1. What is the objective of loss evaluation and assessment by insurance companies?

- The objective is to place the insured in the same position as before the loss or damage by
providing the cash equivalent of the loss.

2. What is the significance of basis of indemnity in insurance policies?

- Basis of indemnity determines how the insurer will compensate the insured for the loss or
damage, considering factors like repair costs, depreciation, and intrinsic value.

3. How does valuation impact insurance claims?

- Valuation determines the monetary value of the loss or damage suffered and assesses the
adequacy of the sum insured, especially in policies with average clauses.

4. What are valued policies in insurance?

- Valued policies are agreements where the value of insured items is predetermined and
reflected as the sum insured in the policy, commonly used in marine insurance.

5. How does market value influence insurance claims?

- Market value policies assess the value of the property at the time of loss, considering
factors like replacement cost, depreciation, and current market prices.

6. What factors are considered in determining the market value of buildings?

- Factors such as reconstruction cost, depreciation based on age and maintenance, and
construction type influence the market value of buildings.

7. How are machinery values typically determined in insurance claims?

- Machinery values are usually assessed based on replacement cost, less allowance for
depreciation or betterment, using original acquisition cost or indices for estimation.

8. What considerations are involved in valuing stocks or merchandise for insurance claims?
- Valuation of stocks considers factors like purchase invoices, reconditioning possibilities,
and price reductions due to damage or deterioration.

9. What is the significance of reinstatement policies in fire insurance?

- Reinstatement policies ensure that the sum insured equals the reinstatement value, and
indemnification is based on reinstatement without deductions for depreciation.

10. What procedural steps are involved in assessing insurance claims?

- Procedural steps include physical inspection, inventory verification, damage analysis,
salvage optimization, and ensuring cooperation from the insured.

11. How does a surveyor determine the cause and extent of loss during inspection?
- Surveyors use observation, documentation, and sometimes expert consultation to assess
the cause and extent of loss, especially in cases of fire or non-obvious damages.

12. What protective measures should be taken to prevent further damage after an
occurrence?
- Protective measures include covering exposed property, shifting valuables to safer
places, segregating damaged items, and engaging salvage agents if necessary.

13. What are the duties of the insured regarding loss prevention?
- The insured is obligated to take reasonable measures to minimize loss or damage, as
stated in policy clauses or under common law principles of good faith.

14. How does loss assessment involve analyzing the quantitative extent of loss?
- Loss assessment involves quantifying the loss by counting, weighing, and measuring
affected items to determine their individual values, especially in cases of total losses.

15. Why is prompt action crucial in loss assessment and protective measures?
- Prompt action is vital to prevent further damage, optimize salvage, and accurately assess
the loss, ensuring the success of insurance claims and cooperation from all parties
involved.
1. What is the significance of assessing the "qualitative extent" of damage in insurance
claims?
Answer: Assessing the qualitative extent helps determine the degree of damage beyond
just physical inspection, aiding in accurate loss assessment.

2. How does the method of volumetric measurement simplify the assessment of large
quantities of powdered or granulated commodities?
Answer: Volumetric measurement involves piling the commodity in a regular shape,
establishing a constant relation between volume and weight, facilitating calculation
without manual or mechanical transfer.

3. What method is commonly used to quantify items in loss assessment when counting is
impractical?
Answer: Detailed counting of a known unit area or sector, followed by multiplication,
simplifies quantification when individual counting is cumbersome.

4. How is cotton bale quantification typically ascertained in cases of total loss?

Answer: Quantification is done by weighing the hoop iron retrieved from the debris,
providing a basis for assessing the loss.

5. What role do material balance calculations play in assessing losses in process

industries?
Answer: Material balance calculations from production records help validate claims by
reconciling the quantity of materials used in production with the quantity lost or damaged.

6. How do smoke marks on building walls contribute to loss assessment?

Answer: Smoke marks provide evidence of storage measurements, aiding in validating
claims by simulating storage based on observed measurements.

7. What factors influence the choice of loss assessment methods by surveyors?

Answer: Policy variations, type of loss (total or partial), nature of affected property, and
the variety and state of damaged items influence the selection of assessment methods.

8. How are marine losses categorized for claim settlement?

Answer: Marine losses are settled based on total loss, constructive total loss, or partial
loss, depending on the observations during inspection and the quantification of loss.

