo policy, under the ICC – 1982, the
benefit of relaxation of warranty of seaworthiness of the ship is extended to the
consignee also if he is not aware about un-seaworthiness at the time of start of the
voyage/ shipment.
QUESTIONS BASED ON

Question 74 'Marine insurance policy is an Agreed Value Policy'. What does this statement imply?
(a) The insurers undertake to replace or reinstate cargo or vessels in the event of loss,
with full compensation
(b) The insurers do not undertake to replace or reinstate cargo or vessels in the event of
loss, they pay a sum of money, agreed in advance, that will provide reasonable
compensation
(c) The insurers do not undertake to replace or reinstate cargo or vessels in the event of
loss, and do not provide any compensation
(d) The insurers do not undertake to replace or reinstate cargo or vessels in the event of
loss, instead, they cancel the policy
Correct Answer The insurers do not undertake to replace or reinstate cargo or vessels in the event of
loss, they pay a sum of money, agreed in advance, that will provide reasonable
compensation
Answer Explanation A marine insurance policy is slightly different from other policies because it provides
for the indemnity to be 'in the manner and to the extent agreed' making it an Agreed
Value Policy.
Since the insurers do not undertake to replace or reinstate cargo or vessels in the
event of loss, they pay a sum of money, agreed in advance, that will provide
reasonable compensation.
QUESTIONS BASED ON

Question 75 In insurance of fishing vessels, all policies have to be subject to the warranty -
(a) Warranted vessel has to be equipped with twin screws and double bottom
(b) Warranted vessel is covered against Protection & Indemnity risks
(c) Warranted vessel has no default of loan payments to the bank
(d) Warranted vessel is structurally fit for its intended service
(e) Warranted vessel to comply with local laws and regulation with regard to
registration and licensing
Correct Answer Warranted vessel to comply with local laws and regulation with regard to
registration and licensing
Answer Explanation In insurance of fishing vessels, all policies have to be subject to the warranty -
"Warranted vessel to comply with local laws and regulation with regard to
registration and licensing."
Question 76 Where parts of the goods are totally lost, the amount payable under the insurance is
such proportion of the insured value as __________ .
(a) the written down value of the part lost, bears to the total cost of the whole
(b) the salvage value of the goods lost, bears to the cost of the part lost
(c) the market price of the part lost, bears to the market price of the whole
(d) the invoice value of the part lost, bears to the invoice value of the whole
(e) the insurable value of the part lost, bears to the insurable value of the whole
Correct Answer the insurable value of the part lost, bears to the insurable value of the whole
Answer Explanation If the parts of the goods in cargo are totally lost, then the amount payable under the
insurance will be in such proportion of the insured value as the insurable value of the
part lost, bears to the insurable value of the whole.
QUESTIONS BASED ON

Question 77 What is the 'Average loss' of the hull risk is also known as?
(a) GT
(b) DWT
(c) ALT
(d) C.T. L
(e) Ex TL
Correct Answer Ex TL
Answer Explanation The rating for hull insurance has two components i.e., rate for risk of Total Loss &
rate for risk of other than Total Loss (also known as Average Loss). The Average loss
element of the hull risk is also termed as Ex TL.
Question 78 What is an Endorsement?

(a) An Endorsement is a document that attaches during a voyage on the happening of a
contingency
(b) An Endorsement is a assurance by the assured to the underwriter that a certain state
of affairs does or does not exist
(c) An Endorsement is a memorandum attached to the policy document which records
alterations in the contract
(d) An Endorsement is the transfer of interests, rights, titles including liabilities in favour
of the insurers
(e) An Endorsement is the right by which an insurer is entitled to place himself in the
position of the insured
Correct Answer An Endorsement is a memorandum attached to the policy document which records
alterations in the contract
Answer Explanation An Endorsement is a memorandum attached to the policy document which records
alterations in the contract. The alteration can be effected only before the end of the
transit and before insurance ceases.
QUESTIONS BASED ON

