INSURANCE OUESTION

1) Mr. Joshi is the sole income earner in the family. Mrs. Joshi is a homemaker. They are aged 40 and 36
respectively. Life expectancy for both of them is another 40 years. They have no children. Other information
you have is: Current investment port folio - Rs.20 lakh; Estimated final Expenses - Rs. 1 lakh.; Present annual
expenses-Rs. 4 lakh (including a lakh of Mr. Joshi.s personal expenses) ; Mr. Joshi.s post-tax income in handRs.3.5 lakh.; Assume a post tax, post inflation return/discounting factor of 3%.. Calculate the insurance
requirement under the Needs Based method.
(4)
A) Rs. 45.2 lakh
B) Rs. 48.3 lakh
C) Rs. 52.8 lakh
D) Rs. 50.4 lakh
Solution (D)

2) Akash has bought textile machinery, worth Rs. 50 Lakh, for his factory. On advice of a Financial
Consultant, he took a reinstatement insurance contract for Rs. 50 lakh. Straight line depreciation over
a 10 year period applies here. In the third year due to heavy rains the factory was inundated and the
machines were under water for over a week. Similar machines cost Rs. 55 Lakh now. Akash puts in a
claim for Rs. 55 Lakh. What will he be paid by the insurance company? (4)
A) Rs. 50 Lakh
B) Rs. 45 Lakh
C) Rs. 55 Lakh
D) Rs. 40 Lakh
3) Sajid has a pension policy details of which are given as under; Pension policy; 28 year PPT; Non
Participating policy; Yearly premium Rs. 10,000; guaranteed returns of Rs. 50/1,000 SA; SA during
accumulation phase Rs. 3 Lakh; No riders. What will be the value of the accumulated corpus just on
completion of the premium paying term? (4)
A) Rs. 5.58 Lakh
B) Rs. 4.80 Lakh
C) Rs. 4.20 Lakh
D) Rs. 7.20 Lakh
4) Motor Insurance Rs 100000 loss Rs 9000000 expenses 45%.
5) Annual income Rs 500000, yearly expenses 50000 rate of interest 8%. Tax paid Rs 50000. What is
policy amount?

Q.6. Which of the following benefits are available in an Endowment Policy?

A. A bulk of the premium is invested and a small portion is used to provide life cover.
B. An Endowment Policy provides larger life cover than a Whole Life Policy, at lower premium
due to its cash value.
C. An Endowment Policy is similar to PPF in terms of returns but gives extra benefit of
insurance cover.
D. An Endowment Policy is usually less expensive than a Whole Life Policy due to the fixed
nature of the term.
Q.7. Whole life insurance contracts contain cash surrender values. These cash surrender
values:
A. Represent estimates based on projected mortality savings.
B. Are based on the past experience of the insurance company and cannot be guaranteed.
C. Represent an excess of the premiums collected over pure insurance costs and earnings
credited.
D. Are available only if the insurer chooses to terminate the coverage under the policy.
Q.8. In case of a life insurance policy, if the gross annual premium amount does not
exceed the sum assured by 20%, then _______.
(A) Death benefit is tax free. (B) Death benefit is taxable. (C) Maturity benefit is tax free.
A. (A) only is correct
B. (B) only is correct
C. (C) only is correct
D. Both (A) & (C) are correct
Q.9. Which of the following statements is/are NOT true about a warranty in an insurance
contract?
(A) Declarations on the proposal form can be warranties by reference.
(B) Warranties help the insurer to ensure that the risk stays the same during currency of
the policy.
(C) Warranties have to be followed literally.
A. (A), (B) & (C)
B. (B)
C. (A)
D. None of the above

Q.10. Which of the following statements is/are correct?

(A) Limits for transacting life insurance in rural sector are laid down in number of lives
insured.
(B) Limits for transacting life insurance in social sector are laid down in number of lives
insured.
A. (A) is correct
B. (B) is correct
C. Both (A) & (B) are correct
D. Both (A) & (B) are wrong
Q.11. Adverse selection refers to an Insurance Company________.
A. Insuring a person in the high risk category
B. Insuring a person in the high risk category without loading his premium
C. Insuring a person susceptible to genetic diseases but at a substantially higher premium
D. Insuring a person whose risk profile is low, hence compelling the company to offer him a
discount in premium.
Q.12. Binding Authority of an insurance broker means __________.
A. the authority of brokers to accept risks within certain limits and term as set out by the
Insurers
B. the contract by which a broker is bound to the insurance companies
C. the contract by which a broker is bound to the clients
D. the regulatory authority that binds brokers to the regulations
Q.13. Reliable age proof must be given along with the proposal form of life insurance which
could be a:
(A) Certified copy of birth certificate of Municipal Corporation
(B) Marriage certificate issued by Marriage Registrar
(C) Registered document of property ownership
A. (A)
B. (B)
C. Either (A) or (B)
D. Either (A) or (C)

Q.14 (A) In level term insurance policies, the coverage remains constant throughout the
term.
(B) The premium payable in level term insurance policies can remain same or increase with
change in working conditions of Insured.
A. Both (A) & (B) are incorrect
B. Both (A) & (B) are correct
C. (B) is correct
D. (A) is correct
Q.15. Possession of the property is transferred to the Mortgagee in _______________.
A. Usufructuary mortgage
B. English mortgage
C. Mortgage by conditional sale
D. Simple mortgage
Q.16. A client has the need to provide for the cost of his child's college education. He
envisages that four annual payments of Rs. 20,000, in current money terms, would be
needed beginning 15 years from now. Assuming level of inflation at 5% per annum and
that the fund earns 8% per annum returns throughout, calculate the present value to be
placed on this liability when carrying out a needs analysis for this client. (Round of your
answer to the nearest '000')
A. Rs. 50000
B. Rs. 49000
C. Rs. 24,000
D. Rs. 23,000
Q 17 What is the difference between gambling & insurance?

Q 18 A normal person paid 3000 premium yearly. He meets with an accident & disable permanently.
What will his premium after disable?
Q 19 Jointly policy one died premium is continue or not?
Q 20 Insurance agent product saler or underwriter of company?
Q 21 A person earn for family become disable is a personal risk or liability risk?

Q 22 Take loan on which policy?

Q 23 What is the capital of Direct, Re Insurance or Composite broker?
A 50 200 250 Lacs
Work Book Question No are start from page no 1
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