9. How is partial loss indemnification determined in fire insurance claims?

Answer: Partial loss indemnification is calculated based on the difference between the
gross sound and damaged value at the place of arrival, proportionate to the sum insured.

10. What factors influence loss assessment in engineering claims?

Answer: Factors such as in-house repairs versus external repair agencies, the
reasonableness of repair costs, and verification of repair estimates affect loss assessment
in engineering claims.

11. How are repairs typically handled in motor insurance claims?

Answer: Repairs are often conducted in authorized service centers, with standardized
prices for spare parts and labor, simplifying assessment based on the nature of damages
and agreed repairs.

12. What methods are employed for assessing losses under miscellaneous policies?
Answer: Assessment methods vary based on the policy type, involving examination of
records for burglary policies and detailed scrutiny of employer's financial records for
fidelity guarantees.
13. What timeframe is typically allotted for insureds to furnish claim details in fire and
engineering policies?
Answer: Insureds are generally required to provide claim details within 15 days of the
occurrence, allowing for prompt assessment and settlement of claims.

14. How do surveyors establish depreciation in loss adjustment?

Answer: Surveyors use their discretion based on observations of damages, age, useful
life expectancy, and maintenance status to determine the applicable depreciation rate,
ensuring fair indemnification.

15. Why is it essential to differentiate between depreciation for insurance purposes and
other contexts such as income tax assessments?
Answer: Depreciation for insurance purposes focuses on the intrinsic market value of
assets, considering factors like wear and tear, maintenance, and obsolescence, unlike
depreciation rates used in income tax assessments.

16. How does the age and usage of property influence the depreciation rate applied in loss
assessment?
Answer: Property age and usage patterns affect depreciation rates, with older or heavily
used items typically subject to higher rates to reflect their reduced value.

17. What challenges do surveyors face in assessing depreciation?

Answer: Surveyors must navigate the absence of a clear definition of depreciation in
policies and the insured's familiarity with depreciation rates used in income tax
assessments, ensuring fair and accurate assessment.

18. What methods are commonly used by accountants to depreciate assets, and how do
they differ from insurance depreciation?
Answer: Accountants use methods like straight-line, declining balance, and sinking fund
methods, which may not fully account for factors like wear and tear, maintenance, and
obsolescence as required in insurance depreciation.

19. How do surveyors validate depreciation rates in loss assessment?

Answer: Surveyors validate depreciation rates based on observations of damages,
maintenance records, operational environment, and useful life expectancy, ensuring a fair
and accurate assessment of loss.

20. What steps can insureds and surveyors take to expedite loss assessment and
settlement?
Answer: Insureds can provide prompt and detailed claim information, while surveyors
adopt a conciliatory attitude, aiming for a speedy settlement by accurately assessing and
adjusting losses within the policy framework.

1. What factors are considered when deciding the applicable depreciation rate in insurance
assessment?
Answer: Factors such as shelf life, moving pattern of sale, extent of soiling, and
technological advancements are taken into account when deciding the applicable
depreciation rate.

2. What unique feature exists in motor insurance regarding depreciation rates?

Answer: In motor insurance, the rates of depreciation for all parts are prescribed in the
India Motor Tariff and are applicable for all categories of vehicles/accessories.

3. How are the rates of depreciation determined for different components in motor
vehicles?
 Answer: Fiberglass components, tires, tubes, batteries, and airbags have a depreciation
rate of 50%. For all other parts, the rates depend on the age of the vehicle, ranging from
5% for vehicles aged 6 months to 50% for vehicles aged over 10 years.

4. What types of obsolescence are considered in insurance assessment?

Answer: Technological obsolescence (e.g., advancements in materials or design),
functional obsolescence (e.g., changes in production rates), and economic obsolescence
(e.g., changes in legislation affecting market desirability) are considered.

5. Why do electronic equipment attract higher depreciation rates in the present market
scenario?
Answer: Electronic equipment attracts higher depreciation rates due to continuous
technological upgrades leading to rapid obsolescence.

6. What is meant by "salvage" in insurance practice?

Answer: Salvage refers to all property covered by insurance that escapes destruction or
damage from an insured peril, or the residual value of partially damaged property.

7. What is the custom regarding salvage in insurance policies?

Answer: Insurers generally reserve the right to take over salvage but do not compel the
insured to abandon it. However, specific policy conditions may vary.

8. How do insurers handle salvage in suspicious cases?

Answer: In suspicious cases, insurers may take over the salvage to prevent potential
fraudulent claims. In such cases, no adjustment is made for salvage recovery, and the
damaged property is surrendered to the insurer.

