Insurance and Machinery Breakdown Policy

INDEX

DIFFICULTY PAGES

LEVEL 1 2 – 31

LEVEL 2 32 - 47

LEVEL 3 48 – 54

DIFFICULTY LEVEL 1 (Part A)

1) The sum insured under the Deppt of Engg Insurance is stipulated as under. a) Market value b) Depreciated value c) Replacement value d) Present replacement value of equivalent new property in operational policies. Ans. d) Present replacement value of equivalent new property in operational policies.

2) What is the normal period of insurance in deptt of Engg Insurance. a) These are annual policies. b) In all policies period is either 12 months or more. c) Period is either 12 months or less. d) In operational policies period is 12 months whereas in policies for projects it may be higher or lower. Ans. d) In operational policies period is 12 months whereas in policies for projects it may be higher or lower.

3) What is the sum insured in storage cum erection and contractor all risk policies. a) Market Value b) Depreciated value c) Estimated value on completion of erection and / or construction d) Total purchase value as estimated.

Ans. c) Estimated value on completion of erection and / or construction

4) What is difference between MB and EEI policies. a) Both are operational policies. b) EEI policy does not cover sabotage and terrorism which is covered under MB policy c) MB policy does not cover fire and allied perils which are covered under EEI policy. d) MB policy can be extended to cover all perils covered under EEI policy.

Ans. c) MB policy does not cover fire and allied perils which are covered under EEI policy

5) Terrorism cover is available for the policies a) MB EEI CPM b) DOS CAR SCE c) SCE MB-LOP CPM d) CAR SCE CPM EEI Ans. d) CAR SCE CPM EEI

6) What is the position of coverage of profit under Engg Ins policies. a) Available under project ins policies b) Available under operational policies. c) Available under all policies. d) Profit cannot normally be covered but overheads can be covered.

Ans. d) Profit cannot normally be covered but overheads can be covered.

7) What is the purpose of CPI Policy under Engg Ins a) It is designed for insurance of equipment of projects b) It is meant for projects-both for equipment as well as civil works. c) It is a tailor made operational cover. d) It is suitable for both project ins as well as operational covers

Ans. b) It is meant for projects-both for equipment as well as civil works.

8) What is difference between normal cover and cover on first loss basis. In Engg Ins a) No significant difference b) First loss is normally available for additional covers only c) Additional covers can be on normal basis as well as where no under insurance is applicable. d) The normal covers mostly are subject to under insurance whereas in additional covers there is no under insurance. e) Covers on first loss basis may or may not subject to under insurance.

Ans. d) The normal covers mostly are subject to under insurance whereas in additional covers there is no under insurance. 9) What is duration of actual testing period in erection policy a) What ever is stipulated in the schedule of the policy b) The schedule of policy specifies maximum period. c) The actual testing period is period commencing from the start of testing and continues till a reasonable level of load is achieved with satisfactory performance or handing over to principle which ever is earlier subject to maximum specified d) The actual testing period is period commencing from the start of testing and continues till a reasonable level of load is achieved with satisfactory performance or handing over to the principal

Ans. c) The actual testing period is period commencing from the start of testing and continues till a reasonable level of load is achieved with satisfactory performance or handing over to principle which ever is earlier subject to maximum specified

10) What is the purpose of excess in engg policies a) To reduce premium b) It is a deterrent to client to maintain his property in order c) It is way to reduce burden of small claims for insurance co d) All the aforesaid factors

Ans. d) All the aforesaid factors

11) The control panel of a machine is damaged due to short circuit and engulf a part of building in fire How to handle claim a) Fire policy b) MB policy c) Control panel under MB policy and consequential fire loss under fire policy. d) Fire policy does not cover consequential losses so only control panel is payable under MB Ans. c) Control panel under MB policy and consequential fire loss under fire policy

12) Which policies of Engg deptt cover incidental transit losses at the site a) MB EEI CPM b) SCE CAR CPI c) Both A and B d) None of above

Ans. b) SCE CAR CPI 13) What is the best way to cover a large project which comprises of both machinery and civil works. a) CPI Policy b) SCE policy since it can cover both machinery and civil works. c) CAR policy and SCE policy d) None of the above

Ans. a) CPI Policy

14) A sophisticated capstain lathe machine has to be covered along with large electronic control panel for operational cover of breakdown, how to handle. a) EEI policy b) MB policy c) None of above d) Main machine under MB policy and control panel under EEI policy

Ans. d) Main machine under MB policy and control panel under EEI policy

15) Which is not correct? a) Deterioration of Stock Policy covers stocks of fish, frog legs, fruits, provisions & diary products stored in Cold Storage. b) Bill of Lading in an important document for claims under Inland Transit (Rail) Policies c) The market value of cattle varies from breed to breed d) The group cover of Hut Insurance is given to State Governments only provided all huts of states in rural/semi rural areas are covered.

Ans. B) Bill of Lading In an important document for claims under Inland Transit (Rail) Policies.

16) Which one of the following is not the common general exclusion under engineering policy a. Willful negligence of the insured b. Cessation of work c. Cost of clearance and removal of debris d. War and nuclear risks

Ans. C) Cost of clearance and removal of debris.

REASON: It is covered under the policy.

17) PML means a. Probable maximum loss b. Probable minimum loss c. Possible minimum loss d. Probable maximum loss

Ans. a) Probable maximum loss.

Reason: It is applicable to both engineering and fire claims. It is considered for rating and reinsurance purpose.

18) The property of the Insured in the workshop is likely to be damaged by the impact of Fork Lift. Can it be covered under fire policy. a) it cannot be covered under fire policy. b) it can be covered under CPM policy. c) it is covered under fire policy with rail/road vehicle clause. d) none of the above

Ans. c) it is covered under fire policy with rail/road vehicle clause.

Reason: - It is covered under insured own rail/ road vehicle clause which is add on cover under fire policy.

19) What is the difference between the Escalation Clause under Fire Policy and MB policy. a. there is no difference. b. under fire policy the limit is 25% and under MB policy it is 50%. c. None of the above.

Ans.a) there is no difference.

Reason: -It is same under both the policy. There is no difference.

20) Which one of the following is a mega risk. a) A petroleum refinery with sum insured Rs 3000 cr b) An organisation having 25 different location with overall SI of Rs 2500 cr c) A power plant with sum insured Rs 2000 cr d) A fertilizer plant with SI of Rs 600 cr

Ans. a) An organisation having 25 different location with overall SI of Rs 2500 cr

Reason: Minimum amount as per IRDA is Rs. 2500 cr. for manufacturing companies and not simply having SI of Rs. 2500 cr.

21) A large industry in operation is to be covered but its Start Up Expenses are very high. Which is or are the most suitable policy /policies. a) fire policy b) MB policy c) Fire and MB policy d) Mega policy or Industrial all risk policy

Ans d) Mega policy or Industrial all risk policy

Reason: Fire policy can be extended to include start up expenses but this additional cover is not available under MB policy.

22) Large manufacturing unit having sum insured of 4000.00 crores wants to cover one part of the plant under mega risk upto Rs. 2500.00 crores and the second part under normal contractor’s plant and machinery insurance for Rs. 1500.00 crores. a) It is possible to take two different insurance policies separately. b) They will have to take single mega insurance policy for Rs. 4000.00 crores. c) They need not to contact IRDA for separate insurance policy. d) None of above.

Ans. B. They will have to take single mega insurance policy for Rs. 4000.00 crores.

Reason: -As per mega risk policy circular, it is not possible to treat one part of risk as mega risk and another part under applicable tariff.

23) Which is correct? Statement A: Boiler & Pressure Plant Policy is extended to cover loss or damage to the surrounding property of the insured. Statement B: There is no obligation on the part of the Insurer to issue Renewal Notice in advance. a)Neither, b) Only A, c) Only B, d) Both

Ans. D) Both.

