Insurance CFP

8/8/2019 Insurance CFP

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FINANCIAL PLANNING ACADEMY

Insurance Planning and Risk Management

PART - 11 Loss of income derived from a property is an example of:

(a) Personal risk(b) Property risk

(c) Liability risk(d) Financial risk

2 Insuring your house is an example of which of the following?(a) Risk transfer

(b) Self insurance(c) A control measure

(d) Risk retention

3 A car insurance policy with an excess of 800 in order to reduce the amount of the

regular premium is considered to be:(a) Self insurance(b) Risk transfer(c) Partial risk retention

(d) Complete risk retention

4 What is the third step in the risk management process?(a) Implement appropriate strategy

(b) Identify the risk(c) Develop alternatives

(d) Monitor, review and update strategy

5 When a financial planner is assessing insurance needs for his/her client, the financial

planner should always:(a) Make sure the client has life cover(b) Identify any risks that the client may be exposed to and recommend strategies to

address those risks

(c) Recommend the client consult an insurance broker to identify risks the client isexposed to

(d) Identify current investments, the risks associated with those investments andrecommend strategies to address those risks

Financial Planning Academy 1


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6 Which of the following statements is correct with regards to an insurance agent?

(a) They are responsible for the ongoing relationship between the adviser and thelicensee

(b) They are the insurance company who issues the insurance(c) Their duty is first and foremost to follow the client's instructions

(d) Their responsibilities and obligations are to the insurance company that theyrepresent

7. What does the insured's duty of disclosure mean?(a) The insured must disclose everything to the insurer(b) If a proposer does not answer a on the application form, the insurer does not have to

pay claims(c) The insured must disclose to the insurer every relevant matter known

(d) If a on an application form is ambiguous, and as such the meaning of the ismisunderstood by the insured, the insurer can claim non-disclosure

8.Anti-discrimination and equal opportunity legislation prohibits discrimination on thebasis of marital status, pregnancy, race, colour, disability and religious or political beliefs.

This means that:(a) Insurance companies cannot refuse applications on any of these factors, but they

can reflect it in an increased premium

(b) Insurance companies cannot refuse applications on any of these factors, nor can theyreflect it in an increased premium

(c) Insurance companies can refuse applications on some of these factors but only underspecial circumstances

(d) Insurance companies can refuse applications on all of these factors but only underspecial circumstances

9. A lender requires a particular insurers product to be in place before they grant amortgage. This is known as:(a) A consumer contract warranty(b) Misrepresentation(c) Third line forcing

(d) Fraudulent disclosure

10. Which of the following client categories are considered to be a high-risk group with

regards to accidental death or injury?(a) Young adult

(b) Young family(c) Over 40s(d) Mature adult



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11. Insurance underwriters consider occupation for the degree in which it could cause

death or disablement. Another reason they consider occupation is:(a) The ability to meet the premium each year(b) The ability for clients to generate sufficient income to maintain lifestyle(c) The likelihood of being able to return to work after a relatively minor injury,

such as a broken leg(d) The opportunity to get to know the client

12. Which of the following occupational classifications would be considered more

hazardous for insurance purposes?(a) Professionals, such as accountants and lawyers(b) Clerical and other white collar workers(c) Skilled workers(d) Trades people doing manual work

13. The income of a client is used to determine:

I. The amount of income protection cover requiredII. The amount of premium loading and/or any exclusions applicable tothe policy

III. What level of income would be required for dependants in the event ofpremature death

IV. What level of income would be required in the event of disability(a) I and II(b) II and IV(c) I, III and IV

(d) I, II and IV

14.Liability arising from the ownership or occupation of a property is an example of:(a) Fixed liability

(b) Personal liability

(c) Speculative liability(d) General liability

15. Capital Required = Living Expenses x Years Required. This is the formula for the:

(a) Future value approach(b) Annuity approach(c) Needs approach(d) Multiple approach

16. Prakash earns 55,000 p.a. He estimates that his family would require 80% of hisincome in the event of his death or disability. Using the annuity approach, what is therequired lump sum if the investment returned 5% per annum?(a) 2,750,000(b) 220,000(c) 1,40,000(d) 880,000



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23. Which of the following is a benefit of having multiple lives covered under the one

policy?(a) The premium is calculated based on the details of 'the person of least risk'(b) The clients are only required to pay the equivalent of one person's premium, being

whichever is the most expensive

(c) Each of persons covered has access to their own sum insured plus that of the otherlife insured, effectively doubling their level of cover(d) The clients only incur one policy fee

24. In the event of the life insured committing suicide, what would happen under aterm life policy?(a) A claim would be paid in full if the policy had been in force for at least 12 months(b) Partial claim paid, depending on length the policy has been in force(c) The claim would be paid if the policy had been in force for at least 13 months

(d) A claim will never be paid in this situation

25.With regards to TPD, the broad definition of being totally and permanently disabledis the 'the insured is unable to return to work'. Can a homemaker then, be covered for

TPD?(a) No, as a homemaker is technically unemployed(b) Yes, but the homemaker must choose their desired definition of TPD from a number

of options at time of application(c) Yes, but only if they are gainfully employed elsewhere at least on a part-time basis(d) Yes, but there may be a separate definition of TPD applied

26. What is the term used for the insured's right to renew their life insurance policyregardless of changes to medical status?

(a) Right to renew(b) Guaranteed renewable(c) Right to continue(d) Guaranteed continuance

27. Some whole of life and endowment policies have a surrender value which gives

rise to the 'non forfeiture' principle. Which of the following best describes the 'nonforfeiture' principle?(a) The ability to 'skip' a premium without the policy lapsing (so long as the

accumulated unpaid premiums, plus interest, do not exceed the surrender value)

(b) The ability to 'skip' a premium without the policy lapsing (so long as the premium is

paid within 6 months)(c) The ability to 'skip' a premium without the policy lapsing (so long as the premium ispaid within 12 months)

(d) The ability to 'skip' a premium without the policy lapsing (so long as the skippedpremium, plus interest, is added to the next premium)



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28. If the life insured has NOT nominated a beneficiary:

(a) The benefits will automatically be paid to the spouse(b) The benefits will be automatically paid to the policy owner(c) The benefits will paid to the insured's superannuation fund

(d) The benefits will be paid to the insured's estate

29. A flat tax rate, limited liability to the value of ownership and separate legal entityare all characteristics of a:(a) Sole trader(b) Partnership(c) Company

(d) Trust

30. Which of the following can sue and be sued as a separate legal entity?

I. A sole trader

II. A partnershipIII. A companyIV. A trust

(a) I, II and III(b) I and II only(c) III only

(d) I, II, III and IV

31. Are the premiums for a business insurance policy tax deductible?(a) Yes(b) No

(c) Yes, but only if the purpose of the policy is to cover a revenue loss(d) Yes, but only if the purpose of the policy is to cover a capital loss

32. Which of the following are all general insurances?

(a) House owners, consumer credit insurance and motor vehicle

(b) House owners, health, TPD and motor vehicle(c) House owners, health and life(d) Householders contents, death and motor vehicle



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33. Professional Indemnity Insurance upholds that:

I. Duty of care is owed by suppliers of advice or informationII. Suppliers of advice or information present themselves as

having special skill and knowledge in the area that the

information is related toIII. It was reasonable that the person who took the advice orinformation would rely and act on that advice

IV. Liability only arises as a result of dishonest service(a) I, II, III & IV(b) I, III & IV(c) I, II & IV(d) I, II & III

34. Major differences between underwriting life insurance and disability insurance are:V. Death is a single event, disability can occur repeatedly

VI. II. Death is unpredictable, whilst demographic statisticsindicate likely events of disablementVII. III. Death is permanent, disability may be permanent or

temporary(a) I, II & III(b) I & III

(c) III(d) I & II

35. A financial adviser must demonstrate to the underwriter that they have considered:

(a) The insurer's requirements, for the proposed amount of cover, has been fulfilled

(b) Their clients ability to meet the cost of premiums(c) Alternative methods to control or avoid the risk(d) The amount of risk that the insurer is taking on by accepting the client

36. Step 2 in the insurance review process is, 'Establish changes in clientcircumstances'. What would NOT be considered a 'change'?(a) The client is made redundant(b) The client wants their insurances reviewed more frequently

(c) The client's mother has permanently moved inThe client's marriage recently ended



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PART - 2

Q1. An executive is offered two ways of collecting his company bonus: either cashequivalent to 6 months salary or a stock option with a 50-50 chance of either doubling invalue or becoming worthless in the next year. If the executive were a risk seeker, what

would he take?A. Definitely the cash.B. Definitely the stock option.C. Probably the cash.D.Probably the stock option.

Q2. A house owner contends that he is exposed to the following risks:I. Loss from fire.II. Loss from theft.III. Loss from legal liability.IV. Possibility of loss when the house is sold. Identify the pure risks amongst those listed.