9. What factors affect the salvage value of damaged items?

Answer: Factors such as the degree of damage sustained, market demand for repaired
items, alternate applications, and recycling potential influence salvage value.

10. What options does a surveyor have to assess salvage recovery?

Answer: Surveyors can negotiate salvage recovery value with the insured, obtain
quotations from salvage recovery agents, or advise the insurer on the potential of
auctioning salvage.

11. What methods are commonly used for salvage disposal?

Answer: Salvage can be disposed of through the insured, private sale, sale by tender, or
public auction, depending on market conditions and the nature of the salvage.

12. What is the purpose of adjustment for underinsurance in insurance claims?

Answer: The purpose of adjustment for underinsurance is to prevent insureds from
obtaining unfair advantages by penalizing underinsurance with a corresponding reduction
in claim payment.

13. How is the amount payable adjusted in cases of underinsurance?

Answer: The amount payable in settlement of a claim is adjusted in proportion to the
sum insured compared to the actual value at risk.

14. How does the "average" clause prevent underinsurance?

Answer: The "average" clause ensures that underinsurance results in a corresponding
underpayment of the claim, thereby discouraging insureds from deliberately underinsuring
their assets.

15. What is the role of deductible/excess clauses in insurance policies?

Answer: Deductible/excess clauses reduce claims by eliminating smaller ones and
shifting a portion of the loss burden to the insured.
16. What are some examples of deductible/excess limits in various types of insurance
policies?
Answer: Examples include a fixed amount for perils like lightning or a percentage of the
claim amount for policies covering machinery or electronic equipment.

17. How is contribution among multiple insurance policies calculated?

Answer: Contribution is calculated by apportioning the assessed loss to each policy
based on the sum insured, with each insurer paying a proportionate share of the loss.

18. What factors influence the choice between salvage disposal methods?
Answer: Factors such as market conditions, the nature of the salvage, and the insured's
preferences influence the choice between salvage disposal methods.

19. Why do insurers use deductible/excess clauses in insurance policies?

Answer: Insurers use deductible/excess clauses to reduce the frequency of small claims
and to shift a portion of the loss burden to the insured, thereby encouraging responsible
risk management.

20. How does underinsurance affect the indemnity received by the insured?
Answer: Underinsurance results in a reduced indemnity payment to the insured, as the
amount payable is adjusted in proportion to the shortfall between the sum insured and the
actual value at risk.

1. What is the main objective of insurance companies in evaluating and assessing losses?
a) To maximize profits
b) To minimize payouts
c) To place the insured in the same position as before the loss
d) To increase premiums
e) To avoid claims

Answer: c) To place the insured in the same position as before the loss

2. What does the basis of indemnity determine in insurance policies?

a) The maximum limit of payment
b) The frequency of claims
c) The type of perils covered
d) The method of compensation for loss or damage
e) The duration of the policy

Answer: d) The method of compensation for loss or damage

3. In valuation, what does a "valued policy" mean?

a) The policyholder determines the value of the insured items
b) The insurer determines the value of the insured items
c) The value of insured items is predetermined and reflected as the sum insured
d) The value of insured items is based on market fluctuations
e) The value of insured items is assessed after the loss occurs

Answer: c) The value of insured items is predetermined and reflected as the sum insured

4. How is market value determined for property insurance claims?

a) Based on the sum insured
b) By assessing depreciation only
c) By considering replacement cost and depreciation
d) By considering intrinsic value only
e) By assessing the age of the property

Answer: c) By considering replacement cost and depreciation

5. What is the purpose of a reinstatement policy in fire insurance?
a) To reimburse the insured for the full replacement cost without deductions
b) To provide coverage for new acquisitions
c) To cover temporary losses
d) To increase the sum insured annually
e) To cover losses caused by negligence

Answer: a) To reimburse the insured for the full replacement cost without deductions

6. What is the first step in assessing insurance claims?

a) Physical inspection
b) Inventory verification
c) Loss analysis
d) Salvage optimization
e) Consulting experts

Answer: a) Physical inspection

7. What duty does the insured have in preventing further damage after an occurrence?
a) To take no action until the surveyor arrives
b) To maximize salvage value
c) To minimize cooperation with the insurer
d) To take reasonable measures to minimize loss or damage
e) To negotiate higher payouts