24) Excess is not applicable is case of a) EAR policy b) EEI policy c) Boiler & pressure plant policy d) MBD policy

Ans. C) Boiler & pressure plant policy.

25) Boiler and Pressure Plant Policy covers a. Explosion of boiler b. Implosion of boiler c. Surrounding Property d. All of above

Ans. All of above

Reason: First two covers are inbuilt in policy and surround property is available as add on cover.

26) Sum insured of Boiler and Pressure Plant should be on the basis of ______ a. Purchase cost b. Depreciated value c. Present day new replacement value d. Agreed value

Ans. c. Present day new replacement value

Reason: It is requirement under BPP policy that sum insured is present day new replacement value. BPP insurance policy cannot be issued on agreed value basis. Escalation benefit shall not be allowed under BPP policy.

27) Under Boiler and Pressure Plant policy upon notification to the company under this general condition the insured may carry out the repair or replacement of any minor damage not exceeding _____ rupees. a) 1000 b) 2500 c) 5000 d) 10,000

Ans. b. 2500

28) Under Boiler and Pressure Plant policy value of boiler and / or pressure plant older than __ years must be indicated separately. a) 10 b) 15 c) 20 d) 25

Ans. c. 20

29) Facility of installment premium is available for project policies if the project periods exceeds 1. 12 months 2. 15 months 3. 18 months 4. 24 months

Ans. 1. 12 months.

30) How many types of EXCESS are available in long term project policies a. Three b. Four c. Five d. Six

Ans. b. Four

Reason: First excess is for normal claims, second excess is for testing period, third excess is for AOG, and fourth excess is for fire and explosion.

31) Which of the following is not an add on cover under a project policy a) Surrounding property b) Third party liability c) Off site storage and fabrication d) Debris of uninsured property

Ans. D) Debris of uninsured property.

Reason: ABC are available as add on cover

32) Project Policies are a) All risk b) Named Perils c) Consequential Loss d) Agreed Value

Ans. A) All risk.

Reason: The covers are very wide.

33) Which of the following statement is true?

Statement A: Rack structure collapse should not be covered under dos policy.
Statement B: Explosion risk in the equipments should not be covered under dos policy.

a) Neither, b) Only A, c) Only B, d) Both

Ans. d) Both are correct.

Reason: Rack structure collapse is not a machinery breakdown hence should not be covered under dos policy. Explosion risk should be covered under fire policy.

34) In DOS potato policy compulsory deductible franchise (excess) in each & every stock deterioration policy both new and old storage shall be as under:- In respect of those cold storage which have opted for foes extension – 20% of the claim amount subject to minimum of Rs. ____. a) Rs. 10,000 b) Rs. 20,000 c) Rs. 25,000 d) Rs. 50,000

Ans. B. Rs. 20,000

35) In dos potato policy if a claim is made and rejected and no action or suit is commenced within ____ months of such rejection then all benefit under this policy shall be forfeited. a) 3 months b) 6 months c) 9 months d) 12 months

Ans. A. 3 months

Reason: Under fire policy this period is 12 months. However this is in contradiction to right under contract act where time barring period is 3 years.

36) What is the position of coverage of testing period in SCE policy? a) It is already covered for one month. b) It is not covered so has to be included by paying extra premium. c) None of above is true. d) Mostly it cannot be covered.

Ans. It is already covered for one month. 37) The SCE policy is in the joint names of the principal and contractors. The claim lodged by principal includes profit of a contractor. Is profit of contractor clamed by principal is payable. a) Not payable b) It would have been payable if the claim had been lodged by the contractor. c) It is payable. d) It is payable but up to a reasonable percentage only. 38) What can be covered under Erection all risk policy. a) Any type of machinery for operational risks b) Any type of existing property c) Only civil works d) Mainly machinery and equipment but can be extended to cover civil works for erection/construction.

Ans. d) Mainly machinery and equipment but can be extended to cover civil works for erection/construction.

39) Under erection all risk (ear) policy loss due to short circuit is not covered

A. Yes covered under ear policy B. Not covered under ear policy C. Covered under contractor’s all risk (car) policy D. Not covered under contractor’s all risk (car) policy

Ans. A. Yes covered under ear

Reason: Under EAR policy loss due to short circuit, explosion, tearing apart on account of centrifugal forces are covered.

40) Under Erection All Risk (EAR) policy loss due to theft and burglary is covered or not A. Yes covered under EAR policy B. Not covered under EAR policy C. Covered under fire policy D. Not covered under fire policy

Ans. A. Yes covered under EAR policy

REASON: Under ear policy loss due to theft and burglary are covered. One need not to take separate policy for different risk of fire, burglary etc.

41) Following is not an annual policy a. MI b. B.P.P c. EAR d. EEI

Ans. C. EAR.

Reason: Erection All Risk Policy is connected to the project implementation life and not an annual policy.

42) In which of the following, testing is an inbuilt cover a) CAR b) CECR c) EAR d) MBD Ans. C) EAR.

Reason: In Erection All Risk policy testing is inbuilt cover.

43) Engineering policy issued during construction phase is A. Machinery Insurance Policy B. Boiler and Pressure Plant Policy C. Erection All risk Policy D. Contractors’ Plant, Machinery and Equipment Policy

Ans. C) Erection All risk Policy.

Reason: Machinery breakdown and the boiler and pressure plant policy are meant for covering operational risk. Contractors plant and machinery and equipment policy can be issued during constructional as well as operational phase.

44) The adjustment of sum insured in EAR (Erection all risk) policy is not done in respect of a. freight and handling charges b. custom duties c. cost of erection d. increase or decrease in cost of plant and machinery

Ans. D) Increase or decrease in cost of plant and machinery.

Reason: The adjustment is done only in case of variable charges.

45) It is advisable to cover permanent and temporary works including liability and all material at a contract work site under: a) Standard Fire Policy b) Machinery Insurance c) BPP Policy d) EAR Policy

Ans. D) EAR Policy.

REASON:- Engineering all risk can cover permanent and temporary works including liability and all material at a contract work site.

46) Under EAR Policy “Cold Testing” means a. Plant is situated at cold place b. Checking of parts under cold condition c. Testing of parts under “No Load” condition d. Testing of parts under full load conditions

Ans. C) Testing of parts under “No Load” condition.

REASON: Independent testing of various units / assemblies without any load is called cold testing.

47) “Hot Testing” under EAR policy means a. Plant is situated at hot place b. Checking of parts under hot condition c. Testing of parts under full or partial load d. Testing of parts under full load conditions

Ans. D) Testing of parts under full load conditions.

REASON: It is similar to trial run with load and whole plant is run simultaneously. 48) Which one of the following is not operational cover under Engineering Insurance a) Boiler Insurance b) Machinery Breakdown Insurance c) Storage-cum Erection Insurance d) Electronic Equipment Insurance

Ans. C) Storage-cum Erection Insurance.

Reason: Storage-cum Erection Insurance policy is meant for projects under erection.

49) Loss due to fault in erection in EAR policy under section I for material damage is covered or not? a) It is excluded under exclusion to the policy. b) It is covered under exclusion to the policy. c) It can be covered as add on cover. d) All of above.

Ans. A. It is excluded under exclusion to the policy.

Reason: - Loss due to faulty design, defective material or bad workmanship other than fault in Erection are covered under exclusion to section I for material damage. As such fault in erection is covered in the policy since excluded under exclusion.

