Insurance Paper 1, May/June 2014  
Questions: 1 2 3 4 5 6 7   Main
General Comments

question 5

Question  5

Use the passage below to answer Question 5.
Akin lent N20,OOU,OOto Olufor5 years. He effecteda life policy on Olu's life for the same amount. Three years later Olu and Akin died after Oluhad paid N5,OOO,OOout of the loan, Akin'swife collected
the policy money from the insurance company, Olu'swife argued that Akin'swife has no right to the entire
N20,000.OO since herhusband had paid N5,000.00 out of the loan.
5           (a)         Explain the principle of insurance applicable in the passage above,
(b)        Explain whether Olu's wife was right in her agitation
(c)What is the total sum Akin' wife is entitled to  fromthe insurance company"



The question here was a short case study which was meant to be understood and attempted by the candidates.  The performance of the candidates in this question was poor.  The following was expected from the candidates.


5(a)       the principle of insurance that is applicable is insurable interest.  Insurable interest is the legal right to insure arising out of the financial relationship between the insured and the subject matter of insurance which must be recognized at law.  Akin has insurable interest in the life of Olu because the relationship that existed between them is creditor/debtor relationship.

  1. Olu’s wife was not right in her agitation because the policy was taken up by Akin who paid the premium; therefore the policy belongs to Akin the creditor.
  2. The total sum assured Akin’s wife is entitled to is N20,000.00.


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