Question 79 As per IRDA directives, the Indian insurers for marine hull have to follow the terms
and conditions as laid down in the _________ .
(a) Marine Hull Manual
(b) Institute Fishing Vessels Clauses
(c) IRDA Marine Insurance Clauses
(d) Marine Insurance Act 1963
(e) Shipping Corporation of India rules
Correct Answer Marine Hull Manual

Answer Explanation Unlike cargo insurance, Hull Manual is always used by the underwriters under
marine hull insurance. As per IRDA directives for hull insurance, the Indian insurers
have to follow T & C as laid down under the Manual, although the premium rates are
discretionary.
Question 80 Every contract of insurance is a contract of ‘Uberrimai Fidei’ which means ______.
(a) Indemnity
(b) Utmost Good faith
(c) Efficiency
(d) Loss and injury
(e) Legally enforceable contract
Correct Answer Utmost Good faith

Answer Explanation Every contract of insurance is a contract of ‘Uberrimai Fidei’ that is, one which
requires utmost good faith on the part of both, the insurer and the assured.
QUESTIONS BASED ON

Question 81 The goods which were in a ship is declared to be missing. This is an example of
_____.
(a) Salvage Total Loss
(b) General Average Loss
(c) Particular Average Loss
(d) Actual Total Loss
(e) Constructive Total Loss
Correct Answer Actual Total Loss

Answer Explanation Actual total loss of the subject matter is said to have occurred when the cargo which
was in ship is deemed/ declared to be missing. A missing ship may be presumed as
actual total loss after a lapse of reasonable time.
Question 82 What do the Institute Warranties specify?

(a) Registration warranty for fishing vessels
(b) Limitations on the navigational limits for the insured ship
(c) Classification requirements for the insured ship
(d) Lay-up requirements for the ship which is insured
(e) Insurance requirements for the insured ship
Correct Answer Classification requirements for the insured ship

Answer Explanation Institute warranties specify classification requirements for the insured ship with a
Classification Society which is a Member or Associate Member of International
Association of Classification Society or a National Flag Society.
QUESTIONS BASED ON

Question 83 Barges, floating cranes, pontoons, flats, launches are vessels which are employed in
canals, rivers or lakes and are known as _________ .
(a) Cruise vessels
(b) Sailing vessels
(c) Singleton vessels
(d) Inland vessels
(e) Passenger vessels
Correct Answer Inland vessels

Answer Explanation All the above types of vessels are known as Inland Vessels.
Question 84 ________ is the assembling of one or more packages or items into a compact load,
secured together and provided with skids for easy handling.
(a) Unitizing
(b) Bailing
(c) Palletizing
(d) Containerization
(e) Shipping
Correct Answer Unitizing

Answer Explanation Unitizing refers to the assembling of one or more packages or items into a compact
load, secured together and provided with skids for easy handling. This method has
various advantages in cargo transportation.
QUESTIONS BASED ON

Question 85 As per Indian practice, the insured is supposed to take insurance ______ .
(a) after the importer has placed an order with the exporter
(b) before the commencement of transit of goods
(c) once the sales invoice is prepared by the exporter
(d) during the transit of goods
(e) after the transit of goods
Correct Answer before the commencement of transit of goods

Answer Explanation Although the insurable interest must exist at the time of loss, but as per Indian
market practice the insured is supposed to take insurance cover before
commencement of transit and as such, this clause (insurable interest must exist at
the time of loss) is strictly not applicable to the Indian market.
Question 86 In case there is a damage to a container but it is not a total loss, then the claim
cannot exceed ________ .
(a) The total cost of such container
(b) The total value of such container
(c) The cost of the cargo inside the container
(d) The reasonable cost of repairing such container
(e) General Average value
Correct Answer The reasonable cost of repairing such container