50) Average clause is applicable under section 1 for material damage or not in ear policy? a) No, average clause is not applicable. b) Average clause is applicable

Ans. B. Average clause is applicable

Reason: Sum insured has to be not less than completely erected value of property inclusive of freight, custom duty, erection cost, change in value due to fluctuation of material or wages. Otherwise average clause will be applicable. 51) Under a contractor all risk policy issued for construction of a road project, is to be extended for a further period a. Can be done only for the full sum insured b. Can be extended for the balance sum insured excluding the completed portion which is not put into service c. Cannot be extended d. Can be extended for value of remaining project completion + 50% of s.i. for the completed portion

Ans. B) Can be extended for the balance sum insured excluding the completed portion which is not put into service.

Reason: The completed portion cannot affect the ongoing balance portion of the construction of a road project.

52) Loss of profit covers a. Third Party claim b. Loss of goodwill c. Loss of Gross Profit d. Fines and penalties payable for delayed fulfillment or cancellation of sales/service contract

Ans. C) Loss of Gross Profit.

53) The basic rate under Fire LOP policy is based on 1. The average rate of the process blocks under the Fire policy 2. The average rate of all blocks under Fire policy 3. A separate rate for selected block as per FLOP tariff 4. None of the above

Ans. 1. The average rate of the process blocks under the Fire policy.

Reason: It shall not be less than 1.25 times of the average rate of all the process blocks.

54) In Fire LOP policy, indemnity period means a) Specified policy period b) Specified interruption period opted c) Specified reinstatement period d) None of the above

Ans. B) Specified interruption period opted.

55) Fire loss of Profit Policy covers a. Net profit + Standing Charges b. Gross Profit – Variable charges c. Net profit + Variable charges d. Cross profit + variable charges

Ans. A) Net profit + Standing Charges.

Reason: Gross profit = Standing charges + Net profit. Under LOP policy gross profit is covered.

56) In an LOP policy, Auditor fees is a. an extension b. a built-in cover c. a part of Standing charges d. not to be covered

Ans. A) An extension.

Reason: Gross profit is always sum insured and in addition to it extension is available for auditor fees to be included.

57) Fire at Supplier’s Premises can be a part of a. A Material Damage Fire Policy b. An LOP policy c. Is a stand alone policy d. Has no relevance

Ans. B) An LOP policy.

Reason: This is a add on peril for LOP policy. 58) In fire (CL) policy “increase in cost of working” a. Deemed to be covered with the relevance to reduction in turnover avoided and rate of gross profit and with additional premium. b. Deemed to be covered with relevance to reduction in turnover and without additional premium. c. Deemed to be covered without relevance to reduction in turnover avoided and with additional premium. d. Deemed to be covered without relevance to reduction in turnover avoided without additional premium.

Ans. In case of consequential loss policy, Deemed to be covered with relevance to reduction in turnover and without additional premium.

Reason: The purpose of increased cost of working is to either avoid or reduced the reduction in turnover. Since it is inbuilt facility so there is no additional premium.

59) Which of the following is not a standing charge for LOP / ALOP a) Insurance premium b) Advertisement & publicity c) Rent and Tenants d) Raw material cost

Ans. D) Raw material cost.

REASON: Raw material cost IS VARIABLE COST.

60) Consequential Loss Policy- Annual Turnover Rs. 16 lacs Variable expenses Rs.10 lacs Standing charges Rs. 5 lacs Net Profit Rs. 1 lac The gross profit would be a) Rs.16 lacs b) Rs.10 lacs c) Boilers d) Rs. 6 lacs

Ans. D) Rs. 6 lacs.

REASON: Annual Turnover Rs. 16 lacs - Variable expenses Rs.10 = RS. 6.00 LACS 61) The FLOP policy covers 1. Loss of profit due to reduction in turnover during indemnity period 2. Loss of profit during the financial year 3. Loss of turnover due to fire 4. None of the above

Ans. 1. Loss of profit due to reduction in turnover during indemnity period.

62) The gross profit insured under FLOP policy would cover 1. Net profit 2. Standing charges 3. Both the above 4. None of the above

Ans. 3. Both the above.

Justification : Net Profit + Standing Charges is Gross Profit.

63) Difference between ALOP and LOP a) Both are almost same b) Both are exactly same except that ALOP is for projects and LOP for operations c) LOP covers loss of profit of operational policies whereas ALOP covers anticipated gross profit due to delay in execution of projects.---

Ans. c) LOP covers loss of profit of operational policies whereas ALOP covers anticipated gross profit due to delay in execution of projects.---

64) Under advanced loss of profit policy annual turnover means a) Turnover during last 12 months b) Current financial year turnover c) Turnover during 12 months after planned date of completion of insured works.

Ans. c. Turnover during 12 months after planned date of completion of insured works.

DIFFICULTY LEVEL 1 (Part B)

65) Insured had taken EAR/SCE policy at a much later date than arrival of first consignment at the site of Erection. How SCE rate is to be computed? a) From the date of coverage. b) From the date of arrival of first consignment at the site c) From the date of testing of first equipment at the site. d) From the date of first storage or erection.

Ans:- b. From the date of arrival of first consignment at the site

Reason: - In all such cases irrespective of date of commencement of insurance, the SCE rate has to be computed for the total period commencing from the date of arrival of the first consignment at the site of loss.

66) Volume discount under EAR/SCE policy can be given: - a) No volume discount for projects upto Rs. 100 crores. b) Volume discount can be given for project above 100 crores and upto 1500 crores. c) Volume discount will not be applicable in case of fabricator’s premises extension. d) All of above

Ans. D. All of above

67) Under EAR/SCE policy, if the period is shorter than the period as indicated in the schedule. How much refund of premium shall be allowed. a) Pro rata basis. b) 50% of pro rata c) No refund.

Ans. C. No refund.

68) On other words ear policy is also known as a) CAR policy b) MB policy c) SCE policy d) None of the above

Ans: - c) SCE policy

Reason: - Erection All Risks Policy (EAR) also known as Storage Cum Erection (SCE) policy is concerned with erection of electrical plant and machinery and equipment and structures involving no or very little civil engineering works. 69) What is contract works insurance? a) EAR b) CAR c) SCE d) Both a and b

Ans. D. Both a and b

Reason: - Some contracts involve both civil engineering works and erection of machinery and equipment and require both covers, i.e. CAR AND EAR. The insurance package which combines the two covers is known as contract works insurance.

70) The CAR policy is in the joint names of principal and leading contractor. One of the big contractors whose name is not in the title of policy damages the property being erected by leading contractor. What is position of recovery rights. a) No recovery rights involved b) Leading contractor will have to lodge claim upon erring contractor and subrogate to insurance co- c) In case cross liability is covered along with TPL there are no recovery rights. d) Both statements under para b and c are correct Ans. d) Both statements under para b and c are correct

71) A large project of construction of road about 1500 kms in length passing through earthquake zone no-1 is to be covered under CAR policy. How to handle earthquake risk. a) Cover earthquake as usual by charging additional premium for zone no-1 b) Examine the route map and divide sum insured length-wise and charge extra premium as per respective sum insured of each zone. c) This involves applying average rate of all the zones for earthquake d) Charge weighted average. Ans. b) Examine the route map and divide sum insured length-wise and charge extra premium as per respective sum insured of each zone.

72) In Consequential Loss (Fire) Insurance Policy, the sum insured is arrived at by a. All standing charges plus net profit b. Specified standing charges plus net profit c. Only net profit d. None of the above

Ans. B) Specified standing charges plus net profit.

73) A CAR policy can be issued where civil work in a project is more than a) 60% b) 50% c) 40% d) 25%

Ans. B) 50%.

74) The Contractors Plant and Machinery Policy covers the property insured at Location A. Project sites only Location B. Contractors own premises only a) Location A, b) Location B. c) Both, d) None.

Ans. C) Both.

75) Which risk is covered under contractors all risk policy? a) Contractors liability b) Negligence of workers/human error c) Negligence of insured. d) Consequential loss of any kind

Ans. B. Negligence of workers/human error

Reason: all other risk except human error is covered under exclusions to the policy.