A. I, IIB. II, IIIC. I, II, III

D. All of the above.

Q3. Gambling losses are uninsurable for the following reason/s:I. It makes those partaking in such a system indifferent to losses.II. Legislation prohibit insuring gambling losses.III. The losses are unpredictable.IV. The losses may be catastrophic.A. I, II

B. I, IIIC. II, IIID. III, IV

Q4. The ease with which an asset can be converted into cash for an approximation of itstrue value is referred to as the assets?A. Return.B. Critical mass.C. Liquidity.

D. Margin.



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Use the following information to provide answers to Questions 5 to 6.

Your client has entered into a partnership that offers an additional business interest of

450,000 in 10 years time or on earlier death or disability of his partner. Your client hasdecided to fund this buy-sell arrangement by ten annual contributions, the first beginningnow. Assuming that the fund earns 7.0% per annum net returns, calculate:

Q5. The annual contributions (assuming that the partner survives for 10 years):A. 30,439

B. 28,447C. 35,111D. 45,000

HINT :-

FVA= PMT * [ (1+k) n 1 ] * (1+k) )k450,000 = PMT * (13.8614) * (1.07)PMT = 450,000/14.7835PMT = 30,439 (multiply by (1+k) because the annual contribution is made at beginningof the period

Q6. The maximum amount your client has to raise immediately to meet the buy-sellarrangement if the partner dies after 5 years from now.A. 324,958B. 312,700C. 283,952D. 262,700

HINT :-FVA= PMT * [ (1+k) n 1 ] * (1+k) )

kFVA = 30,439 * [(1.07)5 1 ] * (1.07)

.07FVA=30,439*6.15329 = 187,300Max. Amount need to be raise = 450,000 - 187,300 = 262,700

Q7. Which amongst the following is a benefit that arises when a life insurance policy ispurchased?A. It serves as an immediate source of funds for the repayment of loans.B. It acts as a collateral for loans.C. It frees properties from leasehold encumbrances.D. It creates an immediate estate if the insured dies.



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Q8. A client has the need to provide for his childs college education costs. He envisagesthat four annual payments of 20,000 would be needed beginning 15 years from now.Ignoring inflation and assuming that the fund earns 8% per annum returns throughout,

calculate the value to be placed on this liability when carrying out a needs analysis forthis client.A. 80,000B. 25,219C. 97,332D. 22,553

Solution :-Annual Payment Period Discounted Value

PV Rate20,000 15 0.3152 6,304

20,000 16 0.2919 5,83820,000 17 0.2703 5,40620,000 18 0.2502 5,005

DCF 22,553

Q9. A client recently purchased a new home for 150,000 including the lot valued at40,000. How much insurance would you recommend that your client purchase to coverfull replacement of the house in the event of a loss?A. 88,000B. 110,000

C. 120,000D. 150,000

HINT :-Cost of new home less Value of the lot 150,000 40,000 = 110,000

Q10. In relation to life assurance, identify the incorrect statement amongst the following:A. A joint-life policy is payable upon the death of the first of two or more lives insuredunder the single contract.B. A last survivor policy is payable upon the death of the last of two or more lives insuredunder the single contract.C. Even with renewable term insurance, the policy owner/insured would not be

permitted to renew the policy if he or she had contracted a terminal disease prior to

the renewal date.

D. With a level premium policy, level premiums in excess of the policys share of deathclaims in the early years of the contract are accumulated at interest in a reserve.



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Q11. The gross premium is obtained by loading the net premium. The loading reflects allof the following except:A. A percentage of the premium.

B. A constant amount per 1,000 sum assured.C. A constant amount per policy.D. A factor for investment expenses.

Q12. An annuity that makes lifetime payments with the first payment made after oneperiod from issue is called a(an):A. Life annuity immediate.

B. Life annuity due.C. Annuity certain.D. Annuity due.

Q13. A disability income policy that specifies a flat benefit amount may contain asupplemental benefit granting the insured the right to increase the benefit amount inaccordance with increases in his earnings, if he can prove a commensurate increase inincome. The supplemental benefit contained in this policy is known as:A. A cost-of-living adjustment (COLA) benefit.B. A future purchase option benefit.

C. A partial disability benefit.D. A guaranteed income contract (GIC) benefit.

Q14. Investment related risks arise primarily due to:

I. Lack of diversification in the assets held.II. The mismatching of assets and liabilities.III. Lack of clear guidelines from the authorities.A. IB. IIC. I, II

D. I, III

Q15. Identify the correct statement among the following with regard to an insurersquality rating on the insurers financial condition:A. An insurers rating can affect its ability to attract new business.

B. A ratings downgrade can damage an insurers persistency.C. In order to improve its rating an insurer may have to invest in highly conservativeinvestments.D. All of the above.



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Q16. Before a contract of insurance is sold to a proposer, a life insurance agent shouldundertake the following except:A. Explain all the essential provisions of the contract.

B. Draw attention to the long-term nature of the policy and the effects of earlydiscontinuance.C. Attempt to persuade a prospective policyholder to cancel any existing policies.

D. Explain the benefits arising from the plan and its riders.

Q17. The following are statements concerning contracts of insurance. Identify thestatement(s) that is/are correct.I. Whenever the wording in an endorsement or rider is in conflict with the terms of thepolicy to which it is attached, the endorsement or rider takes precedence.II. One reason for exclusions in insurance policies is that the risks are covered by otherinsurance.

A. IB. IIC. All of the above.D. None of the above.

Q18. All of the following statements regarding insurable interest are correct except:A. A party has an insurable interest in a life insurance contract when he or she is subjectto a loss upon the death of an insured.B. Only immediate family members can have insurable interest in each others lives.

C. Persons are presumed to have an insurable interest on themselves.D. Generally, the person to have an insurable interest must give his or her consent beforea policy is issued, even if the applicant has an insurable interest.



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PART - 3

1) What are the criteria for determining Insurable Risk?(A) Law of Large Numbers(B) The loss must be definite and measurable

(C) The loss must not be catastrophic

(a) (C) only(b) (B) & (C)(c) (A), (B) & (C)

(d) None of the above

2) A type of risk with high frequency but low severity is probably best handled by:(a) A voidance(b) Subrogation(c) Self-insurance

(d) Under-Insurance

3) Speculative risk can have following outcomes ________.(A) Loss(B) (B) Gain(C) (C) Status Quo

(a) A only(b) B only(c) C only(d) A, B & C

4) LALGI is ___________.

(a) Private contribution guarantee scheme(b) Private insurance(c) Public benefit guarantee scheme(d) Social insurance

5) For risk to be insurable which one of following is not correct?(a) The loss must be fortuitous or accidental.(b) The loss must not be catastrophic.(c) The loss produced by the risk must be definite and measurable.(d) There must be a sufficiently large number of heterogeneous exposure units to

make the losses reasonably predictable.



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6) Consideration under the law is a return promise to:1. Do certain things2. Abstain from doing certain things3. Forbear some acts

4. A minor(a) (1), (2), and (3) only(b) (1), (2), and (4) only(c) (1), (3), and (4) only(d) (2), (3), and (4) only

7) A client explains that she only wants an insurance policy that will cover her familyagainst financial risk over the next five years, while she still has dependent children and alarge mortgage. It is unlikely her income will increase over this period. What type ofinsurance is she looking for?

(a) An unit linked insurance plan(b) Money back policy(c) Term insurance with a level premium

(d) Term insurance with a stepped premium

8) Which of the following is type of pecuniary insurance?

a) Commercial vehicle insuranceb) Engineering insurancec) Money policy

d) Workmans compensation

9) Participating policies are those where _____________.(a) Both insurer and insured participates in each others loss(b) Insured participates in running of insurance of company(c) Insured participates in surplus of insurance company

(d) Insurer participates in loss of insured

10) In Unit-Link policy, market risk is with ______.(A) Insured(B) Insurer

(a) A

(b) B(c) Both A & B(d) Neither A nor B



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11) If the life insurance policy is endorsed under MWP Act, 1874 then ________.(a) Creditors have claim only to the extend of outstanding principal, on policy proceeds(b) Creditors have first claim on policy proceeds(c) Creditors have no claim on policy proceeds

(d) Creditors have residual claim on policy proceeds

12) Minimum age at entry for Medi-claim is ___________.(a) 8 years(b) 91 days

(c) 365 days(d) 18 years

13) Jigar was driving his car home from work, when a pit dug by the municipalcorporation in the road, remained open and unmarked. He met with an accident and hadto be hospitalised for 3 months. What are the insurance claims that can a rise from this

accident?

(a) Jigar can claim personal insurance for the accident, as it was not caused by

negligence on his part; the municipal corporation cannot claim third party loss

insurance to pay damages to Jigar, as it was negligent. Jigar can claim insurance

for damage due.

(b) Jigar can claim temporary disability insurance and insurance for his damaged car(c) Jigar has to apply to the municipal corporation for damages, which the corporation

will pay out of its claims for liability to third party. His motor insurance will coverdamages to his car.

(d) Since the municipal corporation was negligent, it would not be able to lodge a claimto recover payment of damages to Jigar. Jigar will only receive motor insuranceclaims on his car.

