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Insurance Questions and Answers

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Question 1

Which among the following is the regulator for the insurance industry in India?

A	Insurance Authority of India
B	Insurance Regulatory and Development Authority
C	Life Insurance Corporation of India
D	General Insurance Corporation of India

Question 1 Explanation:

Insurance Regulatory and Development Authority is the regulator for the insurance industry in India.

Question 2

Which among the following is a secondary burden of risk?

A	Business interruption cost
B	Goods damaged cost
C	Setting aside reserves as a provision for meeting potential losses in the
D	Hospitalisation costs as a result of heart attack

Question 2 Explanation:

The need for setting aside reserves as a provision for potential losses in the future is a secondary burden of risk.

Question 3

Which among the following is a method of risk transfer?

A	Bank FD
B	Insurance
C	Equity shares
D	Real estate

Question 3 Explanation:

Insurance is a method of risk transfer.

Question 4

Which among the following scenarios warrants insurance?

A	The sole bread winner of a family might die untimely
B	A person may lose his wallet
C	Stock prices may fall drastically
D	A house may lose value due to natural wear and tear

Question 4 Explanation:

The bread winner of a family might die untimely leaving the entire family to fend for itself, such a scenario warrants purchasing of life insurance.

Question 5

Which of the below insurance scheme is run by an insurer and not sponsored by the Government?

A	Employees State Insurance Corporation
B	Crop Insurance Scheme
C	Jan Arogya
D	All of the above

Question 5 Explanation:

The Jan Arogya insurance scheme is run by an insurer and not sponsored by the Government.

Question 6

How does diversification reduce risks in financial markets?

A	Collecting funds from multiple sources and investing them in one place
B	Investing funds across various asset classes
C	Maintaining time difference between investments
D	Investing in safe assets

Question 6 Explanation:

Diversification aims to reduce risks in financial markets by spreading investments across various asset classes.

Question 7

Which among the following is an example of coercion?

A	Ramesh signs a contract without having knowledge of the fine print
B	Ramesh threatens to kill Mahesh if he does not sign the contract
C	Ramesh uses his professional standing to get Mahesh to sign a contract
D	Ramesh provides false information to get Mahesh to sign a contract

Question 7 Explanation:

Ramesh threatening to kill Mahesh if he does not sign the contract is an example of coercion.

Question 8

Which among the following options cannot be insured by Ramesh?

A	Ramesh’s house
B	Ramesh’s spouse
C	Ramesh’s friend
D	Ramesh’s parents

Question 8 Explanation:

Ramesh does not have insurable interest in his friend’s life and hence cannot insure the same.

Question 9

Which among the following would you recommend in order to seek protection against unforeseen events?

A	Insurance
B	Transactional products like bank FD’s
C	Shares
D	Debentures

Question 9 Explanation:

Insurance provides protection against unforeseen events

Question 10

When is the best time to start financial planning?

A	Post retirement
B	As soon as one gets his first salary
C	After marriage
D	Only after one gets rich

Question 10 Explanation:

As soon as one gets his first salary one should start financial planning.

Question 11

Which among the following is not an objective of tax planning?

A	Maximum tax benefit
B	Reduced tax burden as a result of prudent investments
C	Tax evasion
D	Full advantage of tax breaks

Question 11 Explanation:

Tax evasion is not an objective of tax planning.

Question 12

Which among the following is an intangible product?

A	Car
B	House
C	Life insurance
D	Soap

Question 12 Explanation:

Life insurance is an intangible product.

Question 13

The premium paid for whole life insurance is _____________ than the premium paid for term assurance.

A	Higher
B	Lower
C	Equal
D	Substantially higher

Question 13 Explanation:

The premium paid for whole life insurance is higher than the premium paid for term assurance.

Question 14

Which among the following is a non-traditional life insurance product?

A	Term assurance
B	Universal life insurance
C	Endowment insurance
D	Whole life insurance

Question 14 Explanation:

Universal life insurance is a non-traditional life insurance product.

Question 15

Which of the below statement is incorrect?