76) Under car policy, the insurance company shall not be liable for a loss for which no notice has been received by the company within ______ days of occurrence. a) 7 days b) 14 days c) 21 days d) 30 days

Ans. b) 14 days 77) Upon notification being given to the company the insured may carry out the repair or replacement of any minor damage not exceeding ______ rupees. a) 1000 b) 2500 c) 5000 d) 10000

Ans. b. 2500

Reason: in all other cases a representative of the insurance company shall have the opportunity of inspecting the loss or damage before any repair is done. If the representative of the company does not carry out inspection within a reasonable time the insured is entitled to proceed with repair.

78) How much reduction in rates can be allowed for excluding all act of God perils other than earth quake in CAR policy a) NIL b) 1% c) 2% d) 5%

Ans. a. NIL

Reason: All act of God peril other than earth quake in CAR policy are taken care of in the rate prescribed. However no reduction in rates can be allowed for excluding any of these perils.

79) Under EAR/CAR POLICY installment of premium facility is allowed only, if the period is more than a. Ten Months b. Six Months c. NINE MONTHS. D. Twelve Months.

Ans. d. Twelve Months.

Reason: The projects run into years and as such installment facility is allowed in erection all risk policy and contractors all risk policy. Premium can be paid with minimum interval of quarter or more and last premium must come six month before project completion. 80) The last premium under EAR/CAR Policy where installment facility has been granted has to be made before b. Three Months b. Six Months c. Nine Months d. Eight Months

Ans. b. Six Months.

Reason: If project is completing on 31-12-2009 then last premium must come on or before 30-6-2009 in case of project / policy period is more than 12 months.

81) Incase of EAR/CAR Policy premium is to be paid from the c. First consignment arrived at site d. Date of proposal e. Date of shipments/dispatch of project material

Ans. A) first consignment arrived at site.

Reason: Since risk commences from the date when first consignment arrives.

82) Under which of the following policies pro rata average is applied? Policy A. Contractors All risks Policy B. Erection All risks a) Only A, b) Only B. c) Both, d) None

Ans. C) Both.

83) Machinery covered under Breakdown Policy does not cover damage a) While being shifted to another premises for cleaning and overhauling operations, b) While it is at work c) While being shifted within the insured premises d) While it is at rest

Ans. A) While being shifted to another premises for cleaning and overhauling operations.

84) Which of the policies cannot be issued for a project under construction a. Contractors’ all risk policy b. Marine -cum-erection policy c. Machinery breakdown policy d. Erection all risk policy

Ans. C) Machinery breakdown policy.

Reason :- Since Machinery Breakdown Policy can be issued only after the project is complete.

85) Minimum premium under MBD policy is Rs. __________ a) 50 b) 100 c) 500 d) 1000

Ans. B. 100

86) Under MBD policy loss caused by fire including extinguishment of fire, lightning are covered or not in the policy. a) Yes covered b) Not covered c) Covered under exclusion to the policy

Ans. C. Covered under exclusion to the policy

87) Under MBD for photocopier excess salary 5% of sum insured subject to minimum of Rs. _________ a) 500 b) 1000 c) 2000 d) 2500

Ans. B. 1000 88) Under MBD policy it will be in order for insurers to allow automatic regular increase in sum insured through out the period of policy in return for additional premium to be paid in advance for selected percentage increased not exceeding _________% of sum insured and additional premium payable in advance will be at 50% of the full rate charged on the selected percentage increase. a) 10% b) 15% c) 25% d) 50%

Ans. C. 25%

89) In MCE Policy for 18 months if the project is completed prior to declared date of completion (*) 1. A refund of premium can be given 2. No refund of premium can be allowed 3. Refund of premium can be given if there is no claim 4. Premium can be held as deposit for next project

Ans. 3. Refund of premium can be given if there is no claim.

90) In MCE (Marine Cum Erection) policy, during the policy period if the works have not been completed there is a. Scope of extension of policy b. NO scope of extension of policy c. The policy is issued for an indefinite period d. None of the above

Ans. A) Scope of extension of policy.

Reason: There is every possibility of delay in completion of project that’s why there is scope for extension of policy.

91) How many classified group of machineries available under CPM Policy? a. Seven b. Five c. Ten d. Three

Ans. B. Five.

92) Which policy is not issued for a period of more than 12 months a) CAR b) MCE c) SCE d) CPM

Ans. D) CPM.

Reason: Contractors plant & machinery is operational policy and cannot be issued for more than 12 months. Rest contractors all risk, marine cum erection, storage cum erection are all risk policy and can be given for more than 12 months during construction period.

93) CPM can be covered under EAR or CAR policy when the value of CPM does not exceed (*) a) 25 lakhs b) 50 lakhs c) 100 lakhs d) None

Ans. A) 25 lakhs.

94) CPM (Contractors Plant & Machinery) is a) Coverage all risk policy with inclusion of Breakdown b) All risk policy with exclusion of breakdown c) Self propelled machineries on Public / Private Road d) None of the above

Ans. B) All risk policy with exclusion of breakdown.

Reason: This policy does not specify coverage but mentions exclusions only.

95) The contractors Plant & Machinery Policy covers the property insured at Location A : Project sites only Location B : Contractors own premises only a. Location A b. Location B C. BOTH THE LOCATIONS d. None of the above locations

Ans. C. Both the locations.

96) Under CPM (Contractors Plant & Machinery) Policy transit risk from site to site are covered or not a) Yes covered in original coverage b) Coverage is excluded c) Coverage is allowed as add on cover

Ans. b) coverage is excluded

97) Machine break down risk in case of CPM Equipment should not be covered either as an extension of CPM insurance policy or under separate MB policy. a) The above statement is not correct b) The above statement is correct

Ans. B. The above statement is correct

Reason: There is prohibition to issue MB policy on CPM equipment.

98) To delete exception “k” for loss or damage to plant or machinery working under CPM policy applicable tariff rate should be loaded by a) 100% b) 75% c) 50% d) 25%

Ans. C. 50%

Reason: machines use in tunneling work are not excluded under exclusion “k” but other machine working underground are excluded. However by loading 50% one can cover all machines underground.

99) In case of CPM policy short period scale of premium rates full annual premium is charged in case policy period required exceeds a) 5 months b) 6 months c) 7 months d) 8 months

Ans. D. 8 months

Reason: Upto 8 months it is 85% annual premium loaded and more than 8 months it is full rate. 100) Portable ultrasound equipment can now be covered under EEI policy but which is the most suitable cover a) MB policy b) EEI policy c) All Risk policy extended to include breakdowns d) Special Contingency cover by combining EEI and ALL Risk suitably

Ans. d) Special Contingency cover by combining EEI and ALL Risk suitably 101) Which equipment cannot be covered under EEI policy a) Personal Computer b) Laptop c) Sonography d) MRI Scanner Equipments

Ans. B) Laptop.

102) Ultra sound machine can be covered under a) Machinery Breakdown Policy b) Electronic Equipment Policy c) Any of (a) & (b) d) None of (a) & (b)

Ans. B) Electronic Equipment Policy.

103) Electronic Equipment Policy covers : a) Near and tear b) Loss/damage to bulbs/tubes c) Digital X-Ray Machine d) None of these

Ans. C) DIGITAL X-RAY MACHINE

104) Which of the following property is not covered under Electronic Equipment Policy? a) Dish antenna b) Air-conditioning equipment c) Heating equipment d) Power Conversion

Ans. D) Power Conversion

105) The MLOP policy covers a) Loss of profit due to reduction In turnover during Indemnity period b) Loss of profit during the financial year c) Loss of turnover due to fire d) None of the above

Ans. A) Loss of profit due to reduction in turnover during Indemnity period.