14) Sujata was standing on the terrace of her building hanging out clothes. Sheaccidentally fell off and landed on the sunshield of the next floor, which crashed anddamaged the car of her neighbour parked below. What are the insurance claims that arisefrom this event?

(a) Sujata can claim personal accident insurance. Both her neighbours will claim

property insurance for the freak accident.(b) Sujata cannot claim accident insurance as the accident was caused by her negligence.

Her neighbours can claim property insurance cover for loss to their property(c) Sujatas neighbours will collect damages from her, which Sujata can pay out of

insurance cover for losses to third parties.(d) Sujatas neighbours will not be able to claim insurance, as the damage to their

property due to such freak accidents is not usually covered by insurance. Sujata willbe able to claim her accident insurance, as she did not fall intentionally.



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15) Your client has bought life insurance and medical insurance, but has not bought acover for permanent disability. His argument is that he is paying too much by way ofpremium for risks that he believes are "farfetched" and "not likely to affect him". Whatwould you advise the client?

a) A financial planner can persuade the client to consider the losses from permanentdisability and highlight the risks to the client and recommend an appropriate policy forhim.b) If a client is not willing to bear the costs of premium, it can be assumed that he iswilling to bear the costs of risk retention. Insurance may not be necessary in such cases.c) If losses that would occur to the client in the event of permanent disability arehigher than what he can bear, the client is better off buying insurance. The costs of

insuring against losses, which have lower probability of happening, will in any case

be lower.

d) The amount of insurance a person will buy depends on his perception of risks and their

impact on him. It would not be possible to persuade this client to buy more insurance.

16) Suresh has not bought accident insurance cover, though his two-wheeler is coveredfor damages from accidents. He wears a helmet and drives carefully. What can you sayabout his risk management?

(a) Suresh has insured the property risk. He controls some of his personal risk andretains the rest of the risk.

(b) Suresh has controlled his personal risk and insured his property risk(c) Suresh has not done anything to manage his risks and has to immediately go for

accident and personal risk cover. He cannot rely on third party damages alone tocover the risk of the road.

(d) Suresh has transferred his personal risk to other drivers of the road, insured his property risk and can claim damages is accidents are caused by third partynegligence.

17) Mrs.Kapoor, a 40-year-old widow, has a 8-year-old son. Her current savings are notadequate to provide for her sons post graduate studies however she will be able to save itup by the time he finishes graduation i.e. when he is 20 years old. Mortality tablesindicate that her life expectancy is another 30 years. Which of the following is true?(a) She needs to insure her life for 12 years

(b) She does not need to insure her life(c) She needs to insure her life for 30 years(d) She needs to insure her sons life for 30 years



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18) Bhimrao, 36 years and married, works for a multinational firm, which providesadequate medical and related covers. He is also able to accumulate sick leave. He alreadyhas his own home and savings of Rs. 35 lakh, which are well invested. Which insurance

cover does he require the most?(a) Life Cover

(b) Medical Cover(c) Property Insurance(d) Temporary Total Disablement Cover

19) Premium on Motor Insurance policy doesnt depend on which one of the followingfactors?(a) Zone of operation of the vehicle(b) Insured Declared Value (IDV) of the vehicle

(c) Cubic capacity of the vehicle(d) Age of the owner of the vehicle

20) All of the following statements describe the operation of a life annuity EXCEPT:

(a) Because of the interest factor, an annuitant is assured of receiving back more

than he or she paid in

(b) The annuitant is assured that he or she cannot outlive the length of time of the annuitypayments

(c) The emphasis is on the liquidation of the fund as opposed to its growth(d) The older the annuitant is when he or she receives the first annuity payment; the

greater will be the amount of each payment



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21) In a sample of 200 observations, the lowest and the highest scores were 45 and 265respectively, what would be range of the distribution?

(a) 14

(b) 155(c) 155.56(d) 220

HINT:-Range=265-45=220

22) Derive the Policy Cost Per Thousand with following data; Policy cost per thousandconversion = 0.001 Interest rate selected equivalent to the after-tax rate of return = 4%Dividend or Bonus = Rs.13000


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PART - 4

1 (A)Death of the familys breadwinner is a financial risk( B)It is a pure risk.

(a) Both statements A and B are correct.(b) Both statements A and B are incorrect.(c) Statement A is correct.(d) Statement B is correct.

2 Radha had the option of investing her retirement funds in PO (MIS) Or Bank depositsor with private fund raisers. She could get her funds back with great difficulty when sheinvested in 3rd option. This was a case of Radha(a) Not understanding the risks

(b) Taking a gamble for high returns(c) Succumbing to greed

(d) Exercising poor judgment.(HINT : b c and d logically follow from a)

3 Mr. Kumar has suffered severe damages to his property (uninsured) because of a fire.Thereby he suffered severe financial losses. This happened because he did not cover(a) The investment risk(b) The pure risk

(c) The speculative risk(d) None of the above

4 Which of the following statements is true?

The impact of the death of one sole breadwinner of the family-over 40s family-wouldbe severe in the area of(a) Meeting household debts

(b) Meeting basic needs(c) Meeting medical needs(d) Meeting educational needs

5 Bhima the driver causes injuries to a pedestrian by rash driving of car. The injuredvictim had to spend Rs.400 in treating his injuries. Bhima s act has created liabilitiesunder(a) Common law

(b) Contract(c) Statue and Common law(d) Statute only



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6 Mr. K.Mangla took a business premise on lease with the provision that he himself hadto pay the insurance premium for fire and other perils on the premises and not the ownerof the premises. This would be an instance of(a) Risk control(b) Risk transfer

(c) Risk retention(d) Risk reduction

7 The decision to retain risk should be based on(a) Ability to pay premiums(b) Ability to afford the financial consequences of self insurance

(c) Standard practices(d) None of these.

8 Insurance is an agreement to(a) Share the losses

(b) Spread the economic burden throughout the group(c) Make the individual feel more secure(d) All of the above

9 In insurance, the contingency insured against is usually the(a) Financial loss(b) Certain financial loss(c) Uncertain financial loss

(d) Loss of profit

10 (A) The existence of insurance may make people to exert less effort to control losses(B)It might also induce commitment of frauds against insured.

(a) Both A and B statements are true

(b) Statement A is true(c) Statement B is true(d) Both A and B are not true.

11 (A) Insurance companies reduce risk by predicting losses within narrow limits basedon the law of large numbers

(B) It is the increasing pool of resources accessible to an insurer that reduce the riskof non payment.

(a) Statement B alone is correct.(b) Both statements A and B are correct

(c) Both statements A and B are incorrect.(d) Statement A is alone correct



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12 (A) The law of large numbers is useful for making predictions about the future only ifwe assume that future occurrences will approximate past experiences.(B) The law of large numbers would have predictive value only if future happenings arealso a result of chance

(a) Statement A alone is true(b) Statement B is alone true(c) Both A and B are not true(d) Both A and B are true

13 An entrepreneur who was into manufacturing corrugate boxes also owned few photocopying machines and also ran courier and fax services, sought a singlecomprehensive protective non-life insurance cover from an insurance company. Theinsurance company declined the business based on the principle ofA ) Measurability and definiteness of lossB) Large number of homogenous exposure units

(a) Statement A alone is correct(b) Statement B alone is correct(c) Both statements A and B are incorrect(d) Both statements A and B are correct

14 An owner of a large group of privately owned residential property units is seekingcover from a general insurance company for (1) fire and other associated perils (2)depreciation in the value of property (3) complete destruction of property from terroristattacks for the next six months. The chances are that the insurance company will(a) Offer cover for (1) (2) and (3) above(b) Offer cover for (1) and (3) above(c) Offer cover for (1) above only

(d) Offer cover for (1) and (2) above

15 (A) Gambling or wager creates the risk by its act of betting on it(B) The chance of loss exists in life, whether or not the risk is insured

(a) Statement A alone is correct(b) Statement B alone is correct(c) Both statement A and B are incorrect(d) Both statements A and B are correct

16 Insurance companies often offer the services of specialists and experts to industry indifferent fields. This is for rendering advice on(a) Reduction in uncertainties(b) Loss prevention/minimization

(c) Indemnification(d) None of the above



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17 (A) Over time , operating expenses of insurance companies go up for renderingcustomer services.(B) The availability of insurance gives a fill up to moral hazard

(a) Statements A and B are true

(b) Statements A and B are not true(c) Statement A alone is true(d) Statement B is true

18 In controlling risks, the overwhelming consideration will be(a) Economic

(b) Physical(c) Specialized steps(d) None of the above

19 To cope with losses, total or partial, the steps to be taken include the following itemswhich are given here in a jumbled up manner. Order these in their correct or logicalsequences by indicating the correct ranking against each as 1,2 3(A) Take into account potential impact of inflation(B) Itemize and value assets exposed to loss Assess the size of potential income/liability losses

(a) A-3, B-1,C-2

(b) A-2, B-1, C-3(c) A-3, B-1, C-2(d) A-1,B-2,C-3

20 Generally speaking, high severity of losses will be accompanied by(a) High frequency of losses(b) Low frequency of losses

(c) Equal frequency of losses(d) None of these

21 The demand for insurance tends to be inelastic because of(a) Statutory requirements(b) Financial prudence(c) Business transaction requirements(d) All of the above.