Answer Explanation The claims for partial losses are settled on the basis of surveyor’s recommendations,
subject to being covered under the policy. However, claims for damage to a
container, if it is not a total loss, cannot exceed the reasonable cost of repairing such
damage.
QUESTIONS BASED ON

Question 87 The Principle of Subrogation is effectively expressed by which of the following

statement?
(a) Subrogation will apply when there is a loss in marine insurance policies
(b) In case the policies are contracts of indemnity then the right of Subrogation will not
apply
(c) Subrogation applies only at the time of concluding a contract of marine insurance
(d) Principle of Subrogation is to ensure that the assured shall not make profit out of a
loss in respect of which he has been indemnified by the insurers
(e) Principle of Subrogation is to ensure that the assured shall not make profit out of a
loss in respect of which he has not yet been indemnified by the insurers
Correct Answer Principle of Subrogation is to ensure that the assured shall not make profit out of a
loss in respect of which he has been indemnified by the insurers
Answer Explanation The purpose of subrogation is to ensure that the assured shall not make profit out of
a loss in respect of which he has been indemnified by the insurers by reimbursement,
either wholly or partly by another source, effectively conveys the principle of
subrogation.
Question 88 A person books a parcel through post but the parcel was found damaged. What
compensation will be received for this from the postal authorities?
(a) Rs. 10
(b) Rs. 25
(c) Rs. 50
(d) Rs. 100
(e) Rs. 200
Correct Answer Rs. 25

Answer Explanation The maximum liability of the postal authorities under the Indian Post Office Act
1898, in case of loss, short –delivery, delay or damage is limited to Rs 25 per package.
QUESTIONS BASED ON

Question 89 Mohan, an exporter from India, is shipping his cargo and plans to take marine
insurance. When is required to pay the premium as per Indian rules? ( Cover note is
not issued)
(a) The premium has to be paid in advance before commencement of transit
(b) The premium has to be paid when the goods reach the destination safely
(c) The premium has to be paid within 7 days of commencement of transit
(d) The premium has to be paid within 15 days of commencement of transit
(e) The premium has to be paid within 25 days of commencement of transit
Correct Answer The premium has to be paid in advance before commencement of transit
Answer Explanation As per Indian practice, Mohan required to pay the premium in advance before
commencement of transit.
Question 90 If the ship in which the goods are shipped is not seaworthy then in which of the
following situations will the assured get protection?
(a) Where the assured or their servants have no ownership in the vessel carrying the
goods insured
(b) Where the assured or their servants have been privy to such un-seaworthiness at the
time the goods insured is loaded on to the ship
(c) Where the assured or their servants have worked in good faith and did not have
prior knowledge regarding the seaworthiness of the vessel
(d) Where the subject matter of insurance is the cargo and not the vessel carrying it
(e) Where the assured or their servants have not checked with the shipping company,
the sea worthiness of the vessel
Correct Answer Where the assured or their servants have worked in good faith and did not have
prior knowledge regarding the seaworthiness of the vessel
Answer Explanation In case where the assured or their servants have worked in good faith and did not
have prior knowledge regarding the seaworthiness of the vessel, the assured get
protection for the un-seaworthiness of the vessel in which the goods are being
shipped.
QUESTIONS BASED ON

Question 91 Initially, who is responsible to pay the survey fees for the marine claims insurance
surveys?
(a) The Underwriters
(b) The Carriers and Bailees
(c) The Insurer
(d) The Claim settlement agent
(e) The Claimant
Correct Answer The Claimant

Answer Explanation Claimant is initially responsible to pay the survey fees for the marine claims
insurance surveys & if the claim is admissible, it will be reimbursed. Marine
underwriters are liable for such extra charges or survey fees, if the claim is
admissible.
Question 92 The hull risk is divided into two components to calculate the rate of premium to be
charged. Which are these two components?
(a) Accidental Partial Loss and Total Loss
(b) Dead weight tonnage and Gross register tonnage
(c) General Average Contributions and Collision Liabilities
(d) Combined loss and Resultant loss
(e) Total loss and Average loss
Correct Answer Total loss and Average loss