106) Is it necessary to admit a loss under MI Policy before a claim under MLOP Policy? a. YES b. NO

Ans. A) YES.

Reason: MLOP can be considered only if there is valid claim under basic operational cover for machinery insurance or boiler pressure vessel insurance policy.

107) Wherever competent in house maintenance is available the warranty relating to maintenance agreement cannot be deleted for _____ equipments under EEI policy. a) Computers b) Electronic equipments c) medical equipments d) Camera

Ans. c. Medical equipments

108) Under EEI policy normally claim experience of ___ years preceding the expiry policy period will be taken in to account. a) 1 b) 2 c) 3 d) 5

Ans. d. 5

Reason: However for being eligible for discount the policy must run at least for 3 years. Loading if any shall be applicable from 2nd year onwards.

109) Under EEI policy average claim ratio upto 100% will attract loading of ____%. a) 2% b) 5% c) 10% d) 25%

Ans. c. 10% loading

Reason:

Above 100 – upto 125 15% loading Above 125 – upto 150 20% loading Above 150 – upto 200 35% loading

110) Under EEI policy upon notification to the company under this general condition the insured may carry out the repair or replacement of any minor damage not exceeding _____ rupees. a) 2500 b) 5000 c) 7500 d) 10000

Ans. b. 5000

111) Which one of the following is not underwritten in Engg. Dept. a) CAR b) EAR c) IAR d) CECR

Ans. C) IAR.

REASON: IAR (Industrial All Risk) is in fire dept.

112) Minimum sum insured required for granting an Industrial All Risks is - a) Rs. 5 crores b) Rs. 2 crores c) Rs. 1 crore d) Rs.100 crores

Ans. D) Rs.100 crores.

113) Which of the following statements is true? Statement A: Fire Insurance is concerned with capital loss whereas loss of profits insurance is concerned with revenue loss. Statement B: Indemnity period in loss of profits insurance does not extend beyond the expiry date of the insurance.

a. Statement A Only b. Statement B Only c. Both the statements d. Neither of the statements

Ans. Statement A Only

Reason: Indemnity period in LOP may extend beyond expiry date of insurance. LOP covers period after fire has taken place and may extend beyond expiry of policy.

114) Standing charges do not include a) Depreciation b) Salaries Staff c) Interest d) Cost of Raw Material

Ans. D. Cost of Raw Material.

DIFFICULTY LEVEL 2

1) What is typical about policies under the department of Engineering Insurance a) These policies specifies the nature of exact cover. b) These are same as any other policy in other deptts c) These define only the exclusions. d) These specifies both in detail the nature of cover as well as exclusions.

Ans. c) These define only the exclusions.

2) Overheads can be covered under the policies a) In all policies under Engg Deptt b) In MB EEI c) In SCE CAR CPM d) In ALOP LOP

Ans. a) In all policies under Engg Deptt

3) What is the position of theft burglary sabotage under Engg Ins Policies a) Theft is covered under all policies but sabotage is available in project ins covers only. b) All these perils can be covered under project ins policies. c) All these perils are covered under project ins policies and EEI policy. d) All these perils are covered under project ins policies and as an additional covers under operational policies. Ans. c) All these perils are covered under project ins policies and EEI policy.

4) Which policies of engg ins are subject to adjustment of premium. a) MB CPM b) EEI SCE CAR c) DOS MB LOP d) SCE CAR CPI Ans. d) SCE CAR CPI 5) A 5-star hotel is equipped with special (application) software loaded on its computer system for handling billing of the customers. The computers are included under EEI policy. In a major accident all the servers are damaged rendering special software also as total loss and there is no back up. How to handle claim of special software under EEI policy. a) It is payable. if section no 2 is covered. b) It is not payable. c) If section no 2 is covered the cost of new software would be excluded but cost of re recording or reloading from master software would be payable.

Ans. c) If section no 2 is covered the cost of new software would be excluded but cost of re recording or reloading from master software would be payable

6) Eng. Insurance covers except one peril, choose correct answer a. Damage or breakdown of plant and machinery b. Normal wear and tear c. Legal liability for injury caused by damage or breakdown of plant d. Legal liability for damage to surround property of others caused by damage to plant and machinery

Ans: B. (Normal Wear and Tear) IS SIMILAR TO DEPRECIATION.

7) Control room of a Power House is partially damaged due to fire as a result of short circuit. How to deal with claim. a) Source i.e short circuit in the panel or any other apparatus under MB policy and balance under fire policy. b) Under fire policy c) Under MB policy d) None of the above

Ans.a) Source i.e short circuit in the panel or any other apparatus under MB policy and balance under fire policy.

Reason : - The source of origin i.e. control panel or any electrical apparatus which was subject matter of short circuit will not be covered under fire policy and the balance part is covered under fire policy. The source can be subject matter of claim under MB policy. 8) What is the difference between the Escalation Clause under Fire Policy and SCE (storage cum erection) policy. a) Under fire policy escalation is limited upto maximum 25% but in SCE policy limit is 50%. b) In erection policy any amount of escalation subject to a limit of 50% can be availed of at any time during the period of the policy but in fire policy it rises gradually in proportion of 1 over 365 per day of the amount of escalation specified in the policy. c) both A and B are correct d) only B is correct

Ans. c) both A and B are correct

9) Under Boiler and Pressure Plant policy additional peril can be cover for a) owner’s surrounding property b) third party liability c) both above d) None of the above

Ans. c. both above

10) Under Boiler and Pressure Plant policy pressure plant shall mean any ______ closed container under steam gas or fluid pressure. a) Fired b) Unfired c) None of A & B d) Both A & B

Ans. b. Unfired
Reason: Boiler is fired closed vessel or combined container piping system in which steam is generated under pressure but pressure plant is unfired closed container under steam gas or fluid pressure.

11) Under Boiler and Pressure Plant policy boiler which may be fired by oil or gas alternatively shall be rated as _____fired boiler. a) Oil b) Gas c) Combined average of Oil & Gas

Ans. b. Gas

Reason: For coal or oil fired boiler basic rate is 1.20 per mile at 25 years stipulated age for basic rate. For gas fired boiler basic premium rate is 1.80 per mile at 20 years stipulated age for basic rate.

12) Which of the following statement is true? Statement A: Deterioration of Stock Insurance is a form of consequential Loss Cover. Statement B: Claims under Deterioration of Stock is payable only if a claim is payable under the concurrent machinery breakdown policy. a) Neither, b) Only A, c) Only B, d) Both

Ans. D) Both.

13) In dos potato policy on account of shrinkage and rottage amount to be deducted from each & every claim will be same percentage as stated in the insured’s contract with hirer or _____% of insured value of the damaged stock whichever is higher. a. 1% b. 2% c. 5% d. 10%

ANS. C. 5%

Reason: Deduction for shrinkage and rottage will be in addition to excess and under insurance.

14) In Dos potato policy any damage to stock due to rise and fall in temperature caused by stoppage of any section or section of the refrigeration plant for less than ________ hours following an accident to the refrigeration plant & machinery specified in schedule i and covered by concurrent machinery insurance policy shall be excluded. a. 6 hours b. 12 hours c. 24 hours d. 48 hours

Ans. C. 24 Hours
Reason: Any damage to the stocks due to rise and fall in temperature caused by failure of electric supply by whatsoever reason shall also be excluded.

15) Maximum permissible escalation under an EAR policy is a) 25% b) 50% c) 75% d) none

Ans. B) 50%. 16) In ear policy marine (imports) are valued? a. At fob value at site. b. CIF value at site. c. Landed cost at site. d. WDV

Ans c. Landed cost at site.

Reason: - Landed cost at site includes all cost including freight, duty are covered.

