All RE5 questions
Financial Products Apply knowledge of the financial products and services environment
A car with a market value of R180 000 is insured for R250 000 under a short-term policy and is written off in an accident. Ignoring any excess, what is the most the insurer will pay?
RE5 practice question with a worked answer. This is one of hundreds of FSCA RE5 questions in the RegulatoryExams question bank.
- a) R70 000
- b) R250 000
- c) R180 000Correct
- d) R129 600
Why this is the answer
Short-term insurance is a contract of indemnity: it restores the insured to the position before the loss and does not allow a profit. The loss is the market value of R180 000, so that is the most payable even though the sum insured is higher. A proportional reduction applies to under-insurance, which is not the case here.
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