Answer Explanation The rating for hull insurance has two components i.e. Rate for risk of 'Total Loss' &
Rate for risk of 'Other than Total Loss' (also known as Average Loss). The Average
loss element of the hull risk is also termed as 'Ex TL'.
QUESTIONS BASED ON

Question 93 Mr. A has sold some goods to Mr. B and sends these goods on CIF (Cost, Insurance
and Freight) basis. In this trade, who will arrange for the insurance cover?
(a) Mr. A has to arrange the insurance up to destination
(b) Mr. A has to arrange the insurance up to placing goods on board of the steamer
(c) It’s the responsibility of Mr. B after the goods are placed on board of the steamer
(d) Mr. B has to arrange the insurance up to placing goods on board of the steamer
(e) Mr. B has to arrange the insurance up to destination
Correct Answer Mr. A has to arrange the insurance up to destination

Answer Explanation When the sale is governed on CIF (Cost, Insurance and Freight) basis, the seller (Mr.
A) is responsible for arranging insurance up to destination.
Question 94 In the absence of an inquiry, _______ need not be disclosed to the insured by the
insurer.
(a) Total value of insurance
(b) Insurance Duration
(c) Facts of common knowledge
(d) Compensation amount
(e) Premium amount
Correct Answer Facts of common knowledge

Answer Explanation Under the principle of utmost good faith, the insured or his agent is bound to
disclose all material facts to the insurers. However, in the absence of an enquiry, the
insured is not obliged to disclose the facts of common knowledge like riots in the city
etc.
QUESTIONS BASED ON

Question 95 As per the Sue and Labor clause, who should take all practical steps to avert or
minimize the loss or damage?
(a) The Insurer
(b) The Assured and his agents
(c) The passengers in the ship
(d) The Underwriter
(e) The Crew members
Correct Answer The Assured and his agents

Answer Explanation According to sue and labor clause, it is the duty of the assured and his agents to take
such measures as may be reasonable for the purpose of averting or minimizing a loss.
The ICC clause contains the Duty of Assured Clause (clause 16).
Question 96 __________ is an incidental clause of cargo insurance contracts.

(a) Pair and Set Clause
(b) Registered Mail and Postal sending by Air
(c) Institute Cargo Clauses (Air)
(d) Institute War Clauses (Cargo)
(e) Termination of transit (Terrorism) clause
Correct Answer Pair and Set Clause

Answer Explanation Pair and set clause is an incidental clause of cargo insurance contracts. Under this
clause, the liability of insurer is limited to the value of any particular part or parts
which may be lost or damaged.
Other incidental clauses are Institute Replacement Clause, Second had Replacement
Clause, Cutting Clause etc.
QUESTIONS BASED ON

Question 97 The premium for an open policy worked out on the basis of _________ .
(a) Country of import
(b) Total sum insured
(c) Value of the goods
(d) Total number of shipments
(e) Total Value of the shipments
Correct Answer Total sum insured

Answer Explanation Under an open policy, the premium is worked out and charged on the basis of total
sum insured. It is also known as floating policy & is issued for goods dispatched
within the country.
Question 98 In the initial stages, an underwriter assesses the risk of a venture on the basis of
____.
(a) information provided by the insurance company
(b) information provided on the marine cover note
(c) information given in the Bill of Lading
(d) information given in the Declaration Form
(e) the information given in Lloyds Survey Handbook
Correct Answer information given in the Declaration Form

Answer Explanation In the initial stages, an underwriter assesses the risk of a venture on the basis of the
information given in the Declaration Form, which is to be completed & signed by the
proposer. When a proposal results in a policy, the details in declaration form are
incorporated in the policy document.
QUESTIONS BASED ON