Answer: d) To take reasonable measures to minimize loss or damage

8. How are machinery values typically determined in insurance claims?

a) Based on sentimental value
b) Using replacement cost only
c) Using original acquisition cost only
d) Considering replacement cost less depreciation
e) Using market value

Answer: d) Considering replacement cost less depreciation

9. What does loss assessment involve?

a) Only counting the number of damaged items
b) Only weighing the damaged items
c) Determining the cause and extent of loss
d) Consulting with the insurer
e) Negotiating with salvage agents

Answer: c) Determining the cause and extent of loss

10. What is the significance of protective measures after an occurrence?

a) To maximize loss
b) To minimize salvage
c) To prevent further damage
d) To increase premiums
e) To delay claims processing

Answer: c) To prevent further damage

11. How does valuation impact insurance claims?

a) It determines the frequency of claims
b) It determines the type of perils covered
 c) It determines the method of compensation
d) It determines the duration of the policy
e) It determines the sum insured

Answer: c) It determines the method of compensation

12. What is the primary objective of segregation during loss assessment?

a) To confuse the insured
b) To minimize salvage value
c) To make the loss appear worse
d) To present affected items for inspection
e) To delay claims processing

Answer: d) To present affected items for inspection

13. What does the Duty of Assured clause in marine policies entail?
a) Taking measures to maximize loss
b) Taking measures to minimize salvage
c) Taking measures to minimize loss
d) Taking measures to delay claims processing
e) Taking measures to confuse the insurer

Answer: c) Taking measures to minimize loss

14. How are stocks valued for insurance claims?

a) Only based on purchase invoices
b) Only based on depreciation
c) Based on market value
d) Based on sentimental value
e) Based on the insured's estimation

Answer: c) Based on market value

15. What is the role of a surveyor in loss assessment?

a) To delay claims processing
b) To maximize payouts
c) To determine the cause and extent of loss
d) To minimize cooperation with the insured
e) To negotiate with salvage agents

Answer: c) To determine the cause and extent of loss

1. What is the primary purpose of assessing the qualitative extent of damage in insurance
claims?
a) To determine the age of the damaged property
b) To evaluate the extent of physical wear and tear
c) To ascertain the degree of damage beyond physical inspection
d) To calculate the total cost of repairs
e) To establish the cause of the damage

Answer: c) To ascertain the degree of damage beyond physical inspection

2. In loss assessment, what method is commonly used to quantify large quantities of

powdered or granulated commodities?
a) Weighing each unit individually
b) Estimating based on visual inspection
c) Volumetric measurement
d) Counting the total number of units
 e) Calculating based on market value

Answer: c) Volumetric measurement

3. How are smoke marks on building walls utilized in loss assessment?

a) To determine the age of the building
b) To identify the cause of the fire
c) To simulate storage measurements
d) To calculate the cost of repairs
e) To establish the origin of the damage

Answer: c) To simulate storage measurements

4. What factors influence the choice of loss assessment methods by surveyors?

a) Weather conditions
b) Location of the property
c) Type of loss and affected property
d) Personal preferences of the surveyor
e) Insurance company's policies

Answer: c) Type of loss and affected property

5. How is depreciation typically calculated in loss adjustment?

a) Based on income tax assessments
b) Using a fixed percentage for all assets
c) Through observations of damages and maintenance records
d) Using accounting methods like straight-line depreciation
e) By consulting with external auditors

Answer: c) Through observations of damages and maintenance records

6. What is the purpose of conducting material balance calculations in process industries?

a) To estimate production costs
b) To validate claims made by the insured
c) To calculate depreciation rates
d) To determine the age of machinery
e) To identify potential hazards

Answer: b) To validate claims made by the insured

7. How are repairs typically handled in motor insurance claims?

a) By conducting repairs at roadside repair centers
b) By outsourcing repairs to unauthorized service centers
c) By negotiating repair costs with multiple vendors
d) By conducting repairs only at authorized service centers
e) By replacing damaged items with new ones

Answer: d) By conducting repairs only at authorized service centers

8. What is the timeframe typically allotted for insureds to furnish claim details in fire and
engineering policies?
a) 5 days
b) 15 days
c) 30 days
d) 60 days
e) 90 days

Answer: b) 15 days
9. What challenges do surveyors face in assessing depreciation?
a) Limited knowledge of insurance policies
b) Lack of access to relevant records
c) Insufficient training in loss assessment techniques
d) Difficulty in determining the useful life of assets
e) Resistance from the insured