22 Highly refined risk classification systems enable insurers to(a) Earn greater profits(b) Reduce costs(c) Expand the market(d) All of the above



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23 In a business cycle situation when insurance underwriters are unable to correctlyassess claim costs?(a) Profits falls(b) There is excess supply of insurance(c) Many new players are tempted to enter the market

(d) All of the above

24 The length of the insurance industrys business cycle is shortened because of(a) Regulatory provisions(b) High specialization(c) Easy entry and exit conditions

(d) None of these

25 Reserve management practices result in extending the period of business cycle byA. Increasing reserves in good times and lowering reserves in bad timesB. Reporting greater profits in good times and lower profits in bad times

(a) Both A and B statements are correct(b) Statement A alone is correct

(c) Statement B alone is correct(d) Both A and B are incorrect

26 The probability distribution of number of possible accidents to the car of a fleet ofowner of 40 cars is as under

Number of Accidents Cumulative Relative Frequency

0 0.60

1 0.80

2 0.903 0.97

4 1.00

TOTAL 1.00

What is the probability that a car from the above pool of 40 cars has met with at least 3accidents?(a) 0.1

(b) 0.2(c) 0.3(d) 1.0

( Hint: the probability that a vehicle has met with 2 accidents is 0.90.Hence theprobability ha I has me with at least 3 accidents i.e. accident or more I 0.90=0.1)

27 Probability distribution is generally used by insurers to(a) Estimate profitability(b) Determine premium(c) Estimate future losses

(d) Select risks



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28 When there is the possibility of loss or no loss in an outcome it is a case of(a) Gambling(b) Speculative risk(c) Pure risk

(d) Special risk

29 Every employer is obliged to ensure that his employees get a safe and secureworkplace. In relation to the risks arising in the workplace which affects the employees,cover is provided through(a) Employees Provident fund(b) Workmens compensation insurance

(c) Employees group life insurance(d) Employees personal accidents insurance scheme

30 Besides meeting the essential requirement of a valid contract (offer and acceptance,consideration etc ) the following must be there for a contract to be present.

(a) Duty of care(b) Consensus ad idem(c) Waiver and Estoppel(d) None of these

31 In a life insurance contract, offer refers to(a) Proposer paying the first premium(b) Proposers application form for insurance

(c) Original policy bond(d) Company brochure duly authenticated

32 In life insurance(A) Consideration is the payment of premium by the insured(B) Consideration is the payment of premium or the promise to pay future premiums

(a) Statement A alone is correct(b) Statement B alone is contract

(c) Statements A and B are both correct(d) None of the above

33 (A) Payment of the first premium is legal consideration(B) Payment of the first years premium as also the subsequent two years premiumconstitute legal consideration.

(a) Statement A is correct

(b) Statement B is correct(c) Statement A and B are both incorrect(d) None of these



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34 When it is said that insurance contracts, generally speaking are contracts of indemnity,the reference is to(a) Life insurance(b) Group insurance(c) Reinsurance

(d) Non-life or general insurance

35 (A) Under the principle of indemnity, the amount payable by the insurer in the eventof contingency insured against happening, payment will be limited to the loss the insuredsuffers.(B) In certain forms of medical/health insurance, the principle of indemnity is applicable

(a) Statement A is only correct(b) Statement B is only correct(c) Statement A and B are incorrect(d) Statement A and B are correct

36 Which among the following limits the applicability of the principle of indemnity ininsurance:(a) The subject matter of insurance is the insureds interest in that subject(b) The maximum liability of the insurer is limited to the sum insured(c) The sum insured may not always reflect the full value at risk

(d) The value at risk is usually the depreciated value

37 A person owns a flat worth (market value) Rs.200000. He had insured it only for Rs1,50,000. The flat is damaged by an earthquake, which loss is assessed at Rs.40000.Assuming the insurer applies the principle of Average to the loss, The insured will get aclaim payment of(a) Rs.75000

(b) Rs.70000(c) Rs.37900(d) Rs.40000(HINT: S.I/F.V.R*L=150000/200000*40000=75000)

38 In life insurance, for a claim to be entertained, insurable interest must exist(a) At the time of contract

(b) At the time of occurrence of loss(c) Both at (a) and (b)(d) None of the above

39 In the above question if contact is for property insurance(excluding marine insurance)insurable interest must present(a) At the time of contract.(b) At the time of occurrence of loss.(c) Both at (a) and (b) above.

(d) None of the above.



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40 (A) Debtors have insurable interest on the lives of creditors(B) Children have insurable interest on the lives of parents

(a) Statement A is only correct

(b) Statement B is only correct(c) Statements A and B are incorrect(d) None of these

41 In marine insurance claims, insurable interest must shown to exist at the time of(a) Loss

(b) Contract(c) Both a and b above(d) None of the above

42 The principle of subrogation enables

(a) An insured to recover to the extent of indemnity (loss) only(b) To prevent the insurer from recovering more than the amount paid as claim(c) The insurer to reduce overall losses(d) All of the above

43 The principle of subrogation is derived from the principle of(a) Utmost good faith(b) Adhesion(c) Duty of disclosure(d) Indemnity

44 Because of the application of the doctrine of adhesion, the courts construe the terms ofinsurance contracts in favor of(a) The insured(b) The insurer

(c) Depends on circumstances(d) None of the above

45 (A) When an insurer makes an ex-gratia payment to the claimant, he is not entitled tosubrogation rights(B) Because the insurer has already made a payment to the insured, he is within his rightsto claim subrogation.

(a) Statement A is only correct

(b) Statement B is only correct(c) Both statements A and B are incorrect(d) None of these



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46 (A) Insurance contracts are contracts based on the principle of uberrima fide (B ) The principle of caveat emptor governs ordinary commercial contracts.

(a) Statement A and B both are correct

(b) Statement A is incorrect while B is correct

(c) Statement A and B are incorrect(d) Statement A is correct while statement B is wrong

47 The Duty of disclosure follows from(a) The doctrine of adhesion(b) The principle of subrogation(c) The principle of indemnity(d) The principle of utmost good faith

48 (A) In life insurance where the proposer was born would be deemed a material fact.(B) In personal accident insurance medical history would be deemed a material fact

(a) Statement A is wrong while B is correct

(b) Both statements A and B are correct(c) Statement A is correct while B is wrong(d) Both statements A and B are incorrect

49 (A) In fire insurance, type of construction will be considered a material test.(B) In motor insurance, driving track record of the driver will be considered amaterial fact.

(a) Both statements A and B are correct

(b) Statement A is correct while B is wrong(c) Statement A is wrong while B is correct(d) Both statements A and B are incorrect

50 (A) Longevity and age are inversely related.(B) Poor health and risk of death are directly related.

(a) Statement A is correct(b) Statement B is correct(c) Statement A and B both are correct

(d) Statements A and B are both wrong



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51 Explain the difference between a warranty and a representation?(a) A warranty must be strictly and literally complied with whereas a misrepresentation

need not be literally true but substantially correct.(b) A breach of warranty will make the contract void able but breach of misrepresentation

will make the contract void able only if it is material to the risk.

(c) A warranty must be included in the policy either expressly or by reference. Arepresentation does not appear in a policy.(d) All of the above

52 Contribution is considered as a corollary to the principle of indemnity. If in the eventof loss, the insured recovers under various policies, the total amount recovered from suchinsurers would be more than his actual loss.(a) True

(b) False

53 Personal accident policies are not strictly contracts of indemnity and hence principles

of subrogation and contribution are not applicable there under. The insured can claim inrespect of injuries sustained by him as well as recover damages from the negligent thirdparty who has caused the injuries.(a) True

(b) False

54 Sunil insured the building of his house for a sum of Rs.500000 against fire insurance.One day the house is totally gutted in a devastating fire. The insurance surveyors certifiedthat the building is a total loss with no salvage value and that the insurable value of thebuilding just prior to the loss was Rs.40000. The insurer will pay to Sunil:(a) Rs.400000(b) Rs.250000(c) Rs.500000(d) Nil(In case of partial loss full amount will be given)

55 Premium under endowment plans equals(a) Risk premium+ savings element +expenses

(b) Risk premium +expenses(c) Risk premium +saving element(d) None of these



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56 Shri. Mohan is an assistant manager in a private firm. His present age is 35 years andhe is to retire at age 60.His present net salary per annum is Rs.240000. Total lifeinsurance premium as on date including children and wifes policies come to Rs.15000p.a. Income tax and professional tax amount to Rs.35000. Reasonable self maintenanceexpenses including entertainment, sports, club membership, recreation etc are Rs.30000.

Medical expenses are being reimbursed by the company. Calculate the amount ofinsurance required using HLV method? Assume discount rate to be 8% p.a.(a) Rs.1850000(b) Rs.1844600

(c) Rs.1689000(d) Rs.1900500(HINT: H=(E-M)*An H=human life value, E= earnings per annum, M=maintenancecharges+ taxes+ life insurance premium, An annuity factor at a given rate of discount,N=number of years (working span)

Calculation Amount in Rs.

