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Self-test answers vii
Chapter 7 self-test answers
1. Financial compensation sufficient to place the policyholder in the same financial position after a
loss as they enjoyed immediately before the loss occurred.
2. Because it is impossible to place a price on the loss of a limb or sight. Fixed benefits are, therefore,
chosen since the policyholder cannot be put in the same ‘financial’ position as before the loss.
3. The insurers have the choice.
4. The options are:
• cash payment;
• repair;
• replacement; and
• reinstatement.
5. Motor vehicle damage.
6. The overriding factor is that the policyholder can never recover more than the maximum stated in the
policy.
7. Because the ‘first loss’ sum chosen is often closely linked to the insurer’s assessment of a
maximum likely loss, so there is no great effective reduction in risk when issuing a ‘first loss’ policy.
8. Agreed value properties are issued where the true value of an item could be a matter of dispute. Reference copy for CII Face to Face Training