17) Storage risk at fabricator premises/workshop can be covered as an extension to EAR/SCE policy? a. No it cannot be covered. b. Yes it can be covered as extension. c. It is already covered in a normal risk under EAR/SCE policy.

Ans. B. Yes it can be covered as extension.

Reason: - For such coverage there is additional storage rate of Rs. 0.30 per mille per month or part thereof.

18) Additional rates for earthquake perils in EAR/SCE policy is to be charged for risk located in earthquake zones IV as defined in fire tariff: - a. Rs. 1.00 per mille per annum b. Rs. 0.50 per mille per annum c. Rs. 0.25 per mille per annum d. NIL per mille per annum

Ans: - D. NIL per mille per annum

REASON: - Irrespective of sum insured for SCE/EAR the following additional rates are to be charged.

Zone I Rs. 1.00 per mile per annum
Zone II Rs. 0.50 per mile per annum
Zone III. NIL per mile per annum
Zone IV NIL per mile per annum

19) Excess for claims arising out of AOG perils under ear policy: - a) 10% of the claim amount subject to a minimum of the testing period excess with an upper limit of Rs. 5.00 crores. b) 5% of the claim amount subject to a minimum of the testing period excess with an upper limit of Rs. 4.00 crores. c) 2% of the claim amount subject to a minimum of the testing period excess with an upper limit of Rs. 2.00 crores. d) 1% of the claim amount subject to a minimum of the testing period excess with an upper limit of Rs. 1.00 crores.

Ans. a. 10% of the claim amount subject to a minimum of the testing period excess with an upper limit of Rs. 5.00 crores.

Reason: - If excess for testing is Rs. 40,000.00 then excess for claims arising out of AOG perils under ear policy is Rs. 10% of the claim amount subject to minimum of Rs. 40,000.00 and maximum of Rs. 5.00 crores. In case of claim of Rs. 60.00 crores, 10% of it is Rs. 6.00 crores, however maximum excess cannot be more than 5.00 crores. So claim payable is 60.00 crores minus 5.00 crores = Rs. 55.00 crores.

20) Who will take ear policy in erection of a project? a) Manufacturers or suppliers of machinery. b) Firms of contractors. c) All manufacturer, supplier, firms etc concerned with the project can take ear policy jointly. d) Proprietor of a project which is to be erected.

Ans: All manufacturer, supplier, firms etc concerned with the project can take EAR policy jointly.

Reason: - It is possible to issue a joint policy in the names of one or more parties such as principals and/ or contractors and/ or sub contractors in respect of an entire project.

21) How to cover the contract of construction of 5th 6th 7th floors of a building when first 4 floors are already occupied a) SCE CPM b) CAR CPM c) CAR MB d) CAR, the completed floors as surrounding property. construction equipment under CPM

Ans. d) CAR, the completed floors as surrounding property. construction equipment under CPM

22) A contractor has covered 30% overheads in CAR policy, how to handle claim related to overheads. a) Insurance will have to pay full overheads. b) The insurance co has a right to verify and pay only actual overheads subject to maximum covered. c) The policy is on indemnity basis so overheads are not payable. d) The insurance co will have to refund premium charged for covering overheads since not payable.

Ans. b) The insurance co has a right to verify and pay only actual overheads subject to maximum covered.

23) Which risk is not covered under standard contractors all risk policy? a. Burglary b. Land slide c. Malicious damage d. Surrounding property

Ans. D. Surrounding property

Reason: - Surrounding property can be covered by paying extra premium. Add on cover can be taken for surrounding property. 24) A project starts from 02/03/09. In between on 12/12/2008 project stop working due to some managerial problem and then it again started on 01/01/2009 and ends up on 01/02/10. What will be the policy coverage date? a. Policy date will be from 02/03/09 to 01/03/2010 b. Policy date will be from 02/03/09 to 12/12/2008 c. Policy date will be from 02/03/09 to 01/02/2010 d. Policy date will be from 02/03/09 to 12/12/2008 and then from 01/01/2009 to 01/02/2010

Ans c. Policy date will be from 02/03/09 to 01/02/2010

Reason: - Cover shall commence from the commencement of work or after the unloading of the property insured at the site, whichever is earlier. The cover expires when the completed part thereof is taken over ot put into service or the date specified in the policy, whichever is earlier.

25) In the CAR policy under material damage in section I reinstatement of indemnity limit in respect of third party liability (TPL) reinstatement can be allowed upto overall limit of Rs. _________ during entire policy period. a) 1 lac b) 10 lacs c) 1 Crore d) 10 crore

Ans. c. 1 Crore

Reason: Reinstatement of indemnity limit on payment of additional premium after occurrence of a claim can be allowed for extension like express freight, over time, surrounding property, air freight. In respect of third party liability (TPL) reinstatement can be allowed upto overall limit of Rs. 1 crore during entire policy period. Third party liability (TPL) cannot be granted during extended maintenance.

26) Where sum insured for CPM equipment does not exceed 5% of sum insured for CAR insurance or ____ whichever is lower the same can be covered under CAR policy at the rates and excess applicable for CAR. a) Rs. 15 lacs b) Rs. 25 lacs c) Rs. 50 lacs d) Rs. 1 crore

Ans. b. Rs. 25 lacs

Reason: Where sum insured for CPM exceeds 5% of S.I. under CAR or Rs. 25 lacs whichever is lower the same should be separately covered under CPM policy at CPM rates.

27) Extended maintenance cover could be given for any period longer than ____ months as required under contract in CAR policy a) 3 b) 6 c) 12 d) 24

Ans. c. 12

28) What is aspect of depreciation under MB policy a) It is only applied on certain parts. b) It is applied only in case of total loss c) Reimbursement is only on market value basis.

Ans. c) Reimbursement is only on market value basis.

Reason: It is applied on parts with relatively short life in case of claims settled on repair basis and also in case of total loss settlements.

29) How the value of salvage is adjusted in a claim under MB policy a) Its market value is deducted b) Its equivalent new value is deducted c) It is market value is deducted after reducing it by under insurance if any d) It is a negotiated value

Ans. c) It is market value is deducted after reducing it by under insurance if any

30) Machinery breakdown policy can be issued on following terms:- a. First loss basis b. Bonus clause c. Deletion of excess basis d. None of above

Ans. D. None of above

Reason: Machinery breakdown policy cannot be issued on above A,B,C terms.

31) For covering marine portion under an MCE policy you would require information 1. S.I. for Inland transit 2. S.I. for overseas transit 3. Both the above 4. None of the above

Ans. 3. Both the above.

Reason: In case of marine cum erection policy both 1. S.I. for inland transit 2. S.I. for overseas transit are required

32) Volume discounts under MCE policy starts from 1. Projects with S.I. more than Rs. 50 Crores 2. Projects with S.I. more than Rs. 100 Crores 3. Projects with S.I. more than Rs. 150 Crores 4. Projects with S.I. more than Rs. 200 Crores

Ans. 2. Projects with S.I. more than 100 Crores.

Reason: For marine cum erection policy volume discount can be given Rs. 100 crores and above.

33) In MCE (Marine Cum Erection) policy a. Loss or damage due to flood is not covered b. Loss damage due to flood is covered c. Loss due to flood is covered if the loss is below 20% of sum assured d. None of the above

Ans. B) Loss damage due to flood is covered.

Reason: Acts of God / natural calmatives are covered in the policy.

34) What is duration of period under CPM Policy a) Annual b) Less than one year c) For industries under operation--12 months and for projects either 12 months or equivalent to period of the project. d) Over 12 months Ans. c) For industries under operation--12 months and for projects either 12 months or equivalent to period of the project

35) Mobile Construction equipments can be covered under a. Motor Policy b. Car Policy c. CPM Policy d. both a & c

Ans. d. both a & c.