Gross total income= 240000Less:

Self maintenance expenses 30000

Taxes payable 35000

Life insurance premium 15000

Surplus income generated for the family 160000

This surplus income will be capitalized through discounting at the interest rate of

8% per annum for 25 years term.

160000 pmt, bgn mode , 25 n, 8 i

Comp pv=1844600

57 The most important reason for the perceived increase in the longevity of adult lifeexpectancy is because of improvements in(a) Child mortality(b) Migration of population(c) Improved mortality of older sections of people

(d) None of these

58 The increase in adult life expectancy have implications for(a) Disability insurance

(b) Long term care(c) Sickness insurance(d) All of the above



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59 Ram born in 1950 has a life expectancy at birth of 65 years. Sita his wife born in1955 has a life expectancy at birth of 70 years. Assuming that the life expectancies havenot changed. Ram is planning to buy an annuity to be paid to him or his wife till anyoneof them is alive. Ram will retire on attaining age 58 i.e. in 2008(a) 4 years

(b) 12 years(c) 7 years(d) 17 years

(HINT : Ram needs an annuity which will cover his expected span of life(1950+65=2015) as well as the expected life span of his wife Sita (1955+70=2025).Sothe annuity should be life spans of both Ram and Sita)

60 Under the event of the death or serious disabilities of spouse (home maker), theeconomic consequences to be covered by financial planning are(a) Day care for dependent children(b) Costs to meet domestic chores hitherto attended by spouse

(c) Income substitution, if earning(d) All of these

61 For dependent parents, the least important risk to be covered is through(a) Life insurance cover

(b) Hospitalisation /sickness cover(c) Disability cover(d) Long term care cover

62 One of the items stated below, will not generally have an impact in estimating theincidence and severity of losses and determining the premium for motor car insurance(a) Make(b) Age(c) Colour

(d) Rating zone

63 Vishal made a proposal for insurance cover to protect his holiday home propertywhich was occupied on and off during the year. One of the following perils may beexcluded from the cover by the insurance company?(a) Fire(b) Third party liability(c) Theft

(d) Loss of rental income



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64 Fact finder usage has many features and advantages . In the following list find theodd man out.(a) Use of fact finder is compulsory in India

(b) It helps the client and advisor to arrive at precise recommendations

(c) It is a safety and protection provision for the advisor against future litigations.(d) Enables easier periodic review of client needs based on information contained infact finder

65 (A) Term insurance provides protection on insured lives for a selected period only(B) Premiums payable under term insurances are low because nothing is payable tothe policyholder at the end of the term, if he survives

(a) Statement A and B both are correct

(b) Both statements are incorrect(c) Statement A is correct

(d) Statement B is correct

66 John 22, is a young executive at the start of his career . He travels extensively by roadin and out of the city. He has to start a family in 5-6 years time.What kind of lifeinsurance cover should be suitable for him?(a) Endowment insurance policy(b) Money back policy(c) Unit-linked policy(d) Temporary insurance policy with convertibility and renew ability option

67 In our country terminal illness is defined as a condition where medical examiners donot consider the patient to be alive for more than(a) 9 months(b) 12 months(c) 18 months(d) 6 months

68 One way of protecting the erosion in the value of a term insurance policy is by takingan(a) Level benefit constant term insurance(b) Decreasing benefit term insurance(c) Increasing benefit term insurance

(d) None of these

69 For repayment of mortgage (housing loan) or meeting hire purchase liabilities, thistype of policy could be the most appropriate?(a) Decreasing term insurance

(b) Level benefit term insurance(c) Increasing benefit term insurance(d) None of the above



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70 The conversion option in temporary assurance means that the assured can opt toconvert the term cover into say a whole life or endorsement policy. Under this , one willnormally get the(a) Same sum assured benefit level in the changed policy

(b) Increased sum assured level in the changed policy(c) Reduced sum assured level(d) None of these

71 (A) Mortality of a life is influenced by age, gender and personal habits.(B)Under stepped premium method , premium at higher ages would be prohibitive for thelife assured.(a) Statement A and B are both correct

(b) Statement A and B are both incorrect(c) Statement A alone is correct

(d) Statement B alone is correct

72 In a limited payment with profit whole life insurance, while the premium payingperiod is limited to a certain number of years, at the time of claim settlement:(a) Bonuses will be paid for the same period as the premium paying period(b) Bonuses for the period commencing from the year of cessation of premium to the

claim date will be paid(c) Bonuses will be paid for the period commencing from the date of risk till the

date of claim.


73 The most important component for cash value (surrender value) accumulation in theearly years of the policy term is the(a) Interest factor(b) Level premium

(c) Home office exempts(d) None of these

74 The whole life policy which meets both the needs of providing for assuredsdependents as well as providing for the assureds periodic financial needs is(a) Convertible whole life plan(b) Increasing whole life insurance policy(c) Anticipated whole life plan

(d) Limited payment whole life plan



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75 A father takes out a policy to meet his sons enhanced educational needs when the sonreaches 18 years of age. Unfortunately after paying 5 years premium, the father dies. Bywhat means can the policy be kept in force without payment of further premiums so thatthe intended benefits are retained.(a) Accident benefit premium

(b) Lien On policy(c) Premium waiver facility(d) None of these

76 Any payment received from an insurance policy by way of death or maturity claim ,anticipated settlement payment, bonus etc are exempt from income tax as per theprovisions of(a) Section 10 of the Income Tax Act, 1961

(b) Section 88 of the Income Tax Act(c) Section 80 C of IT Act(d) None of these

77 Sums received from any policy under which more than 20% of the sum assured ispayable as premium will be(a) Taxable

(b) Tax-exempt(c) Tax-exempt up to 50%(d) None of these

78 Under a deferred annuity, the purchaser can pay the purchase premium as(a) Single premium only(b) By installments only(c) In any way as stated in (a) and (b) above


79 (A) Riders add to the basic benefits of a life policy(B) Riders do not cost anything to the assured

(a) Statements A and B both are correct(b) Statement A and B are incorrect(c) Statement A alone is correct

(d) Statement B alone is correct

80 In financial planning, regular life insurance cover plus superannuation schemeshelp build resources for(a) Death cover(b) Savings fund(c) Retirement income(d) All of the above



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81 The following are important exclusions from personal accident cover exept for oneitem, which is(a) War and nuclear risks(b) Insane people(c) Horse race jockeys

(d) Persons with existing disablement

82 A typical personal accident policy would normally have provisions to pay(a) 2% of the sum assured per week up to a maximum of 52 weeks(b) 1% of the sum assured per week up to a maximum of 44 weeks

(c) 1.5% of the sum assured per week up to a maximum of 48 weeks(d) None of these

83 The maximum benefit per adult male/female per year under the Jan Arogya BimaPolicy is(a) Rs.7500

(b) Rs.5000(c) Rs.8000(d) Rs.4000

84 Under Unborn Child Disability policy, the following risks are covered except one:(a) Congenital defects(b) Congenital deformity(c) Malformation(d) Still Birth

85 (A) The maximum paid up capital of a TPA in equity shares amount to Rs.1 crore(B) The TPA should have a working capital at all times of not less than Rs.1 crore

(a) Statement A alone is true(b) Statement B alone is true(c) Statement A and B are both correct

(d) Statement A and B are incorrect

86 The purpose of coinsurance or average clause is to(a) Persuade insured to go in for full value insurance cover

(b) Make premium reasonable(c) Reduce losses(d) None of these



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87 (A) For electronic goods the basis for claim is replacement value(B) No, it is market value

(a) Statement A alone is correct

(b) Statement B alone is correct

(c) Statement A and B are both incorrect(d) None of these

88 Under motor vehicle insurance , the following losses are covered. Except for one(a) Terrorist action(b) Riot and strike(c) Burglary housebreaking or theft(d) Manufacturing defects

89 (A) Insureds declared value (IDV) is a negotiated arrangement between the insurerand the insured

(B) In case of total loss, IDV and not the sum assured is payable as the claim amount

(a) Statement A is correct and statement B is incorrect(b) Statement A is incorrect and statement B is correct

(c) Statement A alone is correct(d) Statement B alone is correct

90 Under an Overseas Travel insurance policy , the maximum cover for third partyliability is(a) US $ 40000(b) US $ 200000

(c) US $ 500000(d) None of these

91 Insurance is the method of transfer and distribution of ----------?(a) Funds(b) Resources(c) Risks(d) Losses

92 Life Insurance business is ------------ to the States efforts in social management.(a) Supplementary(b) Complementary

(c) Contradictory



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93 The factors affecting computation of premium are:(a) Mortality(b) Rate of interest(c) Management expenses

(d) All of the above

94 Unit linked Insurance Plan is designed for ----------------.(a) Residents in India

(b) NRIs(c) Both residents in India and NRIs

95 Calculate the paid up value under a policy with the following particulars.S A (sum assured) =Rs.25000 Plan and Terms Endowment- 25 yearsDOC (date of commencement) 14.06.1989 Mode =quarterlyLast premium paid 14.03.1997.

