TRIP Insurance Principles and Coverages 1 — Questions and Answers
Question 1: What is the principle of indemnity in insurance?
- To reward the policyholder
- To create investment opportunities
- To restore the insured to their pre-loss position (Correct answer)
- To pay dividends
Correct answer: To restore the insured to their pre-loss position
The principle of indemnity ensures that the insured is restored to their original financial position without profit from a loss.
Question 2: Which type of insurance covers bodily injury and property damage caused by a vehicle?
- Cargo insurance
- Property insurance
- Auto liability insurance (Correct answer)
- Fleet maintenance coverage
Correct answer: Auto liability insurance
Auto liability insurance protects against claims for bodily injury or property damage resulting from vehicle operation.
Question 3: What is subrogation in the context of insurance?
- Sharing premiums
- Insurer takes legal action against a third party (Correct answer)
- Exempting deductibles
- Cancelling the policy
Correct answer: Insurer takes legal action against a third party
Subrogation allows insurers to recover costs from a third party that caused the insured's loss after a claim has been paid.
Question 4: Which insurance principle requires full disclosure of all material facts?
- Insurable interest
- Contribution
- Utmost good faith (Correct answer)
- Waiver and estoppel
Correct answer: Utmost good faith
Utmost good faith is the principle that both parties must act honestly and disclose relevant information when entering an insurance contract.
Question 5: What is typically covered under motor truck cargo insurance?
- Driver injury claims
- Loss or damage to transported goods (Correct answer)
- Property damage to terminals
- Fuel surcharge expenses
Correct answer: Loss or damage to transported goods
Motor truck cargo insurance provides protection for goods being transported in case of theft, damage, or loss.
Question 6: What is a deductible in an insurance policy?
- The insurance premium
- A co-payment percentage
- The out-of-pocket amount before coverage (Correct answer)
- A type of claim form
Correct answer: The out-of-pocket amount before coverage
A deductible is the amount the policyholder must pay out-of-pocket before insurance coverage begins.
TRIP Insurance Principles and Coverages 1
What is the principle of indemnity in insurance?