Reason: As per CPM policy mobile construction equipments are covered on the site and on its roads within the sites but the same can be covered on the road under motor policy as per motor vehicle act.

36) Which of the following policy normally cover Lift Cranes, Material handling plant and equipment in the construction and project sites? a) Contractor Plant & Machinery b) Contractor All Risk c) Marine cum erection Policy d) Erection All Risk

Ans. A) Contractor Plant & Machinery.

37) In CPM policy the insured does not have option to select motor or non motor policy under motor tariff or CPM policy in engineering department for machinery engaged at project site. a. The above statement is not correct b. The above statement is correct

Ans. A. The above statement is not correct

Reason: In respect of machinery / equipment whether registered with RTO or not but engaged at the project site, the insured has an option either to select motor or non motor policy under motor tariff or CPM policy in engineering department.

38) In case of CPM policy earthquake perils are covered after charging additional rates for earthquake zones _____. a. Zone 1 b. Zone 2 c. Zone 1 & 2 d. Zone 3 & 4

Ans. C. Zone 1 & 2

Reason: Additional rates are charged for earthquake perils only, for earthquake cover is optional for earthquake zone 1 & 2 for entire policy period or no cover at all. Earthquake zone 3 & 4 are free.

39) Industrial All Risk Policy allows under insurance up to 1. 15% of sum insured 2. 20% of sum insured 3. No allowance for under insurance 4. Underinsurance to be computed as per fire tariff

Ans. 1. 15% of sum insured.

Reason: - In case of total value at risk of 100 crores then even if coverage has been taken for 85 crores even then under insurance is not applicable.

40) Standing charges does not include a. Depreciation b. Salaries of staff c. Interest d. Cost of Raw Material

Ans. D) Cost of Raw Material.

Reason: Standing charges means fixed expenses whether manufacturing is done or not. In case of no manufacturing there is no cost of raw material involved. Cost of raw material is variable cost.

41) The basis rate under Fire LOP policy is based on a) The average rate of the process blocks under the Fire policy, b) The average rate of all blocks under Fire policy, c) A separate rate for selected block as per FLOP tariff, d) None of the above

Ans. A) The average rate of the process blocks under the Fire policy. 42) ....................................... is not an example of standing changes insured under Consequential Loss [Fire] Policy a) Purchase cost of raw materials, b) Salaries to permanent staff c) Office & general Establishment d) Insurance premium expenses

Ans. A) Purchase cost of raw materials.

43) Material damage proviso under the Consequential Loss (Fire Insurance) means: a) claims admissible under Standard Fire and Special Perils Policy b) Occurrence of the loss c) Loss discovered during stock taking d) Loss of goodwill

Ans. a) claims admissible under Standard Fire and Special Perils Policy.

Reason: LOP policy can only be issued in conjunction with material damaged (fire policy) as such material damage is payable under fire policy, while gross profit is payable under consequential loss of profit policy.

44) Basis rate for fire consequential loss cover is “Average Fire Rate” of the items covering a) Building, machinery and stocks of all the blocks b) Building and contents of all the blocks c) Building, plant and machinery of process blocks d) Contents of process blocks.

Ans. d. Contents of process blocks.

Reason: As provided in the tariff the average rate of the contents of all the process blocks is accounted for, excluding the rate of storage / utility blocks.

45) The material damage proviso under FLOP policy states that 1. Loss under LOP is admitted only after there is a loss under the fire material damage policy 2. The loss of profit policy is independent from the fire material damage policy 3. The loss under Fire and LOP policies cannot exceed the S.I. under fire policy 4. None of the above

Ans. 1. Loss under LOP is admitted only after there is a loss under the fire material damage policy.

REASON:- without fire claim their cannot be LOP claim.

46) The advanced loss of profit policy covers 1. Loss of projected profit due to interruption of project by an insured peril 2. Loss of turnover after the commencement of project 3. Loss of projected profit due to non-completion of project due to financial bankruptcy 4. None of the above

Ans. 1.Loss of projected profit due to interruption of project by an insured peril.

Reason: Loss of turnover after the commencement of project or Loss of projected profit due to non-completion of project due to financial bankruptcy or Speculative or trade risks like political, social, economical or short coming in management or error in judgment are not insurable risks.

47) Claim under MLOP (Machinery Loss of Profit) is admissible due to a. Fire in machine b. Theft of machine c. Breakdown of machine d. Delay in commencement of commercial product.

Ans. C. Breakdown of machine

Reason:- Claim under MLOP is admissible in the event of breakdown or accident to a vital part of manufacturing plant, actual damage to machinery or boiler and pressure vessel insurance policy may be small but loss due to stoppage of production may be heavy.

48) Machinery Loss of Profits Policy (MLOP) does not provides indemnity against which one of the following a. Loss of net profit b. Insured standing charges c. Increased cost of working d. Civil engineering works

Ans. D) Civil engineering works. 49) Calculation of MLOP rating does not depend on the following factors a. Relative Importance b. Spare capacity c. Indemnity period d. Location

Ans. D) Location.

Reason: Machinery loss of profit (MLOP) does not depend on location, since site hazards are not covered under MLOP.

50) Under MLOP (Machinery Loss of Profit) is it necessary that all items of plant or equipments should be covered under MLOP policy. a. Yes b. No

Ans. B. No

Reason: In case of MLOP insured is allowed to select key items of the plant where stoppage would seriously interrupt the business due to steam boiler, transformer, process machinery etc.

51) In case of MLOP gross profit to be insured is for which period a) Previous financial year b) Current financial year c) Projected next financial year

Ans. c. Projected next financial year

Reason: After the gross profit is worked out from previous financial year, appropriate additions should be made to project the figure for the next financial year during which policy will be in force. Since the profit of the business cannot be accurately forecast, it is advised G.P figure should be kept sufficiently high to cover all anticipated G.P. during the covered financial year.

52) Civil works like Aircraft Hangers, Bridges, Hydro Power Stations are to be covered for fire and allied perils. Which is the most suitable policy a) fire policy only b) storage cum erection policy c) CECR (Civil engineering completed Risk) policy. d) CAR (contractor all risk) policy

Ans. c) CECR (Civil engineering completed Risk) policy.

Reason: - The most suitable policy is CECR (Civil engineering completed Risk) as compare to fire policy since the coverage is wider.

53) CECR policy must be taken at _____ value otherwise under insurance will be applicable. a) Market value b) cost + 10% value c) New replacement value d) C.I.F. + 10% value

Ans. c. New replacement value

Reason. In order to receive full cover, the insured should include realistic amount of new replacement value.

54) In CECR policy claims experience of more than 400% will result loading of _____%. a) 25% b) 50% c) 75% d) 100%

Ans. b. 50%

Reason:
Between 100 – 200% 10% loading
Between 200 – 300 20% loading
Between 300 – 400% 30% loading

DIFFICULTY LEVEL 3

1. What is the role of Catalyst in Chemical Industry. a) It is one of parts of the project b) It is one of the chemicals used after commissioning of the plant. c) It is a chemical used for expediting the chemical reaction during testing phase only . d) It is a chemical used since inception of testing and subsequent normal operation for expediting chemical reaction. Ans. d) It is a chemical used since inception of testing and subsequent normal operation for expediting chemical reaction.

2. How the Catalyst is covered under Engg Ins Policies a) It is part of MB EEI and CPM Policies b) It is covered under CAR policy c) It is covered as an extra cover under SCE Policies d) It can be covered under all policies of Engg Deptt

Ans. c) It is covered as an extra cover under SCE Policies

3. What is position of human negligence and gross negligence in policies under Engg Deptt a) These are available as additional covers. b) Human negligence can be covered but gross negligence cannot be covered. c) Negligence on the part of operators is already covered but negligence on the part of responsible representatives cannot be covered. Gross negligence is an additional cover. d) Negligence on the part of operators is already covered but negligence on the part of responsible representatives cannot be covered. Gross negligence cannot be covered. Ans. d) Negligence on the part of operators is already covered but negligence on the part of responsible representatives cannot be covered. Gross negligence cannot be covered. 4. The Plant Room of the Cold Storage is sometimes damaged due to various perils. How to provide comprehensive cover. a) MB Policy b) Fire Policy c) Fire policy with additional cover of deterioration of stock. d) None of the above.

