Skip to content

NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Basics of Insurance

Ms. Neha Kulkarni has a motor own-damage policy and her car suffers an accident. Her insurer pays a claim, but Neha later discovers she also holds a second policy covering the same car and loss. Under the principle of contribution, which statement is correct?

Under contribution, when several policies cover the same risk and interest, the insurers share the loss rateably so the insured is compensated only up to the actual loss. She cannot profit by collecting the full amount from both insurers, which would defeat the principle of indemnity.

  1. AShe may claim the full loss from each insurer and keep both payments
  2. BInsurers share the loss among themselves so that she is not compensated more than her actual lossCorrect
  3. COnly the insurer whose policy was issued later is liable
  4. DThe second policy becomes void and premium is forfeited automatically

Explanation

Contribution applies where more than one policy covers the same risk and interest; the insurers share the burden rateably so the insured recovers no more than the actual loss. Keeping both payments would breach indemnity. Contribution does not make the second policy void or depend on issue date.

Did you get it right without looking?

One question tells you little. A timed set on Basics of Insurance shows your real accuracy, how long you take and where you lose marks.

Practise Basics of InsuranceFree diagnostic mock

More Basics of Insurance questions