A	Variable life insurance is a temporary life insurance policy
B	Variable life insurance is a permanent life insurance policy
C	The policy has a cash value account
D	The policy provides a minimum death benefit guarantee

Question 15 Explanation:

The statement “Variable life insurance is a temporary life insurance policy” is incorrect. The correct statement is “Variable life insurance is a permanent life insurance policy”.

Question 16

Which of the below statement is incorrect?

A	Variable life insurance is a temporary life insurance policy
B	Variable life insurance is a permanent life insurance policy
C	The policy has a cash value account
D	The policy provides a minimum death benefit guarantee

Question 16 Explanation:

The statement “Variable life insurance is a temporary life insurance policy” is incorrect. The correct statement is “Variable life insurance is a permanent life insurance policy”.

Question 17

Who provides public pensions?

A	State
B	Employers
C	Insurers
D	NGO’s

Question 17 Explanation:

Public pension is provided by the State.

Question 18

Who bears the investment risk in a fixed benefit annuity?

A	Insurer
B	Insured
C	State
D	Risk pool

Question 18 Explanation:

Insurer bears the investment risk in a fixed benefit annuity.

Question 19

Which among the below statements is true? Statement I: Every pension is an annuity Statement II: Every annuity is a pension

A	I and II are true
B	I and II are false
C	I is true and II is false
D	I is false and II is true

Question 19 Explanation:

Statement I is true and II is false.

Question 20

Health insurance is designed to handle which of the following risks?

A	Mortality
B	Morbidity
C	Infinity
D	Serendipity

Question 20 Explanation:

Health insurance can be used to address the risk of morbidity

Question 21

What is the objective behind Mortgage Redemption Insurance?

A	Facilitate cheaper mortgage rates
B	Provide financial protection for home loan borrowers
C	Protect value of the mortgaged property
D	Evade eviction in case of default

Question 21 Explanation:

MRI provides financial protection for home loan borrowers.

Question 22

What does a policy lapse mean?

A	Policyholder completes premium payment for a policy
B	Policyholder discontinues premium payment for a policy
C	Policy attains maturity
D	Policy is withdrawn from the market

Question 22 Explanation:

Policyholder discontinuing premium payment for a policy is termed as policy lapse.

Question 23

Who bears the investment risk in case of ULIPs?

A	Insurer
B	Insured
C	State
D	IRDA

Question 23 Explanation:

Insured bears the investment risk in case of ULIP.

Question 24

During the _________ period, if the policyholder has bought a policy and does not want it, he / she can return it and get a refund.

A	Free evaluation
B	Free look
C	Cancellation
D	Free trial

Question 24 Explanation:

During the free look period, if the policyholder has bought a policy and does not want it, he / she can return it and get a refund.

Question 25

What does a first premium receipt (FPR) signify? Choose the most appropriate option.

A	Free look period has ended
B	It is evidence that the policy contract has begun
C	Policy cannot be cancelled now
D	Policy has acquired a certain cash value

Question 25 Explanation:

FPR is evidence that policy contract has begun.

Question 26

Under what circumstances would the policyholder need to appoint an appointee?

A	Insured is minor
B	Nominee is a minor
C	Policyholder is not of sound mind
D	Policyholder is not married

Question 26 Explanation:

Where the nominee is a minor, the policyholder needs to appoint an appointee.

Question 27

Which of the following cases is likely to be declined or postponed by a life insurer?

A	Healthy 18 year old
B	An obese person
C	A person suffering from AIDS
D	Housewife with no income of her own

Question 27 Explanation:

A person suffering from AIDS is most likely to be declined life insurance cover.

Question 28

Which of the following is an example of moral hazard?

A	Stunt artist dies while performing a stunt
B	A person drinking copious amounts of alcohol because he is inured
C	Insured defaulting on premium payments
D	Proposer lying on policy document

Question 28 Explanation:

A person drinking copious amounts of alcohol because he is inured is an example of moral hazard.

Question 29

Why is heredity history of importance in medical underwriting?

A	Rich parents have healthy kids
B	Certain diseases can be passed on from parents to children
C	Poor parents have malnourished kids
D	Family environment is a critical factor

Question 29 Explanation:

Certain diseases can be passed on from parents to children and hence heredity history needs to be considered in medical underwriting.