(a) Rs.8000(b) Rs.4000(c) Rs.7500(d) Rs.8500

Solution:

Policy in force up to : = 14-06-199

Total period premiums paid = (14-06-1997)-(14-06-1989)

= 8 years

No of premiums paid = 32

No of premiums payable = 25*4=40

Paid up value= { (no of paid installments*SA)/ No of payments in total}

= 32*25000/40=8000

96 Claim is the demand on the insurer for ---------------.(a) Policy money(b) Performance of promise

(c) Terminating the contract



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97 In a death claim no evidence of the claimant title is required if there exists a proper----(a) Assignee(b) Nominee

(c) Children

98 The term Master Policy is related to insurance cover---------------------------(a) For servant obtained by his master(b) Obtained by a group of employees for their master(c) Obtained for a number of persons under Group Insurance Scheme

99 For obtaining an insurance cover under Group Insurance Scheme for a group ofpeople, The group concerned---------------------(a) Should be formed immediately before applying for the cover(b) Should already exist

(c) Should be formed after finalizing terms with the insurer

100 A group insurance scheme that offers insurance cover together with the savingselement is called------------------(a) Group annuity scheme(b) Voluntary retirement scheme(c) GSLI



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PART - 5

1. (A) Death of the familys breadwinner is a financial risk(B) It is a pure risk.

(a) Both statements A and B are correct.(b) Both statements A and B are incorrect.(c) Statement A is correct.(d) Statement B is correct.

2. The value of Rupee one receivable 15 years for on today at 5% interest are(a) 0.48

(b) 0.36(c) 0.55(d) 1.00

3.A has lodged a theft claim in a policy in his name for a watch belonging to his uncle forwhich he has no insurance. This is in infringement of the principle of:(a) Insurable Interest

(b) Indemnity(c) Utmost Good faith(d) Utmost Good faith & Insurable interest

4. In marine insurance, for a claim to be entertained, insurable interest must exist(a) At the time of contract(b) At the time of occurrence of loss

(c) Both at (a) and (b)


5.In the above question if contact is for non marine insurance (excluding marineinsurance) insurable interest must be present(a) At the time of contract.(b) At the time of occurrence of loss.(c) Both at (a) and (b) above.

(d) None of the above.

6. What is the amount of claim payable if the loss is Rs.8000/- under a policy with a suminsured of Rs.1 lakh and excess limit is Rs. 4,000/-

(a) Rs.2000/-(b) Rs.400/-(c) Nil(d) Rs.3000/-



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7. Discharge of Cargo at the port of distress is covered under(a) ICC - A Only(b) ICC-C & B(c)ICC-A, B & C

(d) ICC- A & C

8. Under Private Car Package Policy, the insured vehicle shall be treated as a constructiveTotal Loss if the cost of repair of the vehicle exceeds---% of the IDV of the vehicle:(a) 75%

(b) 80%(c) 90%(d) 40%

9. Salvage Charges under Marine Insurance refers to:(a) Charges deducted by insurers from the claim amounts towards value of salvage after a

cargo loss.(b) Charges paid to a person for preventing an insured maritime loss independent ofany contract.

(c) Charges incurred by Ship owner, Chartered in salvaging a marine adventure(d) None of the above.

10. Cut-through Clause is a reinsurance agreement refers to:(a) The provision to reduce documentary formalities.(b) The right of the original insured to claim directly from the reinsurer

(c) The provision to rescind the reinsurance contract under certain conditions.(d) None of the above.

11. Which of the following statement regarding small losses is correct:(a) Low severalty

(b) Low Frequency(c) Significant impact(d) Minimum predictability

12. B/L stands for(a) Bill of Lading(b) Bill of Loading(c) Bale of loading(d) Bales of Loading



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13. Vishal made a proposal for insurance cover to protect his holiday home propertywhich was occupied on and off during the year. One of the following perils may beexcluded from the cover by the insurance company?(a) Fire(b) Third party liability

(c) Theft(d) Loss of rental income

14. The Principle of UBERIMA FIDES applies to(a) Facultative Method(b) Excess of Loss Method(c) Stop of Loss Method(d) All of the above

15. Under the Fire Tariff the Buildings are classified as:(a) Industrial Building & Godown

(b) Class a, b, c,(c) Kaccha construction & Other constructions(d) None of the above.

16. Under a liability insurance cover the risk factor is:(a) Low(b) High

(c) Unlimited(d) Actual

17. The Letter of Credit is issued to(a) Importer

(b) Exporter(c) All the Parties of the Contract(d) Authorised Bank who guarantee

18. Which of the following methods does not fall under Risk Retention(a) Self-insurance fund(b) Voluntary deductible(c) Transfer of Risk of Sub-Contractor(d) Losses debited to operating expenses



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19. State whether the following statements are true in relation to personal Accident policyA) Once a claim for permanent total disablement, the policy becomes inoperativeB) Weekly compensation becomes payable only after the total amount payable is

ascertained & agreed.

(a) Only Statement A(b) Only Statement B(c) Both Statements

(d) Neither of the statements

20. Which of the following requires additional premium to be covered under Money(transit) policyA) Dishonesty of employees carrying the cashB) Hold-up riskC) Disbursement risk

(a) Only Statement A(b) Only Statement B(c) Only Statement C(d) All three

21. As per IRDA Regulations, if an insurer on receipt of Survey report requires additionalinformation on specific issues, he shall make request within ______ days of receipt of theoriginal report.(a) 15 days

(b) 3 days(c) 21 days(d) 7 days

22. Which of the following is covered on a payment of extra premium under AgriculturePump set policy?(a) Mechanical breakdown(b) Electrical breakdown(c) Flood

(d) Terrorism

23. Which of the following is excluded under Horticulture / Plantation policy?(a) Fire(b) Forest fire(c) Bush fire(d) None of the above



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24. Which of the following statements is correct under private car package policy?Statement A: The liability of insurer shall not exceed for total loss the insuredsDeclared Value of vehicle less the value of wreck.Statement B: The liability for partial losses shall not exceed costs of repairs / replacementsubject to depreciation.


(d) Neither of the Statements

25. Breach of which of the following conditions in the policy will prevent the insuredfrom recovering only a particular loss, the policy remaining unaffected.(a) Condition precedent to liability(b) Condition subsequent to liability(c) Condition precedent to contract

(d) Condition subsequent to contract

26. Which of the following claims can not be settled by Branch offices of Public Sectorinsurance companies?(a) Cattle claims(b) Marine cargo claims(c) Motor Third Party claims

(d) Fire claims

27. Which of the following statements is true?Statement A: The principle of subrogation supports the principle of contributionStatement B: The principle of subrogation supports the principle of indemnity



28. Under Universal Health Scheme the maximum sum insured per person or family doesnot exceed Rs._______.(a) Rs. 20,000(b) Rs. 4,000(c) Rs. 30,000

(d) Rs. 15,000



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29. To obtain a license a Surveyor has to undergo practical training notexceeding_______ months.(a) 3 months(b) 24 months(c) 6 months

(d) 12 months

30. Which of the following statements are true?Statement A: Under Tariff classes of insurance all insurers must charge the sameminimum rates.Statement B: As long as Tariff rates are charged the insurer may use their own policywordings.

(a) Only Statement A

(b) Only Statement B(c) Both Statements


31. Which of the following statements are true?Statement A: The sum insured under a fire policy stands reduced to the extent of theamount of claim paid.Statement B: The sum insured under a Marine Cargo policy stands reduced to the extentof the amount of claim paid


(b) Only Statement B(c) Both Statements(d) Neither of the Statements

32.Principle of Subrogation does not apply to:(a) Property Insurance(b) Liability Insurance(c) Motor Insurance(d) Life Insurance

33. No Fault Liability provisions the compensation payable for permanent disablement is(a) Rs. 25000 under Section 140(b) Rs. 25000 under Section 141(c) Rs. 50000 under Section 140(d) Rs. 50000 under Section 141



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34.As per IRDA (Brokers Regulations) 2000 the kind of brokers are:

a. Direct General Insurance Brokerb. Direct Life Insurance Brokerc. Direct Insurance Broker

d. Corporate Insurance Brokere. Reinsurance Brokerf. Composite Broker

The correct options are:1. a, b, d, e,2. b,d,e,f,3. c,e,f

4. a,b,c,

35. The nature of a reinsurance contract is:

(a) Domestic(b) Export(c) Internationals

(d) Commercial

36. The Rate of Commission payable of reinsurance business is:(a) 30%(b) 35%(c) No Cap

(d) 40%

37. The License of Insurance Company is renewable after:(a) 2 years(b) 3 years(c) 5 years(d) Annually

38. In Reinsurance Business the Cession means:(a) The amount transfer on account of commission payable to the basic insurer(b) The money returned the insurer for payment of proportionate claims(c) The amount payable to the Reinsurer in proportion of the treaty arranged

(d) The Discount given in lieu of commission to the insurer

39. The limit of filing of an appeal against the order of the District Consumer Court:(a) 6 months(b) 3 months(c) 1 months

(d) 1 year



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40.An Insurance Company is subject to which of the following audits:(a) Internal Audit(b) Statutory Audit(c) Audit of Comptroller & Auditor General(d) All of the above

41. Which of the following statement (s) are True?Statement A: Insurance is relevant only if there is a possible economic loss.Statement B: An event, which will certainly happen cannot be insured against.(a) Only Statement A(b) Only Statement B(c) Both Statements


42. An important role of insurance in the development of the economy is to

(a) Reduce investment in infrastructure(b) Reduce poverty in the nation.(c) Reduce inflation in the economy.