Question 99 Suraj has entered into a contract to import goods by sea on CIF basis. Which of the
following statements is CORRECT regarding this arrangement?
(a) The cost of goods includes insurance and the seller has to arrange for transit
insurance up to an agreed place
(b) In CIF pricing, customs authorities may add some amount as insurance premium
when the goods reach Suraj
(c) The price of the goods does not include an element of insurance
(d) Suraj has to pay an extra amount for the insurance charges, apart from price of the
goods
(e) Suraj will have to pay higher customs duty and may not get insurance protection
Correct Answer Suraj has to pay an extra amount for the insurance charges, apart from price of the
goods
Answer Explanation If Suraj needs to pay CIF price to the seller, he has to pay for insurance cost also. The
distinguishing feature of the Cost Insurance & Freight (CIF) option which makes it
different from the Cost & Freight (CFR) option is that CIF value is inclusive of the
insurance premium.
QUESTIONS BASED ON

Question 100 Which of the below is the correct statement with respect to Warranty of Sea
worthiness?
(a) If the cargo is sent by an unseaworthy vessel, then as per warranty of sea
worthiness, the insurer is not liable
(b) If the cargo is sent by an unseaworthy vessel, then as per warranty of sea
worthiness, the insurer is fully liable
(c) The worth / cost of the object must be determined at the time of insurance as per
the warranty of sea worthiness
(d) The warranty of sea worthiness cannot be changed as it will be against the principles
of public policy
(e) The provisions of the warranty of sea worthiness were amended and relaxed under
the 2009 Institute Cargo Clauses
Correct Answer The provisions of the warranty of sea worthiness were amended and relaxed under
the 2009 Institute Cargo Clauses
Answer Explanation The provisions of the warranty of sea worthiness were amended and relaxed under
the 2009 Institute Cargo Clauses, which give the benefit of relaxation to consignee
also if he is not aware about the un-seaworthiness.
QUESTIONS BASED ON

Your feedback is valuable to us. Please write to us at

info@TEXT.in
ALL THE BEST FOR YOUR EXAMS!

Ic s01 Marine Cargo and Hull Insurance

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Ic s01 Marine Cargo and Hull Insurance

Uploaded by

Copyright:

Available Formats

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

WWW.TEXT.IN AND SURVEY AND LOSS ASSESSMENT

WE WISH YOU ALL THE BEST!

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

QUESTIONS BASED ON ‘MARINE CARGO AND HULL INSURANCE’

Question 1 Clause B of Inland Transit Clauses (Rail or Road) relates to ______ .

Correct Answer Cover for Basic Risks

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

Correct Answer 1. Open cover is automatic and continuous

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

Correct Answer Ship classification societies

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

Correct Answer Loading of premium

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

Question 7 What is the advantage of Specific Voyage Policy?

Correct Answer usually declined by the insurer in writing

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

Correct Answer Rs. 400000

Correct Answer Super Tankers

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

Correct Answer In an open cover, there is a specific sum insured

Correct Answer Rs. 20,000

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

Correct Answer Collecting Bank

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

Correct Answer Grains

(a) General Average

Correct Answer Jettison

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

Correct Answer Comprehensive Clause

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

Question 19 Which are the two types of excess of loss covers?

Correct Answer Working covers and Catastrophe covers

(a) Documentary Credit

Correct Answer Open Account

Open Account method of payment offers no protection in case of non-payment to

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

Correct Answer Proposal will be declined by the insurer

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

Question 29 Identify the CORRECT statement with respect Double Insurance.

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

Correct Answer Merchant Shipping Act 1958

Correct Answer At the time of delivery

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

Question 32 Generally an Open Policy is issued for a period of ____ .

Correct Answer twelve months

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

Correct Answer Quota share reinsurance

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

Correct Answer apportionable

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

Correct Answer Shutout Cargo

Correct Answer Ex TL rate

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

IC S01 – PRINCIPLES AND PRACTICE OF INSURANCE

Correct Answer Intermodal Transport