Question 30

Which of the below statement best describes the concept of claim? Choose the most appropriate option.

A	A claim is a request that the insurer should make good the promise specified in the contract
B	A claim is a demand that the insurer should make good the promise specified in the contract
C	A claim is a demand that the insured should make good the commitment specified in the agreement
D	A claim is a request that the insured should make good the promise specified in the agreement

Question 30 Explanation:

A claim is a demand that the insurer should make good the promise specified in the contract.

Question 31

Which of the below statements is correct?

A	The prime purpose of insurance regulation is to protect the insurance companies
B	The prime purpose of insurance regulation is to protect the policyholder
C	The prime purpose of insurance regulation is to protect the insurance intermediaries
D	The prime purpose of insurance regulation is to protect the Government

Question 31 Explanation:

The prime purpose of insurance regulation is to protect the policyholder.

Question 32

Which of the below statement is correct?

A	If agent loses the licence, then no duplicate licence is issued. The agent has to wait till the time of renewal, when another copy is issued
B	If agent loses the licence, then the Authority may issue a duplicate licence free of cost.
C	If agent loses the licence, then the Authority may issue a duplicate licence only after a FIR is lodged and a waiting period of 30 days.
D	If the agent loses the licence, then the Authority may issue a duplicate licence on payment of a fee of rupees fifty.

Question 32 Explanation:

If the agent loses the licence, then the Authority may issue a duplicate licence on payment a fee of rupees fifty.

Question 33

Which of the below statements is incorrect?

A	An individual insurance agent is a representative of the insurance company and is governed by the agent-principal relationship.
B	An individual insurance agent's primary relationship and responsibility is to the insurance buyer and not the insurance company.
C	Insurance broker, who represents the insured, generally does not have any contractual agreement to exclusively serve any one insurance company
D	Insurance broker is expected to represent the customer’s interest when choosing the right product and company that would best fit the customer’s particular needs.

Question 33 Explanation:

The statement “An individual insurance agent's primary relationship and responsibility is to the insurance buyer and not the insurance company” is incorrect.

Question 34

Proportion of policies remaining in force at the end of the period out of the total policies in force at the beginning of the period is referred to as

A	Persistency
B	Consistency
C	Uniformity
D	Reliability

Question 34 Explanation:

Proportion of policies remaining in force at the end of the period out of the total policies in force at the beginning of the period is referred to as persistency.

Question 35

Which of the below statement best describes a “testimonial”?

A	An endorsement from a satisfied customer
B	Test result for a product in a benchmarking test
C	List of tests that a product must pass
D	Money required to test a product

Question 35 Explanation:

A testimonial is an endorsement from a satisfied customer.

Question 36

What is meant by customer lifetime value?

A	Sum of costs incurred while servicing the customer over his lifetime
B	Rank given to customer based on business generated
C	Sum of economic benefits that can be achieved by building a long term relationship with the customer
D	Maximum insurance that can be attributed to the customer

Question 36 Explanation:

Sum of economic benefits that can be achieved by building a long term relationship with the customer is referred to as customer lifetime value.

Question 37

In a customer’s mind, there are two types of feelings and related emotions that arise with each service failure on part of the insurance company. These feelings are

A	Confusion and empathy
B	Dishonesty and revenge
C	Ignorance and sympathy
D	Sense of unfairness and hurt ego

Question 37 Explanation:

In a customer’s mind, there are two types of feelings and related emotions that arise with each service failure on part of the insurance company. These feelings are: sense of unfairness and hurt ego

Question 38

Which among the following is not an element of active listening?

A	Paying good attention
B	Being extremely judgmental
C	Empathetic listening
D	Responding appropriately

Question 38 Explanation:

Being extremely judgmental is not an element of active listening.

Question 39

The ______________ has jurisdiction to entertain complaints, where value of the goods or services and the compensation claimed is up to Rs.20 lakhs.

A	District Forum
B	State Commission
C	Zilla Parishad
D	National Commission

Question 39 Explanation:

The District Forum has jurisdiction to entertain complaints, where value of the goods or services and the compensation claimed is up to Rs. 20 lakhs.

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