(d) Give financial protection to the insurer \ d family

43. Which of the following statement (s) are True?Statement A: Insurance reduces social costs.Statement B: Insurance is an instrument of social security



44. Which of the following statement (s) are True?Statement A: Insurance avoids risks.Statement B: Insurance does not avoid risks.

(a) Only Statement A(b) Only Statement B

(c) Both Statements(d) Neither of the Statements

45. Identify which of the following are basic principles of insurance(a) Utmost good faith(b) Insurable interest(c) Indemnity(d) All of the above



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46. Which of the following statements is true?Statement A: Compulsory Owner-driver cover is restricted to Indian Territory only.Statement B: The insured is not liable for compensation under any other policy in respect of sameof disablement in case of personal accident insurance.

(a) Only statement A

(b) Only statement B(c) Both(d) Neither of the statements

47. In case of fire and miscellaneous insurance the insurable interest must be present(a) At the time of taking the policy(b) At the time of loss(c) Both of above

(d) None of above

48. In marine insurance insurable interest must be present

(a) At the time of taking policy(b) At the time of loss(c) Both of above

(d) None of above

49. Assignment of policy requires prior consent of the insurer in case of(a) Fire & miscellaneous policies;(b) Marine policy(c) Marine hull(d) a & c

50. For applicability of principle of contribution the following must be common(a) Subject matter(b) Peril(c) Interest covered(d) All of the above

51. Which of the following principles supports the principle of indemnity?A) SubrogationB) Contribution(a) Only B

(b) Both A & B(c) Neither A nor B(d) Only A



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52. Endorsement is issued ____________(a) When change of insurers address(b) When cover requires cancellation(c) When risks are to be added/ deleted(d) All of the above

53. If an insurance policy is not stamped as per the Indian Stamp Act, the contractbecomes_____________.(a) Unenforceable

(b) Void(c) Voidable(d) Illegal

54. Which of the following statement(s) is true?Statement A: Endorsements are issued during the policy period to record alterationsStatement B: Endorsements are issued as part of the policy at the time of issue

(a) Only statement A(b) Only statement B(c) Both statements


55. Which of the following statements is true?Statement A: A warranty is an express condition.Statement B: A warranty must be strictly complied with, whether it is material to risk ornot.



56. Which of the following statements is true?Statement A: As per IRDA Regulations there is legal obligation on the part of insurers toissue a renewal notice to the insured.Statement B: Issue of renewal notice means that the policy is automatically renewed, ifthe premium is paid.





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57. In case of technical breach of warranty, the claims are settled on_____________ basis(a) Ex-gratia(b) Non-standard

(c) Past precedents

(d) Arbitration

58. In motor, Cover note is valid for __________ days(a) 15 days(b) 30 days(c) 45 days(d) 60 days

59. Where risk period exceeds nine months, what %age of annual premium will becharged under motor policies?(a) 50%

(b) 75%(c) 85%(d) 40%

60. Under motor insurance premium is fixed by(a) Make of the Vehicle(b) Age of the Vehicle(c) Value of the Vehicle(d) All of the above

61. The minimum premium under a Fire Policy for offices/ shops is(a) Rs.500(b) Rs. 250(c) Rs. 40

(d) Rs. 50

62. Which of the following statements is true?Statement A: The principle of utmost good faith is the same as the principle of let thebuyer beware.Statement B: The existence of high blood pressure need not be disclosed, as the doctorcan find it out during the medical examinations

(a) Only Statement A(b) Only Statement B(c) Both Statements(d) Neither of the Statements



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63. To whom can the policyholder apply in case of bad service from an insurer?(a) I.R.D.A.(b) Consumer Forum(c) Ombudsman(d) All of the above

64. Which of the following statements is true under the Consumer Protection Act?Statement A: An appeal to the national commission against the order of the Statecommission has to be filed through an advocateStatement B: The decision of the national commission is final with no further appeal

(a) Both statements(b) Neither of the statements

(c) Statement A only(d) Statement B only

65. According to Fire Tariff, which of the following cannot be covered under valuepolices ?(a) Obsolete machinery(b) Brand new machinery

(c) Curios(d) Works of art

66. Domiciliary Hospitalisation Benefit is provided if treatment is needed exceeding 3days at home in IndiaStatement A: The patient is not in position to go to nursing homeStatement B: The patient does not have sufficient funds for treatmentStatement C: The patient can not be removed to hospital for lack of accommodation

(a) A and C are correct

(b) B and C are correct(c) B is correct(d) C is correct

67. _____ is not an example of Standing charges insured under consequential loss (fire)policy.(a ) Purchase cost of raw materials(b) Salaries to permanent staff(c) Office & general establishment expenses(d) Insurance premium



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68. Which of the flowing statements is true?Statement A: Arbitration condition appears in all insurance policies.Statement B: Arbitration condition appears only on marine cargo policies.


(b) Only Statement B(c) Both Statements(d) Neither of the statements

69. Under the Transit Clause (Warehouse to Warehouse) of Institute Cargo Clauses, theinsurance terminates on the expiry of __________ days after discharge from the vessel atthe final port of discharge.(a) 30(b) 60

(c) 7(d) 15

70. Which of the following documents is common to claims processing under marineimport policies and inland transit (Rail/Road) Policies?(a) Invoice

(b) Bill of Lading(c) Copy of protest(d) Lost overboard certificate

71. Which of the following statements is true?Statement A: Marine cargo policies are valued policiesStatement B: Marine hull policies are valued policies

(a) Neither of the statements(b) Only statement A(c) Only statement B(d) Both statements

72. Which of the following statements is false in relation to marine cargo insurance?Statement A: The entire marine cargo insurance is governed by Tariff or marketagreementsStatement B: Special storage insurance is granted in conjunction with inland transit openpolicy

(a) Neither of the statements(b) Only statement A

(c) Only statement B(d) Both statements



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73. Under which of the following sale contracts, the seller is responsible for arranging thecargo insurance for the entire voyage?(a) C&F(b) C.I.F.

(c) F.O.B.

(d) F.O.R.

74. Which of the following is true in relation to marine cargo insurance?(a) Claim survey fee is payable by insurers only if the claim is payable

(b) Under every marine policy for export shipments, certificate of insurance is issued(c) General average loses are covered only under Institute Cargo Clauses (A)- All risks.(d) None of the above

75. What is the maximum limit of cover for Third Party Property Damage under liabilityonly polices in case of private cars(a) Rs 1 lac

(b) Rs. 2 lacs(c) Rs. 5 lacs(d) Rs. 7.5 lacs

76. Which of the following is taken as sum insured under a motor policy?(a.) Fair value of subject matter of insurance(b.) Agreed value of property insured(b.) The amount paid when there is a total loss(d.) Insureds Declared Value

77. The liability of the owner of the motor vehicle to pay compensation for death claims,on no fault basis under the Motor Vehicles Act, 1988 is ______________.(a) Rs 4,000(b) Rs. 25,000(c) Rs. 50,000

(d) Unlimited

78. The compensation for death under Solatium Scheme is __________.(a) Rs. 25,000

(b) Rs. 12,500(c) Rs. 50.000(d) Rs. 1,00,000

79. Application for compensation under Solatium scheme has to be made to _____(a) Corporate office of an Insurance company(b) Claims enquiry officer nominated by State Government(c) Nominated divisional office of the insurance company(d) Claims settlement commissioner nominated by the State Government



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80. In which of the following zones, a private car registered in Chandigarh falls for ratingpurpose.(a) Zone A(b) Zone B

(c) Zone C


81. Under the Motor Vehicles Act 1988, third party claims can be adjudicated upon by____ set up by the State Government(a) Legal Aid Board of the State Government(b) Motor Accidents Claims Tribunal

(c) Lok Adalat(d) Lok Nyayalaya

82. The purpose of Personal Accident Insurance is to pay:Statement A: Fixed compensation for death from accidental injury.

