Skip to content

NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Non-Life Insurance Products

In a standard fire and special perils policy issued in India, which of the following is a basic feature regarding the sum insured of a building?

The sum insured should reflect the chosen valuation basis of the property. If it is lower than the true value, the average clause reduces the claim proportionately, because fire insurance is a contract of indemnity and not a source of profit.

  1. AThe sum insured should reflect the reinstatement or market value basis chosen, and underinsurance can lead to a proportionate reduction of the claimCorrect
  2. BThe insurer always pays the full loss regardless of the sum insured
  3. CThe sum insured is fixed by the insurer without reference to the property value
  4. DThe sum insured is irrelevant because premium is charged on turnover

Explanation

Property policies work on the principle of indemnity and carry an average (underinsurance) clause. If the sum insured is lower than the value of the property, the claim is scaled down proportionately. The other options ignore this principle.

Did you get it right without looking?

One question tells you little. A timed set on Non-Life Insurance Products shows your real accuracy, how long you take and where you lose marks.

Practise Non-Life Insurance ProductsFree diagnostic mock

More Non-Life Insurance Products questions