Answer: d) Difficulty in determining the useful life of assets

10. How do accountants' methods of depreciation differ from insurance depreciation?

a) Accountants use fixed percentage rates
b) Accountants consider market value fluctuations
c) Accountants focus on asset replacement costs
d) Accountants do not consider wear and tear
e) Accountants use formulas based on age

Answer: a) Accountants use fixed percentage rates

11. What steps can insureds take to expedite loss assessment and settlement?
a) Delaying the submission of claim details
b) Providing incomplete or inaccurate information
c) Requesting multiple rounds of inspections
d) Coordinating closely with surveyors and insurers
e) Ignoring requests for additional documentation

Answer: d) Coordinating closely with surveyors and insurers

12. How are marine losses categorized for claim settlement?

a) Total loss, constructive total loss, and partial loss
b) Minor loss, moderate loss, and severe loss
c) Immediate loss, delayed loss, and disputed loss
d) Surface loss, underwater loss, and salvage loss
e) Cargo loss, hull loss, and liability loss

Answer: a) Total loss, constructive total loss, and partial loss

13. What method is commonly used to quantify items when counting is impractical?
a) Manual counting
b) Digital scanning
c) Volumetric measurement
d) Weighing each item
e) Visual estimation

Answer: c) Volumetric measurement

14. How does the nature of the affected property influence the choice of loss assessment
methods?
a) It doesn't affect the choice of methods
b) Different methods are used for different types of property
c) Only aesthetic properties require special assessment methods
d) Only functional properties require special assessment methods
e) It depends on the location of the property

Answer: b) Different methods are used for different types of property

15. How does the age of the damaged property impact the assessment of depreciation?
a) Older properties are given higher depreciation rates
 b) Newer properties are given higher depreciation rates
c) Age does not affect depreciation assessment
d) The older the property, the lower the depreciation rate
e) The age of the property is not considered in depreciation assessment

Answer: a) Older properties are given higher depreciation rates

16. What role do repair estimates play in loss assessment?

a) They are used to calculate depreciation
b) They serve as evidence of the extent of damage
c) They determine the insurance premium
d) They establish liability for the loss
e) They are not relevant to loss assessment

Answer: b) They serve as evidence of the extent of damage

17. How do surveyors validate depreciation rates?

a) By consulting with the insured
b) By relying on historical data
c) By using standard industry rates
d) By conducting independent research
e) By guessing

Answer: d) By conducting independent research

18. What is the purpose of loss adjustment in insurance claims?

a) To minimize the payout to the insured
b) To determine the net claim amount
c) To delay the settlement process
d) To maximize the insurer's profits
e) To confuse the insured

Answer: b) To determine the net claim amount

19. How do surveyors handle complications in loss assessment?

a) By ignoring them
b) By placing the full facts before the insurer for advice
c) By denying the claim
d) By escalating the issue to arbitration immediately
e) By settling on a compromise with the insured

Answer: b) By placing the full facts before the insurer for advice

20. What is the significance of differentiating between depreciation for insurance purposes
and other contexts?
a) It has no significance
b) It helps ensure fair and accurate loss assessment
c) It complicates the loss assessment process
Apologies for the oversight. Here are 20 optional questions and answers extracted from
the provided text:

1. **Question:** What is the term used in insurance practice to describe property that
escapes destruction or damage from insured perils?
- A) Salvage
- B) Residual value
- C) Asset recovery
- D) Property preservation
- E) Salvage recovery
 **Answer:** A) Salvage

2. **Question:** Which of the following factors affect the determination of salvage value in
insurance claims?
- A) Market demand for repaired items
- B) Degree of damage sustained by the items
- C) Availability of organized salvors
- D) Recycling potential
- E) All of the above
**Answer:** E) All of the above

3. **Question:** What does the "average" condition in insurance policies aim to prevent?
- A) Overinsurance
- B) Underinsurance
- C) Overcompensation
- D) Risk pooling
- E) Premium reduction
**Answer:** B) Underinsurance

4. **Question:** Which clause in insurance policies adjusts the claim payment in

proportion to the ratio of the sum insured to the actual value at risk?
- A) Average condition
- B) Salvage recovery
- C) Deductible clause
- D) Excess clause
- E) Contribution clause
**Answer:** A) Average condition