Ans. C) Fire policy with additional cover of deterioration of stock.

Reason :- That is covered under both fire and MB policy with additional covers particular in fire policy namely deterioration of stocks in cold storage premises due to change in temperature arising out of loss or damage to the cold storage machinery(ies) in the insured’s premises due to operation of insured peril.

5. Under Boiler and Pressure Plant stands still period should be minimum ____ months to consider refund of premium. a) 1 month b) 2 months c) 3 months d) 6 months

Ans. c. 3 months

Reason: Causes of stands still for complete plant can be due to non availability of raw material, generator sets, major breakdown. For example upto 4 month stand still can allow 15% refund of annual premium. Claim experience should be less than 60% to be eligible for stand still discount. However in case of seasonal industries like sugar factories no such refund is allowed.

6. Under Boiler and Pressure Plant policy boiler shall only be operated by ______ a) Foreman holding valid certificate of competency issued under appropriate act b) Qualified engineer holding valid certificate of competency issued under engineers act c) Attended holding valid certificate of competency issued under appropriate boiler act. d) Qualified boiler technician holding valid certificate of competency issued under from polytechnic

Ans. c. Attended holding valid certificate of competency issued under appropriate boiler act.

Reason: Attended has to hold certificate under appropriate boiler act as applicable to the State. 7. Under dos (potato) policy declaration basis is permissible on under condition of value of stock based on maximum capacity of the cold storage is more than _______ and period selected is 12 months. a. Rs. 10 Lacs b. Rs. 25 Lacs c. Rs. 50 Lacs d. Rs. 1 Crore

Ans. c. Rs. 50 Lacs

Reason: In case less than 12 months or less than Rs. 50 lacs then declaration facility is not available. Declaration have to be given every fortnight and within 15 days of end of fortnight. Monthly premium will be calculated on maximum stock held on any single day during the month.

8. In dos potato policy the temperature in all the chambers does not exceed 10 degree centigrade during the entire period of loading and ____ degree centigrade during subsequent period of storage. a. 4.0 c b. 4.2 c c. 4.4 c d. 4.6 c

Ans. C. 4.4 c

Reason: 4.4 c is the normal temperature to be maintained in cold storage chamber and it should not exceed this temperature.

9. Minimum compulsory requirement applicable to ear policy under fire protection irrespective of sum insured is one portable fire extinguisher of soda acid or water type storage/erection site: - a. Every 100 sq. Meters b. Every 200 sq. Meters c. Every 300 sq. Meters d. Every 400 sq. Meters

Ans. C. Every 300 sq. Meters

10. In EAR/SCE policy inspite of complying with rules for fire protection and construction site no reduction in excess and granting of discount is permitted for sum insured less than a) Rs. 50.00 crores b) Rs. 100.00 crores c) Rs. 150.00 crores d) Rs. 200.00 crores

Ans. a) Rs. 50.00 crores

11. In CAR policy for risk situated in earth quake zone I & II the minimum excess of claims arising out of AOG perils shall be as under during the entire policy period (including all extensions) a) Zone I – 5000, Zone II – 1000 b) Zone I – 10000, Zone II – 5000 c) Zone I – 25000, Zone II - 10000 d) Zone I – 50000, Zone II – 25000

Ans. c. Zone I – 25000, Zone II - 10000

12. Standby machinery in MBD (Machinery Break Down) is a. not covered b. covered at a discount of 50% in rate c. discount of 75% d. only covered when it is put to use

Ans. B) Covered at a discount of 50% in rate.

Reason: Standby machinery shall not be worked at the same time as the machine to be which it is standby, except for when load is being transferred.

13. What is normal usage of CPM policy a) For operational covers of the industry. b) For cover under projects under execution c) For erection of equipments d) For both purposes i.e. operational cover under projects under erection / construction and industry under operation.

Ans. d) For both purposes i.e. operational cover under projects under erection / construction and industry under operation.

14. Under EEI policy for equipment (other than Winchester drive) upto Rs. 1 lac excess amount shall be 5% of claim amount subject to minimum of Rs. ________ a) Rs. 500 b) Rs. 1,000 c) Rs. 2,500 d) Rs. 5,000

Ans b. Rs. 1,000

Reason: Excess shall be in case of upto Rs. 1 lac Winchester drive 10% of claim amount subject to minimum of Rs. 2,500.00.

Under EEI policy for for external data u/s II upto Rs. 1 lac excess amount shall be 5% of claim amount subject to minimum of Rs. 1,000.00.

For equipment u/s I (other than Winchester drive) and also for external data u/s II above Rs. 1 lac excess amount shall be 5% of claim amount subject to minimum of Rs. 2,500.00

Excess shall be in case of above Rs. 1 lac Winchester drive 25% of claim amount subject to minimum of Rs. 10,000.00.

15. Under EEI policy Time excess U/s III for increase cost of working shall be _______ hours, if 52 weeks indemnity period is taken and maximum 1% rate is charged. a. 24 b 48 c. 96 d. 168

Ans. c. 96 (four days)

Reason:
|Time excess |Rate in % |Rate in % |Rate in % |Rate in % |
|In computer working hours |Indemnity period in upto|Indemnity period in upto 26|Indemnity period in upto 40|Indemnity period in upto 52|
| |12 weeks |weeks |weeks |weeks |
|96 hours / 4 days |0.70 |0.80 |0.90 |1.00 |
|168 hours 7 days |0.65 |0.75 |0.85 |0.90 |
|336 hours 14 days |0.50 |0.60 |0.65 |0.70 |
|672 hours 28 days |0.30 |0.40 |0.45 |0.50 |

16. Claim under ALOP (Advance Loss of Profit) is admissible due to a) Delay due to claim under material damage against car / ear policy. b) Delay in commencement of commercial operation having taken fire policy c) Delay in commencement of commercial operation having taken contractor’s plant and machinery policy d) Delay in commencement of commercial operation having taken deterioration of stock policy

Ans. A. Delay due to claim under material damage against car / ear policy.

Reason:- claim under ALOP is admissible in the event of delay caused by direct physical loss or damage admissible under material damage car / ear insurance covering the contract work. ALOP policy covers financial consequences of a project being delayed because of accidental damage to the project material. The sum insured has to be based on assumptions and it’s definition is on “would have been basis”.

17. Time excess under MLOP Policy for industries of explosive, petrol chemical, fertiliser, power plant is a. Three Days b. Seven Days c. Ten Days d. 14 days

Ans. B. 14 DAYS.

Reason: upto first 14 days indemnity will not be given. In case of other industries it is 7 days. In case of fire lop there is no time excess except under exclusion of failure of public electric supply if taken.

18. In CECR policy for mid term increase in sum insured if the policy is renewed for ____ months for an amount not less than increased sum insured, the difference of premium between short scale period of rate and pro-rata rate may be refunded. a) 6 b) 12 c) 24 d) 36

Ans. b. 12

19. In CECR policy any loss suffered by the insured during the first _____ days from the commencement of the policy are covered under exclusion to the policy. a) 7 b) 10 c) 15 d) 30

Ans. c. 15

20. In CECR policy upon notification to the company under this general condition the insured may carry out the repair or replacement of any minor damage not exceeding Rs. _____. a) 2500 b) 5000 c) 7500 d) 10000

Ans. c. 7500