Statement B: Variable compensation for death from accidental injury

(a) Both are correct(b) B is correct(c) A is correct

(d) None is correct

83. Which of the following contingencies is not covered under personal accident policy?(a) Permanent total disablement(b) Temporary total disablement(c) Permanent partial disablement(d) Temporary partial disablement

84. Under group personal accident policies, on duty cover is available at ____ % of thenormal premium(a) 60(b) 75

(c) 25(d) 50

85. Which of the following statements is true in relation to Standard Personal AccidentPolicy?Statement A: The cover is for 24 hoursStatement B: The cover is on a world-wide basis

(a) Both statements(b) Neither of the statements(c) Only statement A(d) Only statement B



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86. The cumulative bonus under a personal accident policy cannot exceed ______ % ofthe total capital sum insured.(a) 50

(b) 25(c) 60

(d) 40

87. Which of the following statements is true as per conditions of personal accidentpolicy?Statement A: Short period premium refund is made if the policy is cancelled by theinsuredStatement B: Short period refund is made subject to being no claim made under thepolicy

(a) Neither of the statements(b) Only statement A

(c) Only statement B(d) Both statements

88. Which of the following statements is true?Statement A: The principle of contribution does not apply to personal accidentinsuranceStatement B: The principle of contribution applies to weekly benefits under personalaccident insurance

(a) Neither of the statements(b) Only statement A(c) Only statement B(d) Both statements

89. The Mediclaim policy is available up to a maximum sum insured of Rs.__ lakh.(a) 5(b) 2(c) 3(d) 4

90. The insurance under Overseas Mediclaim Policy does not operate beyond______days of continuous absence from Indiaa. 120b. 180c. 60d. 90



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91. If hospitalization cover applies under Mediclaim policy, relevant medical expensesincurred during the period of ____________ days after hospitalization treated as part ofthe claim.(a) 30(b) 45

(c) 15(d) 60

92. Which of the following expenses are not payable under Maternity benefit?(a) Cesarean(b) Abdominal operation for extra uterine pregnancy(c) Miscarriages due to accident(d) Pre-natal expenses prior to hospitalization

93. Subject to no claim, cost of health check-up is payable under Mediclaim policy oncein every _____ years.

(a) 5(b) 4(c) 3(d) 2

94. Brokers commission for General Insurance business is(a) Non Tariff business 17.5%(b) Statutory Tariff business 4%(c) Other Tariff business 12.5%(d) All of the above

95. Buyers of reinsurance are(a) Direct Insurers(b) Reinsurers(c) Captives(d) All of the above

96.In India, the amount donated qualifies for(a) Tax exemption under section 4 (4D) of Income Tax Act, 1961(b) Tax exemption under section 80 L of Income Tax Act, 1961(c) Tax exemption under section 88 of Income Tax Act, 1961(d) Tax exemption under section 80 G of Income Tax Act, 1961



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97. In case of assessment of loss where the assessment is not carried out by licencedsurveyor and loss assessor.(a) Up to 20000/-

(b) More than 20000/-(c) None

(d) Both a & b

98. In case of Non-Marine losses insured can exercise/opt for ------ as per policy in caseamount offered by insurer is not acceptable to insured..(a) Arbitration

(b) Litigation(c) Grievance Redressal Committee(d) Ombudsman

99. Which Surveyors services are mandatory under section 64UM of Insurance Act 1938where loss is 25000/-?

(a) Independent Surveyor(b) In-House surveyor(c) Both(d) None of the above

100. Select the correct option in respect of pecuniary jurisdiction of the NationalCommission under the Consumer Protection Act 1986.(a) Above Rs. 20 lakhs and up to Rs. 40 lakhs(b) Above Rs. 20 lakhs and up to Rs. 50 lakhs(c) Above Rs. 40 lakhs

(d) Above Rs. 20 lakhs and up to Rs. 40 lakhs



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PART - 6

1In life insurance, insurable interest must exist at the time of .(a) Premium payment(b) Claim

(c) Proposal(d) Surrender

2 What is a proposal ?(a) A request for an insurance cover(b) An offer to enter into a contract(c) Both statements are correct

(d) Both statements are wrong3 Key man insurance can be taken on the life of (a) Child of key man

(b) Wife of key man(c) Husband of key man(d) Key employee

4 Policy vests in the child when he / she ..(a) Attains majority

(b) Gets married(c) Dies during the deferment period(d) On its maturity5 Persuasion involves tackling an objection by using the technique.

(a) No-infact(b) I know better(c) Yes-but(d) Holier than thou6 With the sale of a life insurance policy, the prospect becomes ..(a) Nominee(b) Policyholder

(c) Proposer(d) Claimant

7 Under group insurance, underwriting is done .(a) For the entire group(b) For some persons(c) For selected persons(d) On individual basis



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8 Which approach is good?(a) Agent advises his prospect that he need not mention that he is an NRI.(b) Agent advises his prospect that he need not mention death due to suicide in his

family.

(c) Both approaches.(d) Neither.9 Which approach is good?(a) Agent advises his prospect not to mention his previous criminal conviction.(b) Agent sells term insurance policy to a prospect who wants to provide for his old age.(c) Both approaches.(d) Neither.

4 Which approach is good?(a) Agent advises his prospect not to mention his earlier dropped proposal submitted

under a different agency.(b) Agent advises his client to include all his previous policies in the presentproposal.

(c) Both approaches are good.(d) Neither approach is good.11 Sum assured payable on death may be maturity amount.(a) Equal to(b) More than(c) Less than(d) Any of these

12 Marketing of insurance includes(a) Maintaining regular contact with policyholders(b) Finding out about policyholders' experiences(c) Helping claimants to complete formalities(d) All the above

13 Insurance advertisements should not ..(a) Distort facts(b) Mislead consumer(c) Throw competition in bad light(d) All of the above.

14 Avoiding superfluous and redundant expressions helps(a) Verbosity(b) Conciseness

(c) Redundancy(d) Exaggeration



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15 That the policyholder can pay the premium on yearly, half-yearly, quarterly ormonthly basis is .

(a) Option

(b) Guarantee(c) Rider

(d) None

16 Which statement is true with regard to the Children's policy?(a) Risk will commence on the deferred date automatically.

(b) Risk will commence on the deferred date after satisfactory medical examination.(c) Risk will commence on the deferred date with enhanced premium.(d) All are wrong.17 Which statement is correct?

(a) Life insurance business generates surplus.(b) Male and female mortality are not the same.(c) Both statements are correct.

(d) Both statements are wrong.18 Assets are insured because they may be destroyed due to occurrences.

(a) Random(b) Unintentional(c) Accidental(d) All these

19 State which of the following statements is correct

(a) Agent fills up the gaps in the proposal form left by the proposer.(b) Agent declines to fill the proposal form himself.

(c) Both statements above are correct(d) Both statements above are wrong20 Premium is collected .

(a) In advance

(b) In part(c) In anticipation(d) All of these

21 State which statement is correct.

(a) Ombudsman is created by IRDA Act.(b) Proportional paid up value is guaranteed by the Insurance Act 1938.

(c) Both statements are correct.(d) Both statements are wrong.



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22 All the needs of the prospect can be met by(a) One policy(b) Two policies(c) Five policies(d) Different kinds of policies

23 Employer has insurable interest in the life of his employee (a) For ever(b) At no time(c) During employment contract

(d) During recruitment24 State which statement is correct.(a) The members of a housing society can negotiate for a group insurance policy.(b) The sports club can get a group insurance policy for its members.

(c) Both statements are correct.

(d) Both statements are wrong.25 Term insurance is ideal for(a) Risk cover in early ages

(b) Old age provision(c) Long term investment(d) Pension26 Risk on a child's life under CDA plans starts on ..(a) The deferred date

(b) The date of commencement(c) The date of maturity(d) The date of vesting27 Policy document is (a) Evidence of the contract

(b) Evidence of risk(c) Evidence of the company having accepted premiums(d) None of the above28 Medical examination is not at all required under policy.(a) Partnership insurance(b) Group insurance(c) Individual insurance(d) Annuity



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29 Which of the following is correct?(a) General insurance is some times bought because of compulsions

(b) Marketing is not necessary when there are compulsions to buy(c) Both are correct(d) Both are wrong

30 If a person having a policy of 4 lacs is suffering from brain hemorrhage and high BP,the insurer will pay(a) Basic SA(b) 50% of SA(c) EPDB(d) Nothing

31 Which of the following is correct?(a) Advertising is made through media.(b) The media for advertising has to keep in mind the likely customer.

(c) Both are correct(d) Both are wrong32 Which of the following is correct?(a) Banks are becoming part of the distribution channel for insurance.(b) Banks and insurers serve the same set of customers.(c) Both are correct

(d) Both are wrong33 Which of the following is correct?(a) The nominee under a policy can transfer his rights to another person(b) The nominee has no rights under a policy.(c) Both are correct(d) Both are wrong

34 A policy that has been assigned will revert to the assignor(a) If the assignment is conditional.(b) Whenever the assignor demands it.(c) When the conditions specified in the conditional assignment assignment happen.

(d) On maturity of the policy.35 Which of the following is correct?(a) An indemnity bond is necessary when the heirs challenge the nomination.(b) Heirs claiming the policy monies must be asked to obtain a court decree

(c) Both are correct(d) Both are wrong



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36 Which of the following is correct?(a) The insurer should ignore a court order attaching the monies under an MWPA policy.(b) The insurer should not become a party to a dispute between rival claimants.

(c) Both are correct(d) Both are wrong

37 W

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