5. **Question:** What is the purpose of a deductible or excess clause in insurance

policies?
- A) To increase claim payments
- B) To reduce premiums
- C) To eliminate claims entirely
- D) To encourage underinsurance
- E) To reduce claims by eliminating smaller ones
**Answer:** E) To reduce claims by eliminating smaller ones

6. **Question:** Which clause reserves the right for insurers to take over salvage and deal
with it as deemed advisable?
- A) Salvage recovery clause
- B) Excess clause
- C) Deductible clause
- D) Contribution clause
- E) Salvage clause
**Answer:** E) Salvage clause

7. **Question:** What is the primary purpose of adjusting salvage value in insurance

claims?
- A) To maximize the insurer's profit
- B) To determine the insured's liability
- C) To ensure fairness in claim settlements
- D) To minimize the insured's losses
- E) To discourage underinsurance
**Answer:** C) To ensure fairness in claim settlements

8. **Question:** In insurance terminology, what is meant by "ratable proportion of the

loss"?
- A) Proportional distribution of premium
 - B) Equal sharing of deductible
- C) Proportional reduction of claim payment
- D) Allocation of salvage value
- E) Adjustment of average condition
**Answer:** C) Proportional reduction of claim payment

9. **Question:** What is the purpose of the salvage recovery clause in insurance policies?
- A) To ensure full indemnity for the insured
- B) To determine the salvage value of damaged property
- C) To minimize the insurer's losses
- D) To provide additional coverage for salvage
- E) To regulate salvage disposal methods
**Answer:** C) To minimize the insurer's losses

10. **Question:** Which clause stipulates the conditions under which the insured can
abandon damaged property to the insurer?
- A) Salvage recovery clause
- B) Excess clause
- C) Deductible clause
- D) Abandonment clause
- E) Contribution clause
**Answer:** D) Abandonment clause

11. **Question:** What is the primary objective of the deductible or excess clause in
insurance policies?
- A) To reduce the insured's liability
- B) To eliminate claims entirely
- C) To increase claim payments
- D) To encourage underinsurance
- E) To reduce claims by eliminating smaller ones
**Answer:** E) To reduce claims by eliminating smaller ones

12. **Question:** How do insurers determine the deductible or excess amount in insurance
policies?
- A) Based on the insured's request
- B) According to the market demand
- C) By assessing the value at risk
- D) Through negotiation with the insured
- E) By stipulating it in the policy
**Answer:** E) By stipulating it in the policy

13. **Question:** Which clause ensures that each item of property covered by multiple
policies is separately subject to average condition?
- A) Salvage recovery clause
- B) Excess clause
- C) Deductible clause
- D) Average clause
- E) Contribution clause
**Answer:** D) Average clause

14. **Question:** What is the primary purpose of the contribution clause in insurance
policies?
- A) To encourage underinsurance
- B) To ensure fair distribution of claims
- C) To maximize claim payments
- D) To eliminate claims entirely
- E) To reduce claims by eliminating smaller ones
**Answer:** B) To ensure fair distribution of claims
15. **Question:** How do insurers calculate the contribution of each policy under the
contribution clause?
- A) Based on the insurer's discretion
- B) Proportional to the sum insured
- C) Equal sharing of losses
- D) According to market trends
- E) By excluding underinsured policies
**Answer:** B) Proportional to the sum insured

16. **Question:** What is the primary objective of adjusting underinsurance in insurance

claims?
- A) To penalize overinsurance
- B) To maximize claim payments
- C) To ensure full indemnity for the insured
- D) To discourage underinsurance
- E) To minimize the insurer's losses
**Answer:** E) To minimize the insurer's losses

17. **Question:** How is the amount payable in settlement of a claim affected by

underinsurance?
- A) Increased proportionally
- B) Decreased proportionally
- C) Remains unchanged
- D) Determined by market demand
- E) Adjusted based on the deductible amount
**Answer:** B) Decreased proportionally

18. **Question:** What role does the average clause play in preventing unfair advantage in
insurance claims?
- A) Encourages underinsurance
- B) Discourages overinsurance
- C) Ensures equal sharing of losses
- D) Maximizes claim payments
- E) Eliminates deductible amounts
**Answer:** C) Ensures equal sharing of losses

19. **Question:** How does the deductible or excess clause contribute to risk
management in insurance policies?
- A) By increasing premiums
- B) By reducing claims
- C) By encouraging overinsurance
- D) By minimizing insurer's profits
- E) By eliminating deductible amounts
**Answer:** B) By reducing claims